Auditor General’s Comments on PSSP Changes
On February 6, the Auditor General released his latest financial report for and about the provincial government. In that report, he raised several major issues about recent changes to the Public Service Superannuation Plan (PSSP). Since that time, we have heard from several NSGEU members who are concerned what these changes could mean for them in light of the Auditor General’s comments.
NSGEU certainly respects and values the work of the Auditor General. However, in the case of his latest questions about the PSSP changes, we think he may not fully understand or appreciate what the changes mean or how they were developed.
His recommendation on the PSSP is as follows:
“The Minister of Finance should directly communicate all significant proposed changes to the Public Service Superannuation Plan to its members”.
Recommendation 2.14, p. 33, Report of the Auditor General to the Nova Scotia House of Assembly, February 6, 2013 found by clicking the link below.
According to the Auditor General, those significant changes are the loss of the provincial funding guarantee, the loss of indexing and its impact on pension benefits, and the pressure for limiting any contribution rate increases in favour of decreasing benefits.
To put the changes in context, a little background information may be useful about why they were made. In 2008, it became clear that the funding level for the Plan was dropping. At the end of December 2009, it was only 69%. Worse still, according to independent advice we received, it was not likely to improve without some significant changes being made. This led to two sets of legislative changes: one set out in April 2010 as part of Bill 24 – Financial Measures (2010) Act and the other in a new Public Service Superannuation Act in April 2012 asÂ part of Bill 17 – Financial Measures (2012) Act. We were informed of the changes in 2010 before they were introduced, and we helped to develop the changes in 2012.
These changes do not affect the basic pension benefit as outlined in Section 88 (2) of the new Act in 2012. What is affected is indexing, that is, an increase in pension benefits according to changes in the cost of living. However, for the first time, indexing is actually guaranteed to be at 1.25 percent of each of the next five years from January 1, 2011 to December 31, 2015.
After December 31, 2015, indexing will only be provided depending on the financial health of the plan. This will mean indexing may only be provided for the next five years if the Plan is funded above 100%. If the funded level is at 110% or greater, contribution rates may be decreased and benefits may also be improved. When the Plan is in surplus, a portion of the surplus must be retained in a strategic reserve to help weather potential difficult times in the future. If the funded level is slightly below 100%, there will be no indexing and a contribution rate increase may be implemented. If it is significantly below 100%, then contribution rates must be increased and future benefits must be reduced. Benefits earned to date are protected. More details can be found on the Pension Agency website
The provincial guarantee to fund future deficits is eliminated, but a whole new set of very specific funding rules is established in the legislation. In addition, the whole new arrangement is jointly overseen by government and non-government representatives. This includes 3 representatives from NSGEU. The new arrangement permits a transfer from the Minister of Finance being the sole trustee to joint trusteeship in the future.
With joint trusteeship, representatives from NSGEU and other members of the Plan will decide the future of the Plan on an equal basis with representatives of the government. Joint trusteeship is also an important protection against possible unilateral actions of future governments who may not be committed to protecting the funding level and benefits of Plan members. Never again should we see unilateral negative decisions by a Minister of Finance such as having the contribution rates increased without our knowledge. This move to joint trusteeship is expected to take effect as of April 1, 2013.
Our sister components across Canada who are part of NUPGE including the Ontario Public Service Employees Union (OPSEU), the BC Government and Service Employees Union (BCGEU), and the Health Sciences Association of BC (HSA-BC) have all had joint trusteeship for their pension plans for several years, and it works very well. As one of our colleagues elsewhere expressed it, “If you are not at the table, you will be on the menu”.
In summary, there have been some major changes made to the PSSP since 2010. But the basic benefit is not affected, the funding level has improved to close to 100%, and we now have a much greater role than we ever had in overseeing and making needed policy changes.