January 21, 2010
Right-wing think tank uses faulty report to attack PS pensions
The C.D. Howe institute's report on the state of the federal public-sector pension is only the latest tired tune that uses public-sector workers as scapegoats in the hysteria over the federal budget deficit.
The Institute's estimate of the “fair-value” costs of the federal public pension liabilities assumes that the federal government will one day cease operations in the same way as a private corporation going bankrupt. However, the current actuarial practices that the Office of the Chief Actuary uses correctly evaluates the pension plans' costs on the basis of on-going concern over its pension obligations. The pension funds are managed according to actuarial projections that spread risk across generations and over a very broad time horizon. Naturally, over that amount of time, there will be projected deficits and surpluses. The latest actuarial report tabled in Parliament in November 2009, in fact, shows that the federal public service plan is adequately funded and is a far cry from the $58-billion liability that C.D. Howe is ringing false alarms over.
Another point the Institute skims over is the fact that federal public sector workers contribute significantly to the costs of their pension plans. Pension benefits paid to retired workers are deferred salary and represent part of their overall compensation package. Federal public service employees are currently paying about 32 per cent of the actuarial cost of their pension plan and this percentage will increase to 40 per cent by 2013.
The C.D. Howe Institute proposes an accounting model designed only to bolster its case against public service pension plans and defined-benefit pension plans in general. The real looming pension crisis is the need to provide retirement security for all Canadians. But rather than heed the labour movement's call for enhancing the Canada Pension Plan and Old Age Security, the Conservatives will likely rely on questionable “studies” such as the Institute's to justify attacks against the federal public service pension plans that are still recovering from the $30-billion pension surplus the previous government appropriated in 1999.
