A report from a prominent think tank says Canada's parliamentarians are facing even graver pension woes than the rest of the country.
The C.D. Howe Institute says the pension plan that secures retirement benefits for members of parliament and senators is underfunded by up to $1 billion.
The report says the plan provides MP's with more than 50 per cent of their six-figure salary, but has no assets set aside to pay for those future benefits.
The Institute says the funding shortfall is at odds with actuarial reports on the plan, which say it has an excess of $176 million.
The institute says the deficit could expose taxpayers to greater financial risks if the pension plan ultimately fails.
It suggests the Federal government should address the problem by raising MP's current wages in exchange for lower retirement benefits.
"When the time comes to pay cash to retiring MPs, Ottawa has to raise it at that time -- by taxing more, spending less elsewhere, or borrowing," the institute said in its report.
Such a fix, the report said, would allow MP's to set retirement funds aside in registered plans without delving as deeply into the public purse.
The institute's plea for reform echoed a similar call issued Wednesday by the Canadian Taxpayers Federation, which exhorted MP's to surrender their pension plan and adopt a more modest system.
The federation contends the existing plan is the best-funded in the world, but lamented that taxpayers foot the bill for most of its perks at a rate of $23.3 for every dollar contributed by an MP.
The federation called on MPs to set up a new program in which government matches their payments on a dollar-for-dollar basis.
"There's no way the prime minister and these MPs can do what they need to do to balance the budget and control spending if they've got their own snouts in the pension trough," federation federal director Gregory Thomas said. "They need to lead by example. They need to put Canada ahead of their own personal bank balance."
The Canadian Taxpayers Federation says it's high time MPs stopped making Canadians pick up the tab for their "gold-plated" pension plan.
"This is a ripoff on a massive scale," the advocacy group's federal director, Gregory Thomas, said at a news conference on Parliament Hill Wednesday announcing its report on parliamentarians' pensions.
The federation says that while officially taxpayers contribute $5.80 for every dollar an MP contributes to his or her pension, that figure does not include "disguised 'interest' and accounting fiction." Its calculations say taxpayers are actually on the hook for $23.30 for every dollar an MP contributes.
While MPs earn a base salary of $157,731 per year, the total contributions to the parliamentary pension fund amounts to $248,668 per year, Thomas said.
MPs are eligible to collect full pension benefits when they are 55, if they sit in Parliament for six years or longer. If all current MPs collected their pensions, Thomas said, the total lifetime payout would amount to some $277 million.
Thomas said the MP pension fund does not invest in the market like the Canada Pension Plan or RRSPs, but instead just dips into public coffers each quarter.
"The government simply passed a decree paying interest to the MP pension fund, and at a staggering rate," he said. "This outrageous rate means they have basically the best performing pension over 10 years on the planet."
Insulated from market forces, Thomas said, the MP pension fund has done 60 per cent better than the Canadian Pension Plan over the past 10 years. "The 'return' on this fund is set by cabinet," Thomas said. "But it's a phoney return on an imaginary investment."
Treasury Board President Tony Clement said he is examining the issue of MP pensions as part of the larger government-wide spending review. He said the government's first step was to freeze MP salaries, but that this will not be the last.
"I've been tasked to come back with some options on MP and public service pensions, and I will be doing so," he told CBC News. "These options are on the table."
Clement said no decisions have been made, but alluded there would be some announcement on MP pensions in the next budget.
The Opposition says Parliament has better things to do than tinkering with MPs' pensions.
"We've got a lot more important things to be doing," said NDP MP Joe Comartin. "There are just too many other things that need to be addressed in the pension field specifically."
Comartin said the government is beating the MP pension drum to distract the public from its lack of action on pensions that directly affect Canadians.
"This is really a smokescreen for the government not to act on the other ones, such as reforms to the Canada Pension Plan," as well as looking after Old Age Security and the Guaranteed Income Supplement, he said.
