Federal Government Will Pocket Billions In Pension Funds
Federal Government Will Pocket Billions In Pension Funds
A government decision to take this money and use it as it pleases amounts to theft of workers’ deferred wages.
This all seems like it's part of the plan, and the title is super biased?
However, legislation governing pension funds restricts the size of accumulated surpluses to no more than 125 per cent of the plan’s liabilities.
Just like the govt guarantees the pensions if the fund fails, it can also take excess surpluses. That seems totally reasonable?
I don't get why the union is acting like it's their money when it isn't -- it's a defined benefit?
Just like the govt guarantees the pensions if the fund fails, it can also take excess surpluses. That seems totally reasonable?
The government doesn't guarantee the pension if the fund fails, they manage it so it doesn't fail.
EDIT TL;DR That means they're not financially liable to top up the pension, it means they get to decide how the pension returns to a healthy state, potentially by rewriting the contribution rules.
Most of the unions assume this means the next step is the government will stop funding their portion of the contributions instead of sharing the savings with employees. The step after that is if (really, when) the fund becomes unhealthy, the government gets to unilaterally decide how to fix the fund. Sure, they could top up the fund completely out of public revenues, but they could require employees to help top up the fund.
The reason why the unions think this will happen is because it has happened before. Any employee under the PSPP who's been employed for greater than ~15 years (I can't remember the cut off date) makes 35% of the contributions to their pension, with the government making the other 65%. Anyone who's been with the public sector under that cut-off pays 50%. That's because we started this same cycle back in the early 2000's with the government taking the surplus, but not putting the money back when investment returns were low. AFAIK, a similar cycle has happened at least once before that.
The government doesn't guarantee the pension if the fund fails
This is incorrect, emphasis mine:
Funding shortfall The Government of Canada has a legal obligation to pay plan member pension benefits. If the plan becomes underfunded for any reason (for example, higher-than-expected costs, lower-than-expected investment results), the government is required to transfer additional funds into the public service pension plan. This has occurred before, including during the period from 2013 to 2018.
I don't dispute that they've renegotiated contribution rules, I don't know the history of this pension fund that well. Typically these rules are renegotiated with union agreement.
The unions have a legitimate concern. As the Bank of Canada and other central banks raised interest rates in response to post-pandemic inflation, many pension plans posted healthy returns. The Public Service Pension Fund was no different. According to PIPSC, the plan performed very well over the last several years, securing returns of 18.4 per cent in 2021 and 10.9 per cent in 2022.
“This isn’t just free money plucked from Santa’s sleigh. This is our members’ money, their deferred salaries. [...] Federal workers contribute 50% of the money that goes into the pension fund, yet are receiving 0% of this added surplus.”
Moreover, the initial $1.9 billion transfer may be just the beginning. The actuarial report tabled by Anand in November projects that the pension surplus could exceed $9 billion by 2028. As PSAC warns, if the government continues to pocket these surpluses, up to $9.3 billion could be removed from the workers’ pension fund. According to the union, the federal government intends to suspend its pension contributions and remove $7.4 billion from the plan over these years.
The decision to withdraw surplus pension funds without worker consultation or input sets a dangerous precedent, potentially signalling to employers across the country that pension assets are theirs and theirs alone. As PSAC warns, “If the government can poach pension funds from its own employees, what’s to stop other employers from following suit and putting millions more at risk?”
This gets to the heart of the matter. Though workers and employers both make contributions, employers ultimately hold all the decision-making power over workers’ pension plans. If unions were able to influence these decisions, surplus funds would likely be used in more progressive ways, and would certainly benefit members more directly.
I think this is more complex, then an employer vs worker issue:
When the Govt originally made these pension investment "corporations", the notion was: "go invest this money and build up enough that we can pay all the members out their defined benefit", if something goes wrong the government will back the pension sort of "de-risking" the investment.
With that de-risking comes the other side of the coin, excess surpluses go to the government, the original agreement stipulated that, this is not a "the government is unilaterally taking money", this is something in the original contract. i.e it's not a surprise to anyone.
This gets to the heart of the matter. Though workers and employers both make contributions, employers ultimately hold all the decision-making power over workers’ pension plans.
This is true, but this is also a defined benefit pension: members know exactly how much they are getting from the pension at all times (with some assumptions about what their work history will be). They shouldn't be expecting more, and (for the positive side they know they won't be getting less). These kinds of pensions are rare, and everyone should want one.
As PSAC warns, “If the government can poach pension funds from its own employees, what’s to stop other employers from following suit and putting millions more at risk?”
I don't think this argument holds much weight, this isn't a flippant decision but something that was decided ages ago.
It also miss states that the money belonged to the employee's or employer in the first place, it does not belong to either it's more of a backup to gurantee future benefits
To put it into American terms that's about two football fields