Pension Contribution Holiday Confirmed

Independent actuaries have confirmed that the public service pension fund has a surplus large enough to afford planned pension improvements and contribution holidays.

"The actuarial report shows the public service plan was in surplus as of Oct. 31, 1998, and would still be in surplus if the contribution holidays and pension improvements had been made on that date," said Finance Minister Don Downe. "Accordingly, I am announcing that the measures will now go forward."

The Public Service Superannuation Plan moved into surplus two years ago. Last spring, the province reached agreement with the Nova Scotia Government Employees Union to have a contribution holiday for fiscal 1997-98.

In the budget for 1998-99, the government announced it would also be suspending contributions for the current fiscal year and would be making substantial improvements to pension benefits. The most significant measure is to increase survivors' benefits to 66 and two-thirds per cent from 60 per cent.

The legislation allowing the contribution holidays to proceed was passed by the legislature Nov. 9.

"As the trustee of the plan, I am required to ensure that the improvements and contribution reductions do not put the plan into the red," said Mr. Downe. "I am pleased to say that the actuarial report shows the plan is fully funded. The report shows that once the changes to the benefits and the contribution holidays are taken into account, the fund remains in the black.

"The past few months have taken a toll on financial markets around the world. It is reassuring to know that our pension investment strategy has been able to withstand these pressures."

The report by the firm Morneau Sobeco examined the state of the Public Service Superannuation Plan as of Oct. 31, 1998. In the letter reporting on the status of the plan, the firm said: "Our valuation looked at the assets and liabilities of the plan after taking into account the impact of the Financial Measures Act (1998). If the act was not proclaimed, the fund surplus as of Oct. 31, 1998, would be $203.48 million. This surplus represents a funding level of 108.8 per cent. Allowing for the implementation of the Financial Measures Act (1998), our report states the surplus to be $38.6 million. The funded ratio is 101.6 per cent."

The actuarial firm continued: "In our considered opinion, this report attempts to set out a 'realistic' indication of the plan's costs, with perhaps a margin of conservatism. If the latter proves to be correct, the financial position of the plan would ultimately be slightly more favourable than indicated by this report."

Government employees will receive the pension-holiday amount on the second paycheque of January. The contributions for 1997-98 were paid out in June of this year.