On November 19, 2013, the Province of New Brunswick introduced for First Reading, An Act Respecting Pensions under the Public Service Superannuation Act (the Act). Under the Act, the Public Service Superannuation Act (PSSA) will be repealed and the pension plan under the PSSA will be converted to a shared risk plan in accordance with the Pension Benefits Act (New Brunswick) (the PBA).
A news release, entitled “Union support for pension legislation”, was also published on November 19, 2013 with respect to the PSSA conversion. The news release provides that a memorandum of understanding had been signed “with unions representing two-thirds of the bargaining positions in the PSSA, including several CUPE locals, in advance of pension legislation that the province will table today”. Finance Minister Blaine Higgs commented that “all members of the PSSA will soon have the benefit of a more secure, sustainable and affordable pension plan as a result of this legislation”.
The Act includes a protected base benefit floor for members and retirees at conversion. Under shared risk plans generally, there is an ability to reduce base benefits in the future in accordance with the plan’s funding policy, if the required funding tests are not achieved. The Act provides that if there ever has to be such a reduction in base benefits under the converted plan, members and retirees at conversion are entitled to a base benefit under the converted plan that is no less than the value of his or her benefit under the PSSA immediately prior to conversion with the exception of indexing not yet granted. If a reduction below this benefit floor is required, the Consolidated Fund will pay such shortfall. As indicated in the press release, there have been several other public and private sector plans in the province of New Brunswick that have converted to shared risk under the PBA. The protected floor under the Act is not provided to such other converted plans.
The Act also includes certain benefits outside the PSSA (e.g., a Special Retirement for Deputy Ministers program) and provides how such benefits will be addressed. These other benefits are also subject to future adjustment, and include a similar benefit floor.
The news release provides that “the PSSA is facing a billion dollar deficit which is expected to get worse due to demographic realities and realistic estimates of future investment returns”. The realities facing the PSSA are not unique to this plan. With changing demographics, and low interest rates, more provinces have been taking a closer look at their public sector plans and the long-term sustainability of such plans. Innovative designs, including future cost of living adjustments becoming conditional on plan funding, are increasingly being considered. In order for such changes to proceed for public sector or private sector plans in other provinces, generally new legislation is required.
The Act has received First Reading only at this time and therefore is not yet law in New Brunswick.