The following is an open letter to Ms. Leah Fichter, the Deputy Superintendent of Pensions of the Financial and Consumer Affairs Authority (FCAA) of Saskatchewan. Ms. Fighter is reviewing the Regina Civic Employees' Superannuation and Benefits Plan in light of its financial troubles.

Click here for a news story on the review.

>>>

Dear Ms. Fichter,

As you review the Regina Civic Employees’ Superannuation and Benefit Plan, the Canadian Taxpayers Federation would like to submit the following recommendations for your consideration.

First, we would recommend that a guiding principle in terms of compensation for government employees should be fairness for taxpayers.

Consider some Statistics Canada data from 2010:

• 87% of government employees in Canada have a workplace pension.
• 24% of non-government employees in Canada have a workplace pension.

Thus, it’s hardly fair for the typical Regina taxpayer in the private sector – who doesn’t have a workplace pension – to continue to have to pay higher and higher taxes while governments bail out government employee pension plans with higher and higher employer (taxpayer) contribution rates.

Make no mistake, no one has a problem with governments providing their employees with a competitive compensation and benefits package. If governments don’t offer employees a fair paycheque and benefits, they won’t be able to attract talented employees to deliver core government services.

The problem is that weak-kneed politicians have let things get out of control – they’ve agreed to unsustainable pension benefits across the country.

In the private sector, businesses recognized a long time ago that defined-benefit plans are unsustainable and extremely risky. As a result, the number of employees in the private sector who are members of defined-benefit workplace pension plans decreased from 31% in 1977 to 13% in 2010. At the same time, the number of employees in defined-contribution plans (and other plans) increased from 4% to 12%.

While the compensation levels for employees in businesses were kept in check by market forces (i.e. if employee compensation increased too sharply, then firms would likely see an increase in costs, driving up prices and potentially a loss in sales), pigeon-hearted Canadian politicians let things get out of control. From 1977 to 2010 the number of government employees in expensive and risky defined-benefit plans rose from 75% in 1977 to 82% in 2010.

Instead of addressing the problem by reforming the plans, bailouts have occurred across the country via governments increasing their contribution rates. In 2003, all levels of governments spent $7.2 billion on government employee pension plans. In 2013, that annual expenditure had skyrocketed to $18.6 billion. Both figures do not include billions in ‘special payments’ that governments have made.

Fortunately, the solutions to the Regina Civic Employees’ Superannuation and Benefit Plan are simple:

1) Immediately start putting new employees into a defined-contribution pension. This is a more than reasonable measure as it would still leave employees with a greater benefit than most taxpayers in the province.

2) Structure the Regina Civic Employees’ Superannuation and Benefit Plan so that the plan pays out what it can afford – no more bailouts should occur. Plain and simple, the plan should have to live within its means, just as taxpayers have to live within their means.

Thank you for considering the recommendations of the Canadian Taxpayers Federation. We look forward to your decision surrounding the Regina Civic Employees’ Superannuation and Benefit Plan

Colin Craig,
Prairie Director – Canadian Taxpayers Federation