Thursday, March 15, 2012

Pension Perils (2)

In February, 2011, I complained here about coming changes to my BC Public Service Pension Plan.  Medical benefits were being reduced and contributions were being increased.

Today, I received my first bill from Revenue Services of British Columbia, requesting that I start paying $116.00 per month for Medical Services Plan premiums.  Until this month, $64.00 of this amount has been paid by the Pension Plan, and the MSP payment had been made through monthly pension deductions.  A number of years ago, my employer stopped paying increases in the premiums, but the residual "subsidy" had been continued.  Now the Pension Plan says that it can no longer afford to pay it.

Also beginning next month, the Pension Plan will no longer pay for Blue Cross Extended Health benefits for  member's dependents.  They rationalize by saying that the value of benefits will then be the same for all  members, regardless of spouses or other dependents.  This means an additional $48.00 per month (with a $250.00 deductible) to provide for my wife.

The reason given for the reduction in benefits is a loss to the Pension fund of $2.5 billion in 2009, as a result of the global recession.  At the time, the fund was reduced from $17.5 billion to about $14.0 billion.  Since then, it has recovered well to $18.7 billion, due to improved returns and increases from employee contributions.  I guess reducing pension benefits is about sharing the pain.

In some ways I shouldn't complain, because the Plan seems healthy.  In fact, with 36,000 retirees and another 64,000 members on their way to retirement, the Plan is ten times better funded on a per member basis than either U. S. Social Security or Canada Pension Plan, (although CPP is only a part of Canadian federal pension benefits).  The U. S. Social Security Trust Fund is due to run out of money in 2036, unless changes are made; CPP is rated as "robust" until at least 2075.  My pension plan is also more generous in its payments than Social Security or CPP.  Somewhat questionable to me is a payroll tax cut this year in the U. S., which reduces contributions to the Social Security Trust Fund.  I guess it's "pay me now or pay me later", and the U. S. is opting for "later", at least in an election year.