Thursday, June 25, 2009

Billions of Dollars Pouring Into Public Sector Pension Plans

I have been approached with a lot of questions and have had a few radio interviews
as a result of the article last week in the Globe and Mail. In feudal age of pensions, renaissance must come

Some of the questions have been centered on how much money is being poured into pension plans and how badly affected were the public sector pension plans.

It is estimated that last year public sector pension plans in Canada lost $100Billion.

It is hard to grasp how much money is being funneled into these plans. There are a few major plans and lots of little ones spread around the province. We do know that many of your tax dollars over the next few years will be pumped into these plans.

One item on the last Ontario Budget that received no public debate was the commitment of the government to make extra or supplementary payments into the public sector pension plans. In the Ontario Budget 2009/10 additional payments into pension plans amount to $10.6 over the next 4 years. This has already been budgeted and I am sure much more will have to be made available to stop the hemorrhaging. See Table 20 of the budget. These are just "bonus" contributions.

These contributions are in addition to the billions funneled into these plans by all of the government organizations in Ontario.

One example in my back yard is McMaster University. As of the last actuarial report the plan had assets valued at $1.059Billion and a shortfall of about $90Million. Last year the contributions into the plan were by employee $ 12,698,000 and by the university $41,562,000. This was before the market crash which potentially wiped another $200,000,000 from the plan. The details can be found in the Annual Report at Page 38.

In addition the annual report shows future employee liabilities at $222Million. These would be for such things as the sick leave policy the City of Toronto is debating in its strike.

This is typical of most public sector plans. Huge contributions are being pumped into the plan to try and make up previous shortfalls. Then the markets smacked these plans by around 20% last year. Now they are facing huge shortfalls. For example, the estimated pension shortfalls and the future employee benefits liability are close to Half a Billion dollars. This on a budget of revenue coming in at $730Million.

This is only one of many taxpayer funded institutions in my neighborhood. This is a typical picture. The only question is how long can the hemorrhaging last for?

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