Cracks appear in public-sector pension plans

Bumpy road ahead for some of the biggest DB plans in Canada
By Uyen Vu
|Canadian HR Reporter|Last Updated: 02/28/2006

Public-sector workers may take comfort in knowing their defined-benefit pension plans are unlikely to be converted any time soon, but that doesn’t mean they’re spared the worries of unfunded liabilities that DB plans across the board are facing.

“The big concern (these plans) all should have is how expensive they’re going to get,” said Malcolm Hamilton, principal of Mercer Human Resources Consulting in Toronto. “They’re very expensive in terms of large benefits, (cost-of-living) indexing and early retirement. And we’re now in an environment of low real interest rates and high security prices which means we have reason to believe that returns aren’t going to be like they have been in the last 20 years.”

The result is increasing pressure for increases in contribution and reductions in benefits. Hamilton said that’s already happening.