Premier Dalton McGuinty tours new full-day kindergarten classes at St. Luke Catholic School with principal Martha Palmer.
Credits: Michael Aubry/Ottawa Sun/QMI Agency
TORONTO - It's not just teachers' wages that are under pressure these days.
Pensions, too, are getting squeezed as markets contract and the number of retirees grows steadily.
As of Jan. 1, 2012, the venerable Ontario Teachers Pension Plan - long renowned as one of the most successful pension funds anywhere - reported it had an unfunded liability of $9.6 billion.
"It (the unfunded liability) is something that has to be watched to preserve the fund's sustainability," Finance Minister Dwight Duncan said.
"Modest steps (to address the liability) today will assure young teachers and those who are not collecting pensions yet will be able to do so in the future."
The unfunded liability - the difference between what the fund expects to earn and what it expects it will have to pay in benefits - is actually coming down after the stockmarket meltdown of 2008 and came in at $17.2 billion at the start of 2011.
"This preliminary shortfall is all the more frustrating because it detracts from the results that the fund's management and staff turned in. But it also makes the point that we cannot expect to close the funding gap solely through investment earnings," OTPP chair Eileen Mercier said in the plan's annual report.
"This leaves us with the reality that the cost of future benefits must be recalibrated."
The plan is funded 50-50 between teachers and the government. Both agreed to take steps to address the unfunded liability in 2011.
Those included raising contribution rates to 13.1% of salary over three years and scrapping inflation indexing of benefits for three years for people who retire after 2009.
More changes could be on the way. Economist Don Drummond said in his February 2012 report that it's unlikely teachers will agree to increase their contributions beyond 13.1%, and that reducing benefits may be the only other option should investments fail to cover the gap.
The government has appointed Bill Morneau to consult on Drummond's pension recommendations and is expected to report back sometime this fall.