These two Trust Funds contained in the Public Accounts of the Province are actually Pension Trust Funds. They are the Funds where both employee and employer pension contributions are made too where they are invested by the NBIMC.
I recall the PSSA plan and Trust Fund commenced circa 1932 and still exists today. From 1932 until fiscal year 1975/76 (or 76/77) primarily only employee contributions were paid into this fund and it was invested mainly in government bonds. Pensions were paid from this Trust Fund, from the mainly employee money. The Province of NB did not make a regular contribution to this pension plan for these some 43 years (for 28 years no employer contribution was made).
In fiscal 75/76 (or 76/77) the Province committed approximately $7.2 million to begin funding the PSSA and TPA. Approximately $3.6 million was paid into each Trust Funds #4 and #7. This was the establishment of Trust Fund #7; it did not exist prior to 75/76 (or next) fiscal year. Prior to this fiscal year teacher contributions were paid into the General Revenue fund of the Province and pensions were paid out of that general revenue fund. The Teachers Plan commenced circa 1910 and pensions always exceeded employee contributions and each year including fiscal 75/76 (or next) the province budgeted for the pension payroll shortfall. This was the Province’s only contribution to the Teachers Pension Plan in those some 65 years.
In fiscal 76/77 (or 77/78) the Province began matching contributions of both PSSA and TPA members. In addition, because the TPA Trust Fund #7 was beginning with just the $3.6 million contributed the previous year the Province continued to budget and pay the annual teacher pensioner payroll in order to allow the fund to increase more rapidly than if pensions were being paid out directly from Trust Fund #7.
In late 80’s/early 90’s the Province realized it had neglected the issue of funding its pension plans. In approximately 1993 the employer contributions provisions to the PSSA and TPA were changed from matching contributions to actuarially determined contributions in an actuarial valuation approved by the Chairman of Board of Management. At the same time pensions began to be paid directly from the TPA, Trust Fund #7. They had always been paid from the PSSA Trust Fund #4.
In addition the Province embarked on a plan to full funding by making amortization payments to liquidate the unfunded liability in each of these two pension plans. It was estimated that liquidation would take approximately 22-25 years.
Due mainly to exceptional market performance and overall performance of NBIMC a fully funded status was reached much quicker, inside approximately 11 years. It could be said that this was due to the investment performance being front end loaded. Unfortunately the Province stopped special payments when fully funded state was reached, thereby putting the financial status of the pension funds at risk. After a few years, the special funding payments recommenced, but damage had been done. There was no provision in Law that outlined the special payments and that they were mandatory.
It was these same exceptional returns that lead the Province to be able to book, for accounting purposes, negative pension expenses for a number of years. These “surpluses” are still showing on the books of the Province and are being amortized.