Over the next three years, the Yukon government will have to cough up more than $6.2 million to shore up deficits in territorial pension plans.
And it’s not alone.
Global financial instability and federal pension regulations could force waves of Canadian employers to pay millions into pension plans in order to counteract investment losses from falling market values.
These payouts could prompt nationwide bankruptcies, and slap taxpayers with massive tabs to cover the pension plans of government employees.
According to the Federal Pension Benefit Standards Act, Canadian pension plans are required to remain at solvency rates of 100 per cent. Simply put, if everyone covered by a plan were to retire tomorrow, there must be enough cash to cover their pensions.
If these solvency rates can’t be maintained, the difference must be covered by the employer.
All Yukon government employees are served by the federally run Public Service Pension Plan — putting the shortfall responsibilities in Ottawa’s court.
“For that plan, we don’t bear any risk because of the market fluctuations,” said Clarke Laprairie, the assistant deputy minister of finance.
On the other hand, Yukon College, the Territorial Court, the Yukon Hospital Corporation and territorial MLAs, all have their pensions guaranteed from Yukon coffers.
The Hospital Corporation’s pension plan has a $4,716,000 deficit, which the territorial government has agreed to cover over the next three years.
Yukon College has a seven-year government commitment of $4,140,000 in order to cover “increased pension costs.”
The MLAs’ plan has taken a hit, but is still in a surplus position, said Helen Fitzsimmons, a manager of finance and systems for the legislative assembly office.
The surplus is due largely to the decision not to take a “contribution holiday” — a time where contributions are held for a certain period of time as a result of a surplus in the plan, said Fitzsimmons.
“We went to a new manager, and we weren’t really sure how he was going to work so, just to be sure, we continued to contribute while other plans would not have,” she said.
Across Canada, large numbers of companies are lobbying federal regulators to reduce solvency demands on employee pension plans. Already cash-strapped by a plummeting market, they argue pension-plan contributions could be a linchpin for bankruptcy.
“There are companies that would absolutely fold if they had to make contributions based on the provisions of the legislation as they stand now,” said pension consultant Jeff Kissack in the October 29 Globe and Mail.
Contact Tristin Hopper at
tristinh@yukon-news.com