Ontario finance minister Dwight Duncan announced yesterday that the province and the Healthcare of Ontario Pension Plan (HOOPP), the Ontario Public Service Employees Union (OPSEU) pension plan and the Colleges of Applied Arts and Technology (CAAT) pension plan have reached a deal to keep the plans separate from any proposed superfund and also freeze employer contributions for five years.
Essentially, by agreeing to not increase employer rates for the next five years, the plans will be able to keep control over plan assets and investment decisions. However, should a funding shortfall occur during the set five-year period, the plans would be required to reduce future benefits, up to a limit, before further increasing employer contributions. Any benefit reductions necessary to address a new deficit during that period would apply to future benefits only—current retirees would not be affected.
For HOOPP—which has been at least 97% funded since 1979 and was 103% funded at the end of 2011—this is a winning scenario. Although HOOPP hadn’t expect to be included in a superfund, the government planned to change the contribution make-up to a fifty-fifty split. Currently, HOOPP members pay $1 for every $1.26 that the employer contributes. By signing this deal, the contribution ratio will stay the same.
OPSEU president Warren (Smokey) Thomas said that this is a major victory over what was sure to be an all-out attack on retirement security for thousands of public sector workers.
“Not only have we maintained joint sponsorship of our pension plans, but we have also put mechanisms in place that will make sure these plans remain funded and even allow for expansion and portability,” Thomas said. “We recognize the financial difficulties the government is facing. However, our goal all along was to allow our members control of the pensions that they themselves have paid for year after year.”
The Canadian Union of Public Employees was also part of the original negotiations, but the organization has yet to sign a deal.
“These agreements confirm what the McGuinty government has always maintained: when our partners are willing, we can reach goals that benefit Ontario families, protect jobs and public services. These deals will protect plan members and help Ontario eliminate the deficit by 2017-18,” Duncan said.