Saturday, January 15, 2011

Pension Plan Liabilities Plague Regina City Employees

Excepted from the Regina Leader Post

So where are most of the millions in proposed new property tax dollars going this year?

Operating costs, Sjoberg [general manager of corporate services] acknowledges. The biggest increase this year is for salaries and benefits. An extra $6.6 million is required to meet increased needs in those areas.

"That revenue is raised to support the current levels of programs and services provided to the community," he says of the tax hike, noting that while city hall's work does require a lot of employees, the total number has only recently returned to the level it was at in the late 1980s and early 1990s, despite significant growth in Regina since then.

But none of the increase would be spent to address the biggest challenge facing the city in the salaries and benefits department. That is, the pension liabilities, estimated at $238 million — about $90 million more than the city plans to take in via taxes this year.

Right now, on average, employees contribute 10.35 per cent of their salaries to the pension plan and the city matches that. In the near future, council is expected to face a decision on increasing the plan's contribution rates.

Sjoberg says reports have indicated that proposal could suggest contribution rates averaging 13.85 per cent for the employee and the employer each. That would mean the city would need to come up with about an extra $3 or $4 million each year to meet its contribution obligations.

No money is allocated for that, either, in this year's budget plans.

"The 2011 proposed budget doesn't have any additional funding towards the pension deficit," Sjoberg says.

He points out there are really two options to get the pension plan — which is complex due to the involvement of numerous employer and employee groups — back on track toward sustainability.

One, contribution rates could be raised. Two, the benefits offered under the plan could be changed going forward, though past obligations would still need to be met.

Meeting the legislation requirements for pension plans can get complicated. And the prospect of increased contribution rates isn't appealing to employees, either, Sjoberg admits.

"It certainly becomes a recruitment and retention issue for the city," he says. "We do need to come to some resolution on this."

Fiacco says the pension issues aren't anything new, but reserves offering his opinion on the solution for the time being.

"I'll be making my comments when I'm asked to make my decisions," he says.

Pension plan problems are not isolated to the city, Sjoberg notes, but stresses the city is different than a company when it comes to addressing issues of money shortages.

"Everything we do flows back to the taxpayer," he says. "It's not as if we can create a new product, like a new iPad, and go out and sell it and generate profit. That is the reality."

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