Deficit can be eliminated with no benefit reductions
Deficit can be eliminated with no benefit reductions
With a mandate to examine all possible ways to reduce the Plan’s deficit, the Funding Task Force analyzed the impact of many potential changes, including changes to benefits members would build in future, and contribution rate increases.
Contributions changes will help secure future benefits, improve equity
Rates to edge up over three years, beginning in 2012
Members living longer
Improved life expectancy means more valuable pensions
About the Funding Task Force
How the task force conducted its review
About the deficit
How the Plan is managing the deficit
To determine how big the changes might need to be the task force first updated the Plan’s funding projections. The actuarial assumptions the Plan uses to estimate the value of its assets and the benefits it owes to members over the long term were reviewed and updated. One of these assumptions is member life expectancy, which has risen to 87.7 years for the typical member who retires at age 60. This increase means the Plan needs to assume members live 28 more months on average – a change that increases the ongoing cost of funding lifetime pensions for our members by $447 million.
Updated projections show Plan is secure over long term
with only small changes
Other actuarial assumptions were updated to align with current actuarial standards. Some of these improved the funding status. Together with steps the Plan has already taken to manage the deficit, the updated projections confirmed the Plan is secure over the long term if only small changes to contribution rates are made now.
“The Plan is in a position to grant inflation protection increases through 2014, including on both pre-1992 and post-2007 service,” says Derek Dobson, Chief Executive Officer and Plan Manager.
After 2014, inflation protection on pre-1992 service will return to being granted on an ad hoc basis while increases on post-2007 service will continue to be reviewed every three years.
In determining which changes to recommend, the task force was deeply aware that neither benefit changes nor contribution rate increases would be desirable to members, or their employers who match member contributions. After careful consideration, the task force concluded that members place a high value on their pension benefits and would prefer to pay slightly more in contributions to help secure those benefits over the long term than see any benefits cut.
“Members can rest assured that their pension plan exists solely to secure the pension promise. Their representatives who jointly govern the Plan have benefit security top-of-mind when making funding decisions,” Derek Dobson, Chief Executive Officer and Plan Manager says.
Read about the contributions changes here
