Solvency of a DB pension plan

Preparing for life after work. RRSPs, RRIFs, TFSAs, annuities and meeting future financial and psychological needs.
Glen
Contributor
Contributor
Posts: 55
Joined: 21 Jan 2012 19:46
Location: Toronto

Solvency of a DB pension plan

Post by Glen »

My employer, a large Canadian manufacturing company, seems to be struggling. When this happens - and it has happened before - the water cooler talk turns to the security of our DC and DB pensions. I believe that the DC money is beyond the reach of the employer. I've done some reading today on the DB plan. The plan's last annual report stated that the estimated solvency ratio was 95% in March of 2014. Does that mean that the plan is 5% underfunded? It also stated that the plan's assets are held in trust, separate from the assets of the company.

If the company did fail, is it naive to believe that (a) our DC money is safe, and (b) employees (or retirees for that matter) are likely to receive about 95% of the DB pensions they've earned?
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

Re: Solvency of a DB pension plan

Post by brucecohen »

Glen wrote: If the company did fail, is it naive to believe that (a) our DC money is safe, and (b) employees (or retirees for that matter) are likely to receive about 95% of the DB pensions they've earned?
Not naive at all. Both DC and DB money is held in trust. It is not a company asset and neither the employer nor its creditors have access to it. The DC accounts are safe since DC plans impose no future obligation on the sponsor. The degree to which the DB promise is safe will depend on what happens to the company. If another company buys it, the DB plan is likely to be kept intact and continue to operate. That's because plan windups are complex, costly and take a lot of time. Or, the new owner might keep the DB plan intact but freeze it and put accruals for future service on a DC platform. If there's a union, that'll be subject to negotiation. If the company really does go under and the plan has to be wound up, the DB assets will be used to meet the promise to the extent possible. Usually current retirees get first claim as life annuities are bought for them. Next come current employees now eligible for pensions and then the rest. But this ranking might be changed if the windup involves negotiations with one or more unions. So, if the plan is 95% funded, you might be covered for 95% or a bit more or a bit less. When the company enters bankruptcy, the DB plan is one of the creditors and might obtain a bit more money through those talks. If the DB plan is Ontario-registered, it's covered by a provincial pension benefits guarantee fund -- the only one in Canada -- that basically covers pension of up to $1,000/month.

Note: the 95% solvency ratio as at March xx, 2014 is now a historical snapshot just like a personal net worth statement done on that day. Today, it's likely higher or lower and will continue to change as the ratio's key determinants change. Those determinants are:
-- Average yield on long-term bonds. Rising interest rates reduce the plan's funding requirement and vice versa
-- Fund's investment performance
-- Degree to which employer has maintained required contributions
-- Demographics of the plan's membership, especially mortality and longevity plus pattern of covered earnings

FWIW, a DB plan that's 95% funded is generally regarded as being in good shape.
Glen
Contributor
Contributor
Posts: 55
Joined: 21 Jan 2012 19:46
Location: Toronto

Re: Solvency of a DB pension plan

Post by Glen »

Thanks, Bruce, for the incredibly thorough response.
User avatar
CROCKD
Veteran Contributor
Veteran Contributor
Posts: 3343
Joined: 15 Aug 2008 16:59
Location: GTA

Re: Solvency of a DB pension plan

Post by CROCKD »

Re DB and DC pensions plans.
Here is an article extracted from the book by Moshe A. Milevsky and Alexandra C. Macqueen.
It examines pensions in 4 countries and compares them to Canada.
The decline of true pensions: A global overview and how Canada compares
" A verbal contract isn't worth the paper it is written on " Samuel Goldwyn
"The light at the end of the tunnel may be a freight train coming your way" Metallica - No Leaf Clover
Chuck
Veteran Contributor
Veteran Contributor
Posts: 2048
Joined: 21 Feb 2005 11:48
Location: Manitoba

Re: Solvency of a DB pension plan

Post by Chuck »

