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CALL TO HAVE AG SCRUTINIZE SHARED-RISK PENSION MODEL REJECTED

CHRIS MORRIS Telegraph Journal LEGISLATURE BUREAU 14 JUN 2013

FREDERICTON – The New Brunswick government is rejecting a call to send its shared-risk model for public sector pensions to the auditor general for independent review.

During question period in the legislature on Thursday, Opposition Liberals asked Finance Minister Blaine Higgs whether he would involve the provincial auditor in examining the new pension model, which is strongly opposed by many retired public servants.

Finance Minister Blaine Higgs said the government doesn’t see any reason for the AG’s office to get involved in the matter.

“I do not see that it is necessary to do that, so it is not our intent to refer it to the auditor general,” Higgs answered.

“We have a process to work with the pensioners and to work with current employees. It is very open and very transparent. Actuaries are looking at this from both sides. They understand what it means and what it looks like. It is a common process that is done for pension evaluation. It does not need any further analysis.”

Opposition Liberal critic Victor Boudreau said it’s hard to believe the Tories would want the auditor general to review an old issue like Atcon while not referring the pension changes that will affect “35,000 retirees, 45,000 current members of the pension fund, and a pension fund of over $10 billion.”

Higgs said there’s a key difference between Atcon and the pension changes.

“In this particular situation, we can account for the money,” he told the House.

According to a statement earlier this week from the New Brunswick Investment Management Corporation, the financial assets of New Brunswick’s public service, teachers’ and judges’ pension plans grew to more than $10 billion by the end of 2012-13, largely due to impressive investment returns.

The corporation said that thanks to over $800 million in valuation gains and $166 million in special funding payments, the plan posted a gain of about $700 million after net pension payouts of $305 million.

Finance critic Roger Melanson said that given the impressive performance of the management organization – a Crown corporation – he wants to know if it will continue to manage funds under the proposed shared-risk model.

But Higgs did not give a clear-cut answer.

“In the initial phases and as we start, our intent is that NBIMC will be managing the fund,” he told the legislature.

“It will manage it and start the process, and we hope that it will be able to continue the process through great performance.”

Higgs said he is pleased with the pension performance, but not swayed from his determination to convert the plans to a shared-risk model.

He has described the public service plans as “dangerously underfunded and requiring millions of dollars or significant amendments to again become sustainable.”

Retired civil servants currently have guaranteed pensions, with taxpayers shoring up any shortfalls to their plans. They are the kind of defined-benefit plans that are becoming increasingly rare in private industry.

But public sector retirees have raised concerns about the proposed shared-risk model, warning it means the loss of guaranteed cost of living increases, the loss of the province as the sponsor and guarantor of the public sector plans and the possible reduction of base benefits, among other things.