Pension Perils

Some say that I'm lucky to be retired and have an employment pension.  I agree.  My complaint is that my pension benefits seem to be deteriorating bit by bit.

I retired at a time when my employer was downsizing and the number of retirees suddenly increasing.  The Pension Board of Trustees announced that they could no longer afford the dental plan.  I could purchase Blue Cross dental insurance if I wanted.  Shortly after, the Extended Health Care annual deductible was increased from $30 to $250. 

The latest revelation from the Pension Trustees is that most of the group benefits are being eliminated, effective April, 2012.  This includes the Pension Plan portion of the Medical Services Plan premiums, which will increase my monthly payments from $45 to $109 ($768 annually); and Extended Health Care for spouses/dependents.  The latter covers 70% of the cost of prescription drugs, but it looks like I'll have to purchase more Blue Cross insurance if I want to include my wife's needs.  Group life insurance is also being eliminated, although I lost this a few years ago when I turned 65.  Those 60-65 will have to buy their own insurance (expensive when you are no longer in the larger pool of younger employees).

These benefits were promised, and we thought we were paying for them through years of contributing to the Pension fund.  We were assured that they would be there, and that the Plan was prudently administered.  The current newsletter states that the basic pension plan is secured and assured for life.  Unfortunately, that only means if nothing upsets the projections.

In reality, the Pension Board can't assure the pension.  Unforeseen events can bring it down.  Pension payout projections depend on forecasting the amount of contributions, the amount of benefit payments, and the amount of investment income.

When the BC Liberals reduced the size of Provincial Government in 2002-2003, the amount of contributions declined and the benefit payments dramatically increased.  This resulted in the elimination of dental coverage and the increased Extended Health Care deductible.  The current round of reductions is the result of mismanagement of the fund and a loss of $2.5 billion (14% of fund) in the economic downturn of 2008-2009.  Obviously not prudent management.  Although it has recovered somewhat, the amount of the Pension fund is still less than it was in 2007.

The consolation we are left with is that other major pension plans in BC are having to make similar changes.