Every Canadian may be on the hook for more than $9,000 to pay for the unfunded liabilities of public sector employee pension plans, according to a report by the Canadian Federation of Independent Business (CFIB).
"The privileged status of public sector pensions has bred a dangerous complacency on the risks they pose to future pensioners and taxpayers," said Ted Mallett, CFIB's chief economist. "And, since the state of disclosure of public sector plan financials is alarmingly low, nobody really knows how big the problem might be."
The unfunded shortfall for public pension plans across the country likely exceeds $300 billion, according to Canada's Hidden Unfunded Public Sector Pension Liabilities, based on information from Statistics Canada, public accounts and other sources.
This shortfall exists even though public sector employers injected an extra $1.27 billion per year into these plans between 2001 and 2010.
Allowing pension managers to use overly optimistic rate-of-return assumptions has also contributed to the problem. This means money promised to public sector employees in the form of pensions won't be there without additional massive contributions from taxpayers, said CFIB. "We've known for a long time that the public sector pension scheme is unfair to taxpayers and small business owners," said CFIB president, Catherine Swift. "This is further evidence that many public sector pension plans are structurally unbalanced and in need of immediate reform."
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