The worry for the DB pensioners, is although it might be 95% funded today, if the company is experiencing lean times, they will likely stop funding the plan. Bankruptcies don't typically happen overnight, a company might struggle along for 5 or more years (all the while not contributing to the DB plan). If the end game is indeed bankruptcy, the pension might be much less well funded by the time the plug is finally pulled. That's when you'll find out what sort of haircut you are really going to get (if you are a DB pension plan member).
User avatar
CROCKD
Veteran Contributor
Veteran Contributor
Posts: 3343
Joined: 15 Aug 2008 16:59
Location: GTA

Re: Solvency of a DB pension plan

Post by CROCKD »

From the article
Canada
the proportion of public-sector workers enrolled in a DB pension plan increased from 2002 to 2012, from 93 to 94 per cent, while the proportion of private-sector workers with DB plans fell dramatically, from 73 to 48 per cent – and where DB plans exist in the private sector, most new employees are not offered membership in DB plans
" A verbal contract isn't worth the paper it is written on " Samuel Goldwyn
"The light at the end of the tunnel may be a freight train coming your way" Metallica - No Leaf Clover
User avatar
adrian2
Veteran Contributor
Veteran Contributor
Posts: 13333
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Re: Solvency of a DB pension plan

Post by adrian2 »

Chuck wrote:The worry for the DB pensioners, is although it might be 95% funded today, if the company is experiencing lean times, they will likely stop funding the plan. Bankruptcies don't typically happen overnight, a company might struggle along for 5 or more years (all the while not contributing to the DB plan)
It would be illegal for a company to stop funding a pension plan which is underfunded.
A contribution holiday is allowed only when the plan is in a surplus position.
Imagefiniki, the Canadian financial wiki
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
flywaysuzy
Veteran Contributor
Veteran Contributor
Posts: 1224
Joined: 23 Feb 2005 10:04

Re: Solvency of a DB pension plan

Post by flywaysuzy »

Wouldn't you notice immediately on your pay stub that the company portion of your DB pension was not there? I don't think you would only notice after 5 years...
suzy
User avatar
adrian2
Veteran Contributor
Veteran Contributor
Posts: 13333
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Re: Solvency of a DB pension plan

Post by adrian2 »

flywaysuzy wrote:Wouldn't you notice immediately on your pay stub that the company portion of your DB pension was not there? I don't think you would only notice after 5 years...
There was never a company portion of my DB pension on my paystub. All it shows is my portion; whatever the company has to pay to make good of its promise is their responsibility and does not affect the taxes on each paycheque; the only visible effect now is the PA which reduces my RRSP limit as shown on the T4.
Imagefiniki, the Canadian financial wiki
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
User avatar
Bylo Selhi
Veteran Contributor
Veteran Contributor
Posts: 29494
Joined: 16 Feb 2005 10:36
Location: Waterloo, ON
Contact:

Re: Solvency of a DB pension plan

Post by Bylo Selhi »

adrian2 wrote:It would be illegal for a company to stop funding a pension plan which is underfunded.
A contribution holiday is allowed only when the plan is in a surplus position.
It may be rare but it's not unprecedented: Retirement dreams under siege
In July of this year [2009], the airline won a special 21-month reprieve from its employees and the federal government to delay repairing its $2.9-billion pension deficit. It is one of seven companies lobbying Ottawa to allow businesses more time and discretion to replenish pension deficits.

Federal and provincial governments, which divide responsibility for pension regulation, have responded to the pension crisis by granting businesses like Air Canada extra breathing room to replenish underfunded pensions...

In early 2002, only a few months before Slater Steel filed for bankruptcy protection, two pension funds at subsidiary Slater Stainless Corp. received a stamp of approval from Melvin Norton, a veteran actuary with Aon Consulting Inc. The Ontario Superintendent of Financial Services, the province's pension regulator, later concluded the funds were in fact 40-per-cent underfunded. It sued Mr. Norton for allegedly filing a false actuarial report.

The charges against Mr. Norton were dismissed by an Ontario judge. In 2008, the Canadian Institute of Actuaries fined Mr. Norton $15,000 and placed him under supervision for six months after it found that he had failed to perform professional services with "skill and care."
Sedulously eschew obfuscatory hyperverbosity and prolixity.
User avatar
adrian2
Veteran Contributor
Veteran Contributor
Posts: 13333
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Re: Solvency of a DB pension plan

Post by adrian2 »

Bylo Selhi wrote:
adrian2 wrote:It would be illegal for a company to stop funding a pension plan which is underfunded.
A contribution holiday is allowed only when the plan is in a surplus position.
It may be rare but it's not unprecedented: Retirement dreams under siege
The above quote, rare as it is, is about "replenishing pension deficits", which is a mandatory contribution in addition to the regular company contribution. I was writing about the regular part, for which there is no reprieve while the plan is in deficit.

