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Heading For Broke

Heading For Broke . Newfoundland and Labrador Pension System . Policy work.

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Heading For Broke

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  1. Heading For Broke Newfoundland and Labrador Pension System

  2. Policy work Consulting on employee compensation and pensions House of Commons Finance Committee Senate National Finance Committee Provincial consultations on pensions Municipal consultations on compensation MEPCO Policy think tanks Chamber of Commerce Canadian Federation Independent Business

  3. Demographic Tsunami Statscan: Focus on Geography Series

  4. Population Projections N.L. Population Projections Ages 0 to 19 20 to 64 Over 65 2012108,377 329,477 84,254 2026110,205 281,547 130,055 Change 2 % - 15 % + 54 % Source: Department of Finance Population Projections, N.L.

  5. The Problem of Aging Top Healthcare Systems 2011 2008 % INC N.L. $ 5,061 $3,930 28.7 % Alberta $ 4,486 $3,252 37.9 % P.E.I $ 4,291 $3,845 11.6 % N.L. Estimated Per Person cost 2013 $5,399 Cost per person, public healthcare costs Source: National Health Expenditure Database, CIHI

  6. Where is healthcare going?

  7. N.L. Budget $ 7.6 Billion Health Care $ 2,843,585,000 Pensions / Retiree Benefits $ 875,613,000 Debt Expense $ 847,569,000 Pension Shortfall * $ 840,000,000 Education $ 795,350,000 Post-Secondary $ 789,746,525 * FPFA Recommendation

  8. It’s Bad "They are not sustainable as they are…They are not going to last."  Tom Marshal – CBC Dec 2, 2013 The shortfall to the pensions amounts to $7,500 per NL resident. Source : Board of Trade

  9. How bad? NL Pensions have promises of $13.5 B and assets of $ 8.0 B Pensions are 59% funded. March 31, 2013

  10. Future Retiree Benefits Promises of $ 2.87 B Add: Pensions $ 5.50 B Total - 2013 $ 8.37 B 2008 $ 2.97 B

  11. Standard and Poors

  12. Front Door Bailouts The $ 2-billion advance payment under the Atlantic Accord in 2005 was directed to the Teachers’ Pension Plan. Further special payments totaling approximately $1.6 billion were made between 2006 and 2013 Bailouts $ 3.6 B $4.5 B???

  13. Backdoor Bailouts These are annual increases in the premiums paid into the pensions plans. The province has not taken advantage of this feature yet. Ie. Canada public sector contributions in 2002 were $ 12.4 B by 2012 they were $ 33.6 B StatscanCansim 280-0004

  14. Changes the R ules If the bailouts don’t work the governments can just change the rules • Solvency relief funding 2008, from 3 years to 10 years. • OOPS! Solvency relief rules extended in 2010 • Recent conversations with Finance are talking about 30 years!

  15. Why changes are urgent Public employees might appear to have little incentive to push for reforms, yet they will pay a price for inaction: salary freezes, layoffs, increased payroll deductions and the threat of a city or county bankruptcy. Doing nothing to current pension obligations will cost public employees everything. A pension cannot grow without a job attached to it. Little Hoover Commission for Pension Reform

  16. Every Day The Hole Grows “Unfunded liabilities, simply put, are the amount of money needed to be put into the plans today to fully support promises made to retirees and current employees for services already provided.Unfunded liabilities do not include amounts required to pay for benefits related to future service” Alberta Auditor General's Fall Report 2013

  17. Why are pensions underfunded? CFA Institute – Feb 2014

  18. We Love Public Sector Employees Teachers Police, Firefighters Military Public Works Librarians, etc. Can we afford to pay them what they have negotiated??

  19. Value of OMERS Pension Total Value $960,000 $280,000 Inflation Protection @ 2.5% $75,000 Survivor Pension $450,000 Lifetime Pension aged 65-84 $155,000 Lifetime Bridge Benefit Source: OMERS Report to Members Based on $ 45,000 Annual Income

  20. Cost of Pension Total Contribution $50,000 Total Value $960,000

  21. Excessive Compensation??

  22. Assets VS. Liabilities Source: Pension Investment Committee, Activity Reports

  23. We are all in this Together Government Unions Taxpayers

  24. Solutions • Enroll all new hires in the public sector in Defined Contribution (DC) plans • Convert existing employees to DC plans • Phase out early retirement for all employees • Eliminate the bridge benefit • Convert all pensions for Members of the House of Assembly (MHA) to DC plans

  25. Questions ?

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