Pension Contribution Holiday Proposed

The provincial government and the Nova Scotia Government Employees Union (NSGEU) have agreed that a pension contribution holiday is the appropriate response to the significant surplus in Nova Scotia's Public Sector Superannuation Fund.

The provincial government employees' pension plan is more than 100 per cent funded, and the surplus is growing. Revenue Canada's rules for continued registration of any pension plan requires employers to stop contributing when the plan's surplus exceeds 20 per cent. The government and the NSGEU have concluded that employees should also benefit, by way of a pension contribution holiday.

"The fund is well managed and has performed very well in recent years," said Finance Minister Bill Gillis.

Dave Peters, president of the NSGEU said, "I have always said that employees should benefit right away from any surplus in the pension fund. After talks with the government throughout the fall and winter we are able to make this offer to employees now."

The pension contribution holiday will not affect retired government employees, whose benefits are fully indexed.

"Retirees will continue to benefit from a sound pension plan that they can rely on throughout their retirement," said Mr. Gillis.

Pension funds are well protected by legislation and regulations. Any proposal for the dispersement of surplus funds, even for contribution holidays, requires enacting legislation. The current proposal has been examined and approved by external pension fund experts and pension fund lawyers over the last few months. The government would still have to pass legislation before a contribution holiday could be granted.

Under the agreement, all contributions made during the 1997-98 fiscal year would be returned to the contributors. About $28 million will be distributed to government employees. The employers, primarily the provincial government, will receive the same amount. In total, this agreement will reduce the surplus in the government employees' pension plan by between two and three per cent. At the end of 1996, the plan was about $150 million over funded, or 108 per cent funded. Since that time, the surplus has increased.