Even the additional contribution is quite hard to stop, unless the company files a false actuarial report and/or goes through lots of hoops and whistles.
Imagefiniki, the Canadian financial wiki
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

Re: Solvency of a DB pension plan

Post by brucecohen »

Chuck wrote:The worry for the DB pensioners, is although it might be 95% funded today, if the company is experiencing lean times, they will likely stop funding the plan. Bankruptcies don't typically happen overnight, a company might struggle along for 5 or more years (all the while not contributing to the DB plan). If the end game is indeed bankruptcy, the pension might be much less well funded by the time the plug is finally pulled. That's when you'll find out what sort of haircut you are really going to get (if you are a DB pension plan member).
A DB plan sponsor must file a solvency valuation with regulators at least every three years. If the company is known to be in stress, regulators can -- and have -- required an annual filing. Many large plans voluntarily do annual valuations though they file those reports with regulators only when required. When filed, a valuation is supposed to be balanced. If there's a deficit, the sponsor has to present a plan for covering it. Depending on the cause of the shortfall, the sponsor gets 5 to 15 years to cover the deficit. Sometimes an employer is granted special concessions. For example, Air Canada whose DB plan is now in fine shape.
Chuck
Veteran Contributor
Veteran Contributor
Posts: 2048
Joined: 21 Feb 2005 11:48
Location: Manitoba

Re: Solvency of a DB pension plan

Post by Chuck »

It would be interesting to see a list of companies with DB plans that actually went bankrupt and the solvency of their DB plans at that time. Alas, I have no idea where to find such data (especially for Canadian companies). If most companies shut their doors with 90%+ funded plans, then I guess there is not much reason to worry. From the headlines I've read about pension haircuts, I suspect this is not the case.

One has to wonder if both regular and catch-up contributions are particularly hard to avoid how plans get so underfunded to begin with. Is is all just due to unrealistically optimistic investment return predictions (i.e. create the illusion the pension is in surplus so the company can go on a contribution holiday)? That's kind of a condemnation of the fiduciary duty of accounting firms if so.

I'm also under the impression getting catch up funding relief is not really that hard. A 5 year window is pretty standard I believe. IIRC Air Canada got 10 years, and Algoma 15 after some pleading. A lot can go south in 10-15 years (or even 5), such that the plan never returns to a fully funded state.
User avatar
adrian2
Veteran Contributor
Veteran Contributor
Posts: 13333
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Re: Solvency of a DB pension plan

Post by adrian2 »

brucecohen wrote:
Chuck wrote:The worry for the DB pensioners, is although it might be 95% funded today, if the company is experiencing lean times, they will likely stop funding the plan. Bankruptcies don't typically happen overnight, a company might struggle along for 5 or more years (all the while not contributing to the DB plan). If the end game is indeed bankruptcy, the pension might be much less well funded by the time the plug is finally pulled. That's when you'll find out what sort of haircut you are really going to get (if you are a DB pension plan member).
A DB plan sponsor must file a solvency valuation with regulators at least every three years. If the company is known to be in stress, regulators can -- and have -- required an annual filing. Many large plans voluntarily do annual valuations though they file those reports with regulators only when required. When filed, a valuation is supposed to be balanced. If there's a deficit, the sponsor has to present a plan for covering it. Depending on the cause of the shortfall, the sponsor gets 5 to 15 years to cover the deficit. Sometimes an employer is granted special concessions. For example, Air Canada whose DB plan is now in fine shape.
The problem I had with Chuck's statements was that, the way I read it, he was referring to a company not contributing at all to the plan. I don't think that's allowed, if the plan is <100% funded. Alleviating the solvency deficit is a separate step.

