Yesterday's federal budget demonstrates that, like many of
its provincial counterparts, the federal government is looking for
cost savings in its employees' compensation arrangements.
In an effort to ensure that "public service employee
compensation is reasonable and affordable, as well as aligned with
that offered by other public and private employers", the
federal government announced the following proposed changes to its
employees' compensation and benefits:
implementing a new disability and sick leave management system,
including the introduction of a formal short-term disability
transitioning from currently paying 75% of retiree benefit
costs under the Public Service Health Care Plan (PSHCP) to equal
cost sharing for retired federal employees; and
increasing from two to six the number of years of service
required to be eligible to participate in the PSHCP in retirement,
except for current pensioners.
The budget indicates that these changes will be a
"priority" in this year's round of collective
bargaining negotiations, but does not specify that such changes
would be enacted via legislative amendments.
In addition, the federal government reiterated its previously
announced plan to align the pension plans of Crown corporations
with the federal Public Service Pension Plan (PSPP) by implementing
a 50:50 employer-employee pension plan cost sharing model by 2017.
The budget also calls for an increase in the retirement age for new
Crown corporation hires to 65, as well as raising the age at which
other retirement benefits are available to correspond with the age
at which they are available under the PSPP.
Perhaps more of a political gesture, the budget also indicated
that the federal government will introduce legislation to prohibit
Members of the Senate and the House of Commons from accruing
pensionable service as a result of having been suspended from
Parliament through a majority vote by their peers.
As noted above, the federal government is not the only Canadian
jurisdiction making changes to public sector pensions.
Last fall, the Alberta government announced that it will be making changes to
its public sector pension plans to ensure that they are more
"secure, adaptable and affordable", including ending
subsidies on pension benefits earned for service after 2015 for
those who retire before age 65 and making cost-of-living
adjustments (COLA) on benefits earned after 2015
"targeted" at 50% of the Alberta inflation rate.
In its 2013 Economic Outlook, the Ontario government
indicated that it would implement an asset pooling framework for
public sector pension plans in 2014 and that it had already reached
agreements with the four Ontario jointly sponsored pension plans to
freeze employer contribution rates for a period of five years.
Most recently, Prince Edward Island passed changes to its
public sector plans which included placing limitations on COLA for
its public sector retirees and increasing the age at which
employees may retire with an unreduced pension.
For a number of years, many have expressed concern regarding the
sustainability of defined benefit plans. It appears that
governments across Canada have also begun to turn their attention
to the costs of such plans. Will reductions in benefits, asset
pooling and contribution rate freezes be enough? Or is it time to
take a more targeted approach?
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