The Ontario Teachers’ Pension Plan will use part of its $13.2-billion surplus to restore some inflation protection for teachers who retired after 2009, according to the Ontario Teachers’ Federation and the provincial government.
The remainder of the surplus will remain in reserve to ensure stable benefit and contribution rates as interest rates remain low and members live longer, federation president Mike Foulds said in a release.
“Conditional inflation protection has proven to be an effective tool for managing plan deficits and now, for the third year in a row, the sponsors will use some of the surplus to partially restore indexing that pensioners lost in recent years,” said Foulds.
In January 2017, retirees will receive a one-time increase to restore their pensions to expected levels if full inflation protection had been place. The teachers will also receive a slightly higher inflation-related increase for pension credits earned after 2009: cost-of-living increases will rise to 90 per cent of the annual increase in the consumer price index from 70 per cent.
Pension credits earned before 2010 are subject to full inflation protection, so the changes don’t affect teachers who retired before that time. Active plan members are also unaffected because Ontario Teachers’ determines inflation adjustments after retirement.
As of the beginning of 2016, the plan reported a funding status of 107 per cent, based on current benefit and contribution rates. That was the third surplus the plan had reported in a decade.