Government Review Shows that Changes to Public Pensions May be on the Horizon
Jan 12, 2018
Earlier this week, the Manitoba Government announced plans to launch a public review of Manitoba pension law. If enacted, potential changes would be cause for concern for many Manitobans, including MGEU members and their families, who have planned their futures based on the current provisions in pension legislation.
“Manitobans who have worked hard for many years and invested in their retirement deserve to retire with income security and they should feel confident that their long-term financial plans won’t be derailed by the short sighted changes proposed here,” said MGEU President Michelle Gawronsky. “Pension plan members need to sit up and take notice of this because this has implications for how pension plans are both funded and managed.”
Reviews like this are done every five years as part of the Pension Commission’s review of pension legislation (the Pension Benefits Act). That commission makes recommendations to the Province on changes it feels are necessary. Pension Commission vice-chairman Tim McGorman is quoted in the Winnipeg Free Press saying the major recommendation proposes changes to defined-benefit plans. He said recommendations would “relax” funding requirements and result in lower contributions for employers.
In addition, new pension plan designs are contemplated in the recommendations, including target benefit pension plans and shared risk pensions plans.
Target Benefit Pension Plans and Shared Risk Pension Plans pose the following risks to members:
- Provide less benefit certainty to members with potential reduction in benefits during retirement;
- Have the potential to create a two-tier plan where existing members would keep their defined benefit plan, while new hires would be subject to potential reductions if the plan doesn’t meet targets;
- Open the door to promote the full conversion of a Defined Benefit pension plan to less predictable benefits under a Defined Contribution (DC) pension plan. Conversion to DC plans have shown in many cases to be more costly to the plan rather than yielding savings; and
- Don’t require the employer to fund deficits.
New Brunswick’s Shared Risk Pension Plan currently has three legal challenges against its conversion from a public sector pension plan to a shared risk pension plan.
McGorman said he was unable to say what effect the changes would have on workers’ pension contributions and retirees’ payments.
Meanwhile, Gawronsky says it’s important to note that the PC Party pledged to MGEU members during the 2016 election that they would make no changes to public pension plans if elected.
“Our union remains committed to protecting public pensions and ensuring the government lives up to its promise to protect them as well.”
There will be no
public meetings on any of the proposed changes. Instead, those affected are
asked to submit comments on the government’s website at email@example.com. The deadline to submit
comments is February 21, 2018.