To give you a numbers example, the company I work for has a plan 81% funded, and the transfer ratio was 81%, at the valuation done on January 2011.
In 2013, company contributions were:
$22 MM for regular service
$8 MM to amortize the solvency shortfall
$70 MM voluntary additional contribution elected by the company.
Total company contributions = $100 MM

A new valuation was done in January 2014. The funded ratio was 102% and the transfer ratio was 88%.
In 2014, company contributions were:
$17 MM for regular service
$7 MM to amortize the solvency shortfall
Total company contributions = $24 MM

Noteworthy in the actual numbers is that the regular service contributions went down, this may be because the plan has swung into surplus, by the funded ratio; however that's just speculation on my part.
Side note: member contributions went up slightly year over year, inflation plus a bit, so membership numbers are slightly up.
Imagefiniki, the Canadian financial wiki
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

Re: Solvency of a DB pension plan

Post by brucecohen »

Chuck wrote:It would be interesting to see a list of companies with DB plans that actually went bankrupt and the solvency of their DB plans at that time. Alas, I have no idea where to find such data (especially for Canadian companies).
You might find that it you root around on the Ontario or federal pension websites.
If most companies shut their doors with 90%+ funded plans, then I guess there is not much reason to worry. From the headlines I've read about pension haircuts, I suspect this is not the case.
I've followed the pension industry for years and can recall few cases in which single-employer DB plans could not meet at least 90% of their commitments. I suspect the headlines you cite are from the US where it's pretty easy for a bankrupt company to walk away from a pension plan. That's not the case in Canada. Also, very few bankrupt companies really shut down. They're generally bought and Canadian laws require the purchaser to assume the pension liabilities. Note that since 2008 Canadian bankruptcy law has given pension plans priority over secured creditors. There have been problems with multi-employer DB plans not being able to pay promised benefits. Companies sponsoring MEPs are not required by law to cover deficits; that's a contractual issue between the employers and the union.
One has to wonder if both regular and catch-up contributions are particularly hard to avoid how plans get so underfunded to begin with.
It's actually pretty easy. Most, if not all, single-employer DB sponsors now use minimum funding strategies in which they put in only as much as is required. Then, an unexpected drop in long-term interest rates will hurl the plan into the red. A stock market crash would make that worse. Increasingly, sponsors are now trying to reduce their exposure to market volatility and matching bond duration to their liabilities to reduce their exposure to falling interest rates. Recall that two years or so ago everyone was convinced that deficits would consume Canadian plans. Now, the average private sector DB plan is more than 90% funded, according to Mercer. One problem is that companies are limited in their ability to over-fund plans when times are good because the Income Tax Act does not allow a DB plan to have more than a 10% surplus.
create the illusion the pension is in surplus so the company can go on a contribution holiday)? That's kind of a condemnation of the fiduciary duty of accounting firms if so.
While there is considerable leeway, the Canadian Institute of Actuaries sets standards for the assumptions actuaries use in valuing plans. As you mentioned, valuation and plan administration are fiduciary duties. US pension plans had a huge problem with over-optimistic investment assumptions. AFAIK, Canadian DB plans had little, if any.
I'm also under the impression getting catch up funding relief is not really that hard.
It depends on the sponsor's health, revenues and business plan. If the sponsor files a valuation with red ink, top-ups will have to be made. That means less money for expansion, pay hikes, etc.
pickmepickme
Contributor
Contributor
Posts: 117
Joined: 07 Oct 2008 12:04

Re: Solvency of a DB pension plan

Post by pickmepickme »

You sound like you've really learned a lot about the subject, Bruce, so I hope that you can help jog my memory on the Nortel retiree's problems. I vaguely remember reading that the DB members really lost out on their DB pensions for some reason. Do you recall how little they ended up receiving and why?
User avatar
ghariton
Veteran Contributor
Veteran Contributor
Posts: 15954
Joined: 18 Feb 2005 18:59
Location: Ottawa

Re: Solvency of a DB pension plan

Post by ghariton »

pickmepickme wrote:You sound like you've really learned a lot about the subject, Bruce, so I hope that you can help jog my memory on the Nortel retiree's problems. I vaguely remember reading that the DB members really lost out on their DB pensions for some reason. Do you recall how little they ended up receiving and why?
Depends on the jurisdiction governing their pension, usually the one where they lived and worked. I am told that Ontario ex-workers are getting some 70% of promised benefits. Actually, they are getting a progressively lower percentage, because their benefits are not being adjusted for inflation.

