Public-sector pensions: options for reform from the Saskatchewan NDP
In 2011, just over six million Canadians were enrolled in some type of registered pension plan (RPP). In the public sector, 87.1 per cent of employees were covered by an RPP, up from 75.5 per cent in 1978. In the private sector, just 24.4 per cent of employees were enrolled in an RPP in 2011, down from 35.2 per cent in 1978.
In 1974, of those enrolled in a registered pension plan, 98.8 per cent of public sector workers were in a defined benefit plan, which had decreased 94 per cent by 2011. In the private sector, 88 per cent of private-sector workers were in a defined benefit plan in 1974 but that declined to 52.3 per cent by 2011. In the private sector, significant growth has occurred in defined contribution and other registered plans.
Actuarial assumptions about major provincial public sector pension plans have been too optimistic, which has had consequences for public treasuries. In fact, increased contribution rates and/or bailouts for public sector pension plans have been the norm among the major plans, not the exception. Since the year 2000, taxpayers have seen repeated increases in the contribution rates to public sector pension plans, this to ameliorate pension fund shortfalls. In addition, taxpayers have also been required to bail out the public sector pension plans through special payments.
Given the tight connection between the cost of public-sector pension plans and the public treasury, and thus to taxpayers, one notable Canadian-made option for reform comes from Saskatchewan. There, the province stopped adding to pension liabilities and did so over three decades ago. The NDP's 1970s-era reforms can serve as a useful model for long-term reform to any government, provincial or federal.