N.L. government, unions reach deal on pension reform

“In reaching this agreement, we are protecting a defined benefit pension plan for current and future Public Service Pension Plan members, and we are working to address the most significant financial issue facing the province,” says Tom Marshall, premier of Newfoundland and Labrador. “This agreement is contingent on joint trusteeship, meaning that both government and members will share responsibility for the plan equally, and deficits will no longer rest solely on the taxpayers of Newfoundland and Labrador.”

The government will pay about $2.7 billion, amortized over 30 years, to address the unfunded liability of the PSPP. In return, unions have agreed to plan changes and contribution rate increases with a value of $1.13 billion.

The changes include the following:

• matching contribution increases of 2.15% of all pensionable earnings for all plan members and an additional 1.1% for the portion of pensionable earnings above the year’s maximum pensionable earnings;
• future service to be calculated using the best six year average earnings. For existing employees, past service will be calculated on the basis of the higher of the frozen best average five-year earnings or the best average six-year earnings;
• early retirement with an unreduced pension at age 60 with a minimum of 10 years of service or age 58 with a minimum 30 years of service;
• early retirement with a reduced pension at age 55 with a minimum of five years, age 53 with a minimum of 30 years, or age 59 with 29 years, including a five-year transition period;
• employees who will meet the current early retirement provisions or have at least 30 years of service at the end of the five-year transition period will be grandparented under the current early retirement rules;
• eligibility for a pension and at least 10 years of service will be required for entitlement to other post-employment benefits, such as health insurance, with a five-year transition period for existing employees;
• indexing on future service is suspended; and
• current retirees will not be affected by plan changes.

In addition, an independent corporation will oversee the administration of the plan. Legislation that will set out the framework for the corporation will be introduced in the fall sitting of the House of Assembly.

There are approximately 27,000 contributing plan members in the PSPP and approximately 17,000 pensioners.

Related articles:

• Retirees sue New Brunswick over changes to pensions
• Quebec introduces bill to reform municipal pensions
• N.B. teachers, province reach pension deal
• Ottawa calls for target benefit plans