The City of Winnipeg will soon approach police unions about amending their defined benefit pension plan as it struggles to keep it afloat, according to the CBC.

It reported that last Friday, Mike Ruta, Winnipeg’s chief financial officer, sent an email to city council members about the sustainability of the city’s police pension plan in which he noted the city currently spends $29.1 million to fund it while its members contribute $13 million.

An actuarial valuation of the police pension plan as of Dec. 31, 2014, showed a funding deficiency. The city’s 2015 annual report confirmed the mounting costs to sustain the police plan: employer contributions to the plan had risen to $24.1 million in 2015 from $23.1 million the year before, while employee contributions have remained fairly stable at $12.8 million. Benefits paid from the plan also increased by about $2.9 million over that period.

Read: What does OSFI’s updated guide on actuarial reporting mean for pension plan sponsors?

Benefits Canada has confirmed that Ruta has approached the Winnipeg Police Association and Winnipeg Police Senior Officers Association to present them with options on changing the pension plan to make it more affordable and sustainable.

It’s not unusual for defined benefit plans with solvency funding requirements to face such challenges in today’s economic climate, says Jana Steele, a pension lawyer at Osler Hoskin & Harcourt LLP in Toronto. “One of the typical problems for plan sponsors is looking at plan sustainability, as well as affordability.”

Since the police pension plan isn’t exempt from solvency requirements, the City of Winnipeg faces higher funding obligations, according to Steele. “When you have a plan that has a funding requirement like that, your costs can go up one year and they’re not predictable.”

Read: 2016 Top 100 Pension Funds Report: Solvency reform on the agenda

According to the 2015 annual report, the City of Winnipeg approved a report in 2011 that dealt with the option of a solvency exemption for the plan. Voting in 2013, the majority of plan members rejected that option. Steele says that in general, many public pension plans in Canada are exempt from solvency funding. “There’s less risk of an employer going bankrupt in a public sector scenario.”

The report recommended that if the city didn’t obtain a solvency exemption, it should explore all options to reduce the financial impact of the obligations.

Published in December 2011, the Winnipeg police pension plan bylaw states the city can amend the plan, merge it with another one, divide it or terminate it as long as existing members don’t have their accrued pension benefits reduced. The bylaw also states the city can make the changes retroactively.

Read: A refresher on the purposes of pension plan funding


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