Over the past 10 years, pension reform has been a hot topic in Nova Scotia and other provinces. Solvency relief, expansion of jointly-sponsored pension plans and other legislative amendments have been designed to assist privately-sponsored and some public pension plans to be successful.
However, should small private employers and smaller municipalities even be managing their own pension plans? Small employers don’t manage their own health plans. They contract out to insurance companies. Some small municipalities run their own pension plans, mostly Defined Contributions (DC) plans, through insurance companies, but at what expense? It is commonly agreed by pension experts that a DC plan does not provide the same level of benefits as a Defined Benefit plan(DB), but DB plans are more expensive to operate and fund and are generally riskier. Also, when employers go bankrupt in the private sector, the pension plan suffers and beneficiaries lose a significant portion of their pensions (Stora Forest Products, Fraser Paper, to name but two).
Why don’t we have a Nova Scotia Pension Plan where employers and employees make equal contributions to a well-established pension plan that would not be subject to the vulnerabilities of employers?
I am proposing that all municipalities that do not have a pension plan equal to or better than the Nova Scotia Superannuation Pension Plan (NSSPP) be required under the Municipal Government Act (MGA) to join the NSSPP, thus accomplishing 2 important things:
- better retirement security for current and future employees
- less risk for employers and employees
Employers could make matching contributions with employees at either 7% or 9% into the NSSPP which is a Target Benefit Plan. This is the same plan that Acadia just joined and some municipalities are considering joining. Municipalities don’t have the time or the expertise to manage complicated pension plans. They are also expensive to run and manage, and often come with unknown liabilities for Council and employers.