George
The juice is worth the squeeze
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

Re: Solvency of a DB pension plan

Post by brucecohen »

The Nortel case is still working its way through the courts. Here's the latest report I found. (Here is a more technical account from the pensioners' lawyers.) According to the Globe article, the pensioners' lawyer estimates they'll get 71%. I think he's referring to the majority, who were employed in Ontario. Those employed elsewhere are getting less, IIRC. The pensioners committee has a website but the news section is for members only.

This 2011 Star article said the pensioners were getting full benefits for a while and were then cut back to 70% in Ontario and 59% elsewhere. That was when the pension plan was being wound up. Now the pensioners' lawyers are fighting for a share of corporate assets still left.
pickmepickme
Contributor
Contributor
Posts: 117
Joined: 07 Oct 2008 12:04

Re: Solvency of a DB pension plan

Post by pickmepickme »

Thank you George and Bruce. That is quite a cut, but I suppose that since Nortel seems to be a "worst case scenario", at least 70% would be a lot better than nothing.
longinvest
Veteran Contributor
Veteran Contributor
Posts: 3956
Joined: 10 Sep 2012 17:26
Location: QC

Re: Solvency of a DB pension plan

Post by longinvest »

pickmepickme wrote:Thank you George and Bruce. That is quite a cut, but I suppose that since Nortel seems to be a "worst case scenario", at least 70% would be a lot better than nothing.
Maybe it's better than nothing, but it falls short of taking the commuted value and buying SPIAs from different insurance companies as to fully remain under Assuris protection thresholds. This is pretty miserable, as SPIAs must generate profit for insurance companies and most buyers are self-selected whereas a pension plan has no profit motives and its members cannot self-select.

It appears that, for a retiree, the risk associated with an employer pension plan is pretty big in Canada when things go badly. In most (all?) provinces, there's simply no good protection against plan failure. Nortel's case is a good illustration of this.
Variable Percentage Withdrawal (finiki.org/wiki/VPW) | One-Fund Portfolio (VBAL in all accounts)
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

Re: Solvency of a DB pension plan

Post by brucecohen »

longinvest wrote:but it falls short of taking the commuted value and buying SPIAs from different insurance companies as to fully remain under Assuris protection thresholds.
One problem with taking cv and annuitizing on your own is that if the DB plan has early retirement benefits, part of the cv must be taken as fully taxable cash. That's typically about 1/3 for public employees but would be lower for private sector workers since their plans are typically less generous.

In any event, big pension plans are starting to cover their risk by purchasing huge annuities. The trend is more advanced in Europe but I think a few Canadian plans have done this. Mercer now tracks the cost of this for a typical DB plan and reported here that at the end of last year transferring its risk to an insurer would cost the sponsor of a typical Canadian plan 8.6% over the liability value.
longinvest
Veteran Contributor
Veteran Contributor
Posts: 3956
Joined: 10 Sep 2012 17:26
Location: QC

Re: Solvency of a DB pension plan

Post by longinvest »

brucecohen wrote:One problem with taking cv and annuitizing on your own is that if the DB plan has early retirement benefits, part of the cv must be taken as fully taxable cash. That's typically about 1/3 for public employees but would be lower for private sector workers since their plans are typically less generous.
I was not advocating in favor of taking the commuted value; I was just illustrating the crappiness of the outcome for Nortel pensioners, where putting the commuted value in expensive SPIAs would have given a better outcome. This is awful and I simply don't understand why our laws allow this.
In any event, big pension plans are starting to cover their risk by purchasing huge annuities. The trend is more advanced in Europe but I think a few Canadian plans have done this.
As far as I can see, there's simply no incentive for companies and pension plan administrators to change anything. In any case, what is probably needded is something similar to Assuris for pension funds, mandated by law, to protect pensioners.