Liberal MP Rodger Cuzner said Canadians should be wary of the federation, which he described as a "branch office of the Conservatives" and "so deeply entrenched in (the) digestive tract of Tories that it's embarrassing."
He noted that senior Tories, such as Immigration Minister Jason Kenney, and others got their start in politics at the federation.
Cuzner said it's strange the group launched a full-scale attack on parliamentary pensions, but stayed silent on accountability issues such as G20 spending or the untendered F-35 stealth fighters contract.
"Obviously, this is something to shift the attention of Canadian taxpayers," he said. "To trot out the old faithful pension plan, it seems to be just the thing to do by these guys."
Opposition MPs said it was the government's job to make proposals on how to fix MP pensions, if they need fixing at all.
"As our leader, Bob Rae, said back in November, we're happy to look at any proposal the government brings forward," said Liberal MP John McCallum. "MPs should set an example during a time of austerity."
Comartin said if the issue is to be examined, the government should appoint an independent commission to adjudicate the issue.
"If there is going to be a review of the MPs' pensions, it has to be done by an independent commission, as it has been the last two times," said Comartin. "It takes partisan politics out of it."
Finance Minister Jim Flaherty said Canadians expect their politicians to be reasonable in how they fund their pension plan.
"Pension remuneration for people in the public service, and public service in Canada ought to be — including members of Parliament, including senators, including everybody in public life, including provincial politicians, including mayors, including councillors — ought to be reasonable, and the test of reasonableness requires a review of these types of systems," he said.
"People of Canada expect us to be reasonable in the pension compensation and the other compensation that is received for benefits and for salaries as well."
Damn right Canadians expect our elected officials to be reasonable in pension compensation, and the same goes for compensation being doled out to senior Canadian public pension fund managers.
The thing that strikes me is that the MP pension fund does not invest in the market like the Canada Pension Plan or RRSPs, but instead just dips into public coffers each quarter. Excuse moi? The MP pension fund is not managed by CPPIB or PSPIB? Worse still, it is funded by dipping into public coffers? Talk about no alignment of interests!
The NDP, Liberals and Conservatives are all in the same boat. I am all for giving MPs a decent salary and good pension but this is ridiculous. And yes, the Conservatives need to reform MP pensions but they should also revisit those silly PRPPs they're banking on. Total nonsense.
I'm warning all Canadian politicians -- federal, provincial, municipal -- we have a looming pensions crisis in this country that needs to be seriously addressed. And when the Canadian housing bubble bursts, it will get worse. Wake up already an stop living in dreamland!
The same goes in the US where Bloomberg reports, Congress’s Six-Figure Benefits Add to $674 Billion Pension Gap:
Almost 15,000 federal retirees, including former leaders of Congress, a university president and a banker, are receiving six-figure pensions from a system that faces a $674.2 billion shortfall.
About one of every 125 retired federal civilian workers collects more than $100,000 in benefits annually. They include physicians, postal workers and presidential candidate Newt Gingrich, according to data obtained by Bloomberg News under the federal Freedom of Information Act.
“We don’t want to bash federal employees,” said Jim Kessler, vice president for policy at Third Way, a Washington- based research organization. “Still, when you have today’s economy, public sector jobs look better and better. And there are some pensions that make you question the system as a whole.”
About half of all private-sector workers have no retirement plan other than Social Security, according to figures from the Employee Benefit Research Institute, a Washington-based nonprofit that studies pensions. About 16 percent are in plans similar to the federal system, which guarantees payouts based on workers’ earnings. Some private employers offer so-called defined-contribution plans, including 401(k) plans, in which benefits depend on employees’ contributions and how they’re invested.
The federal retirement system has emerged as a cost-cutting target as the government faces a budget deficit exceeding $1 trillion. A 2010 Congressional Research Service study reported that U.S. government pension programs had a shortfall of $674.2 billion, mostly due to insufficient funding for workers hired before 1984.
