Reforming the MLA pension plan is a vital first step toward overall pension reform

The quest for pension reform starts with MLAs

By -- Todd MacKay – CTF Prairie Director—— Bio and Archives--October 31, 2017

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It might be too nerdy to be the next Indiana Jones storyline, but, after years of searching, the long-lost, secret MLA pension annual report has been found. After dusting off the cover here’s what it shows: for every dollar MLAs contribute to their retirement fund taxpayers have to put in $2.79.

And, while the discovery may not quicken the pulse, it all adds up to allow MLAs to stash some serious treasure. When he left the Legislature, the Canadian Taxpayers Federation calculated that former MLA Steve Ashton would qualify for a pension of $86,000 per year for a lifetime total of $2.5 million. MLAs can join the pension plan after one year of service and start collecting guaranteed benefits at age 55.

Discovering that MLAs only contribute a buck for every $2.79 taxpayers throw into their pension plan may not seem like an epic quest, but it’s taken an absurdly long time to get that number. The CTF started asking for the MLA pension report back in the beginning of 2015 and got a bureaucratic runaround of referrals to multiple offices that ultimately resulted in a failure to find the report even though other government pension reports are routinely made public. We asked again in our budget submission last year. This month an email arrived.

“Here you go! Sorry for the delay,” wrote a helpful government official. And there it was: the Legislative Assembly Pension Plan 2016 Annual Report.

It didn’t take long to figure out why the MLAs might be prone to procrastinate in releasing the report. In 2016, under the heading Contributions and Payments, the report shows that MLAs contributed $404,531 while government payments (i.e. taxpayers) provided $1.13 million. That certainly doesn’t look good.

At this point, it’s important to keep the MLA pension in perspective. First, MLAs deserve credit for leading by example and foregoing a pay raise they were scheduled to get. Second, the MLA pension is a relatively small factor in the province’s $840-million projected operational deficit. Third, the MLA pension plan is not the province’s biggest pension problem.

But it’s that overall perspective that makes the MLA pension important.

Manitoba is facing an overall unfunded pension liability of nearly $2.8 billion, according to budget documents. That simply means the government is anticipating that pension payouts for government employees are going to cost $2.8 billion more than is in the fund. Worse, the unfunded pension liability has shot up from $1.8 billion in 2012-13. Unfunded liabilities ultimately lead to taxpayer bailouts like the billion dollars the province poured into the Civil Service Superannuation Fund in 2012. The price of procrastination is going up by hundred-million-dollar increments for Manitoba’s pension problem.

Ultimately, the quest for the MLA pension report wasn’t a search for a problem, but rather a solution. And while the overall issue of pension reform will undoubtedly take time, an important first step is obviously achievable. MLAs need to take the lead by reforming their own pension plan.

Rather forcing taxpayers to pay $2.79 for every dollar MLAs contribute to their defined-benefit pension plan, the province should establish a matching RRSP contribution plan. Legislators could save up to 7 per cent of their salaries and get a generous matching top up from taxpayers. That would still be a better deal than most Manitobans get at their jobs, but it would cost taxpayers significantly less and negate the risk of unfunded liabilities appearing in the future.

Most importantly, reforming the MLA pension plan is a vital first step toward overall pension reform. When MLAs are inevitably forced to tackle the topic of pension reform with government employees, they’ll need to show they’ve led by example. MLAs have the means to reform their own pension plan and they need to get it done.

Todd MacKay is the Prairie Director for the Canadian Taxpayers Federation

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Canadian Taxpayers Federation -- Todd MacKay – CTF Prairie Director -- Bio and Archives | Comments

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