Teachers To Vote on Pension Plan Changes

Nova Scotia teachers will be asked to vote later this month on new pension arrangements designed to ensure the continued health of the Nova Scotia Teachers' Pension Plan.

Details of the plan, agreed to jointly by the Nova Scotia Teachers Union and the Government of Nova Scotia, were released this week.

"Right now the pension plan's liabilities are growing faster than its assets, and we can't allow that to continue," Finance Minister Peter Christie said today, Jan. 13. "The proposed changes to the plan will raise its funding levels to acceptable levels not only now but in future."

"Changes are required to make sure the pension plan remains healthy in the long run," said Nova Scotia Teachers Union president Mary-Lou Donnelly. "Ultimately, it is in the best interests of our members that the plan continue to perform at a level that guarantees retirement benefits well into the future."

A 10-year review of the plan in 2003 found that, while pension plan investments performed well overall in the last decade, less favourable market conditions from 2000 to 2002 put pressure on the funding levels. This is consistent with the experience of other large pension plans in Canada. At the same time, the plan is experiencing higher costs as more teachers retire.

Targets were set in the 1993 agreement to reach a funding level of 65 per cent of liabilities by year-end 2003 and 70 per cent by 2033, and to have a positive trend line. Although the funding level had reached 81 per cent by the end of 2003, the long-term funding trend was expected to decline to less than 60 per cent by 2033 and continue to decline even more rapidly after that.

Under the new proposal there will be a new system to govern the plan, and contributions of equal value from the teachers and the government.

The new proposal says:

• The government and the union will now share equal responsibility for the plan in all respects, through a joint board of trustees;
• A new indexing formula will allow inflation protection to be tied to the health of the plan;
• Government will make an upfront contribution of $142 million to the plan.

The Nova Scotia Teachers Union is recommending acceptance of the proposal, which will be voted on by teachers on Tuesday, Jan. 25.

If the proposal passes, a new board of trustees will take responsibility for administration of the plan after April 1, and the new indexing rules will start on Jan. 1, 2006.

The proposed agreement will have no impact on the payments being received by teachers now on pension. However, teachers who are retired by the end of 2005 will have the option to adopt the new rules if they so choose.

Despite the $142 million payment this year, the new pension arrangement will reduce the government's long-term liabilities, causing a net positive impact on the budget over the next few years.

Members of the Nova Scotia Teachers' Pension Plan include the province's public school teachers, some community college faculty and professional support staff. As of Dec. 31, 2003, the Teachers' Pension Plan reported 13,065 contributing members, with 8,815 pensioners and survivors receiving benefits.

The agreement does not affect the province's other major pension plans, such as the Public Service Superannuation Plan, which are governed separately.