Prince Edward Island's two public pension funds could be revamped under a proposal to be introduced in the province's legislature this fall, with changes including increased employer and employee contributions and the removal of guaranteed cost-of-living benefit increases.
The pension funds — P.E.I. Civil Service Superannuation Fund and P.E.I. Teachers' Superannuation Fund, both in Charlottetown — have a combined C$1.9 billion (US$1.86 billion) in assets and unfunded liabilities of more than C$400 million, according to a report from provincial Premier Robert Ghiz. The CSSF currently is 78% funded; the teachers plan, 77%.
The two defined benefit plans will not be closed, according to the report.
Along with the existing dollar-for-dollar contribution match, the province will contribute an additional total of C$25 million annually to the plans for the next 20 years. Extra contributions equal to 1% of pay for employees and 2% for employers will kick in if each plan's funding level drops below 110%, and an additional 2% employer contribution will begin if funding drops below 100%.
The province would also be responsible for making sufficient additional payments to reach 100% within five years if the added employer and employee contributions fail to do so.
Also, starting in 2017, the annual cost-of-living increase for participants in both plans will be based on whether each plan is more than 110% funded, in what Mr. Ghiz called “contingent indexation.” Currently, civil service retirees get a cost-of-living increase equal to 100% of the consumer price index up to 6%, while retired teachers get an increase equal to 60% of the CPI. Under the plan, the 2013 cost-of-living increases of 1.5% for civil servants and 0.9% for teachers will continue.
If the proposed changes are approved by the P.E.I. Legislative Assembly, they will become effective Jan. 1, 2014.
