Let’s be clear who is on the hook
CITY’S AILING PENSION PLAN NEEDS MORE THAN A TWEAK.
The City of Regina, along with other large public-sector employers, is looking to changes in provincial regulations as part of the solution to its $300-million pension mess.
The city’s pension problems need a permanent fix, not a regulatory tweak that eases the embarrassment of potentially being labeled insolvent, removes requirements to take corrective action and camouflages continuing structural weaknesses that put pensioners’ futures at risk.
Promises have been made, and there’s not enough cash to cover the expected bills.
Without a cash infusion, it’s unlikely there ever will be. This year started with a warning in the city pension fund’s newsletter that the “unfunded liability will not be eliminated over time and positive investment returns will not provide a solution.” It’s difficult to see what’s changed in the past 12 months that might moderate that bleak assessment.
The expected regulatory change to solvency requirements is only part of the city’s answer to digging itself out of the pension hole. Details of the other parts of the proposed solution are expected soon, perhaps by the end of the year.
The current pension plan is demonstrably unsustainable, with its $293-million deficit prompting the plan’s actuary to recommend a combined employer/employee contribution rate of as much as 45.5 per cent.
The purpose of solvency requirements is to protect plan members by forcing them, and their employers, to ensure pension funds are adequate to pay off retirement obligations. Eliminating this requirement for taxpayer-financed employers doesn’t fix anything. Instead, it removes an important incentive for public-sector employers and employees to agree to the hard decisions necessary to make pension plans sustainable on their own merits.
And it implicitly treats taxpayers as an inexhaustible financial resource.
“The only way the plan is going to go bankrupt ever is if the city goes bankrupt, which is highly unlikely,” Brent Sjoberg, deputy city manager and chief financial officer, told the Leader-Post in a recent interview.
Unlikely as long as taxpayers — few of whom are likely to enjoy anything approaching the benefits of a public-sector defined-benefit pension — are willing to pony up the necessary cash, that is.
Sjoberg went on to say the city and its employees are working on addressing the current deficit, as well as taking measures so the plan doesn’t fall into another deficit in the future. If so, why the need for a permanent solvency exemption and, tellingly, why are such exemptions being offered only to the public sector?
Taxpayers should be wary of pension solutions that don’t allow private-sector plans to use the same fix. Because the likeliest reason is that taxpayers are the fix.