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Past Decisions on Pensions the Problem
Past decisions on Pensions are the Problem
Synopsis by John Sushelnitsky Article appeared in the Winnipeg Free Press by Paul Moist in October 17, 2016, and Mr. Moist has given permission to use his article as a basis for this synopsis.
1. In 1963, the government opted to stop funding teachers’ and civil service pension plans, to which it had made matching contributions on a monthly basis to these pension plans. Instead, it chose a “pay-as-you go” basis. This meant the province would not make any contributions while employees were working, but would pay half their pension when they retired. 2. Today, Manitoba teachers pay about 9.4% of their salaries to their pension plan. The province pays about 16.3 % of salaries to pension costs due exclusively to the decision made in 1963. Had the government continued to fund on a monthly basis as it had before 1963, its share today would be the same as those of its employees. 3. Only the government’s half of the teachers’ pension plan is underfunded; the teachers’ half is close to fully funded. 4. Of the 9% of the provincial education budget that went into the teachers’ pension fund last year, 4.6% was for the current service cost of teachers’ pensions; the other 4.4% was an additional “unfunded liability” contribution resulting from the 1963 decision. 5. The government, in 2001, began contributing to the teachers’ pension plan to make up for the shortfall that had resulted from not matching employee contributions on a monthly basis. 6. That shortfall of unfunded liability stands at $1.4 billion; however, if no change had taken place in 2001, that shortfall would be approximately $3.6 billion. It is estimated that approximately 75% of current teacher pensions are the result of investments. By not matching teacher contributions on a monthly basis, the government, over forty years, reduced the investment potential of the pension fund very significantly. §