Can you imagine? You've been retired for 10 years. In the meantime, your former employer goes out of business. One day, you hear from your pension plan that your benefits are significantly reduced because of bad market performances and no employer to make up losses. And, by the way, your reduced pension won't be indexed anymore. All this being due to events that happened after you retired!
Variable Percentage Withdrawal (finiki.org/wiki/VPW) | One-Fund Portfolio (VBAL in all accounts)
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

Re: Solvency of a DB pension plan

Post by brucecohen »

longinvest wrote: As far as I can see, there's simply no incentive for companies and pension plan administrators to change anything.
Sure there is. Aside from fiduciary duty, a DB plan's funded status is a line item on the company's income statement. A surplus increases net income. A deficit reduces it. DB plans at many large companies now rank in size among operating divisions. As I noted above, big DB plans are now doing a lot to change their investment programs. Chief among that are immunization programs which match bond and liability durations and reduced exposure to public stock markets. As I noted above, in 2008 changes to the federal Bankruptcy Act gave DB pension plans priority over secured creditors. That was in response to the Nortel case.
In any case, what is probably needded is something similar to Assuris for pension funds, mandated by law, to protect pensioners.
Ontario has a Pension Benefits Guarantee Fund. Some/many pension analysts feel such plans are not a good idea because they might encourage reckless behavior by plan sponsors and their investment managers. Also, it adds to the cost of running a pension fund -- Ontario's program is financed by assessments on all DB plans registered in the province. As well, note that the US has a national pension benefits guarantee fund yet US DB members have suffered more than those in Canada.
Can you imagine? You've been retired for 10 years. In the meantime, your former employer goes out of business. One day, you hear from your pension plan that your benefits are significantly reduced because of bad market performances and no employer to make up losses. And, by the way, your reduced pension won't be indexed anymore. All this being due to events that happened after you retired!
How is that different than being retired for 10 years on a DC pension or RRSP and getting hit by a huge market or interest rate crash? Consider the plight of a DC or RRSP pensioner who retired in the early '90s and based his/her planning on the then-reasonable assumption of 8-10% interest rates. Remember: we know about DB deficits because the law requires that valuations be done at least every three years and publicly reported. There's no such requirement for DC plans and RRSPs.
And, by the way, your reduced pension won't be indexed anymore.
Perversely, that's not a major risk for private sector employees because very few private sector DB plans have automatic indexing and the days of voluntary ad hoc indexing are virtually or entirely over.

In any event, I think you're over-dramatizing the risk. The fact that only two company failures -- Nortel and Algoma -- get cited when DB pension risk is discussed is a testimony to how well plans have done. Again, bear in mind that much of our view of DB pension problems is skewed by events in the US.
User avatar
Insomniac
Veteran Contributor
Veteran Contributor
Posts: 2802
Joined: 29 Oct 2011 19:01
Location: Vancouver Island

Re: Solvency of a DB pension plan

Post by Insomniac »

longinvest wrote: Can you imagine? You've been retired for 10 years. In the meantime, your former employer goes out of business. One day, you hear from your pension plan that your benefits are significantly reduced because of bad market performances and no employer to make up losses. And, by the way, your reduced pension won't be indexed anymore. All this being due to events that happened after you retired!
Sure, I have seen it.

My pension plan used to pay our monthly MSP premiums and Blue Cross premiums for both pensioner and spouse. A few years ago, the plan announced that the pensioners would have to pay their own MSP premiums and the Blue Cross premiums for the spouse. This change cost the pensioner approx $150 per month. A big hit for those who are just getting by.

The College Pension Plan has had issues with their inflation adjustment account and has capped the indexing at 1.83%. Fortunately for their pensioners, we are in times of low inflation. e.g. If inflation was say, 5%, the pensioners would only get a 1.83% increase.
User avatar
Bylo Selhi
Veteran Contributor
Veteran Contributor
Posts: 29494
Joined: 16 Feb 2005 10:36
Location: Waterloo, ON
Contact:

Re: Solvency of a DB pension plan

Post by Bylo Selhi »

brucecohen wrote:Aside from fiduciary duty, a DB plan's funded status is a line item on the company's income statement. A surplus increases net income. A deficit reduces it.
But this too is subject to gaming. As Buffett warned before the financial crisis, e.g. Pension Investment-Return Assumptions Unrealistic, Says Buffett. Has this been addressed in post-2008 reforms or are we still at the mercy of their accountants (and CEO's greed)?
Sedulously eschew obfuscatory hyperverbosity and prolixity.
Post Reply