The U.S. Treasury pays about $4.9 billion every month for about 1.8 million retirees, an average of $31,633 annually. Federal employees contribute $1 of every $14 toward retirement, according to the National Commission on Fiscal Responsibility and Reform, a bipartisan panel created by President Barack Obama.
Public employees at the state and local levels already have faced moves to cut future benefits, as officials seek to address a cumulative pension gap that exceeds $4 trillion. Dallas Salisbury, president of the benefits institute, said in an interview that federal pensions might be “richer than we can now afford. Something’s going to have to give.”
The number of current federal employees eligible to retire and collect a pension will grow to 956,613 by the end of the 2016 budget year, a 35 percent increase from the 707,750 who could have retired at the end of September, according to a 2008 study by the Office of Personnel Management.
Roughly 27 Years
Retirees in the database that OPM released to Bloomberg News had careers that lasted an average of roughly 27 years. The database is dated Sept. 29, 2011, and doesn’t contain the names of employees’ survivors who receive benefits. The Congressional Budget Office said in a report last March that in 2010, the U.S. government paid $69 billion to 2.5 million civilian retirees and their survivors, and $51 billion to 2.2 million military retirees and their survivors.
Retired physicians and politicians ranked among those collecting the largest benefits. The chance of getting a six- figure pension was best at the Securities and Exchange Commission, where 9.3 percent of retirees collect at least $100,000 annually.
Irving K. Jordan Jr., former president of Gallaudet University in Washington, led the list at $375,900. Gallaudet gets about $120 million federal funding each year. Jordan didn’t return a request for comment left with the university president’s office.
Maxey D. Love Jr., of Columbia, South Carolina, is second on the list at $322,272 a year. For years, he was president of a farm credit bank he first joined as a college student, he said. His salary eventually topped $300,000 a year.
“I’m a fortunate person to have been at the right place at the right time,” said Love, 78. Shortly after he was hired, the chance for workers at farm credit banks to stay in the federal pension system ended, he said.
Because of cost of living adjustments, at least 48,500 retirees are making more now than they did on the federal payroll. For example, former U.S. Representative Robert Michel, 88, a Republican from Illinois, is collecting $211,452, fourth on the list and more than any other employee of the congressional branch. The average of his three highest annual salaries was $146,875. He retired in 1994 as House minority leader with 49 years of federal service and is now a senior adviser in Washington to Hogan Lovells, a law firm.
“Oh, for heaven’s sake,” Michel said in an interview when told of his ranking. “I didn’t realize it was up there.”
Former lawmakers, including some who have become lobbyists or strategic consultants, also received six-figure pensions, according to the OPM database. They include former House Majority Leader Richard Gephardt ($106,512 for 28 years of work as a Missouri Democratic congressman); Senate Majority Leader Tom Daschle ($105,804 for 33 years as a South Dakota Democratic lawmaker); Senate Majority Leader Bob Dole ($144,432 for 40 years as a Kansas Republican lawmaker); and Senate Majority Leader Trent Lott ($110,352 after 39 years as a Republican lawmaker from Mississippi). Calls to the offices of Gephardt, Daschle, Dole and Lott weren’t returned.
Edward J. Derwinski had the highest pension of any former cabinet official, collecting $193,368 annually after more than 36 years of federal work that included 24 years as an Illinois congressman before he became the first secretary of the Department of Veterans Affairs. Derwinski, 85, died Sunday.
Former Vice President
The list of former federal employees collecting more than six figures also includes former Vice President Dick Cheney ($125,976 for 28 years of work, including as a Wyoming congressman, White House chief of staff, and defense secretary). Cheney didn’t respond to a message requesting comment.
Gingrich, the former House speaker, receives a pension of $100,200 after 20 years in Congress, according to the data. He has argued as a Republican presidential candidate that government employees ought to shoulder more of the burden for planning their retirements. His campaign spokesman, R.C. Hammond, didn’t respond to a request for comment.
The federal retirement system changed in 1986 to bring federal workers hired after 1984 into the Social Security system and make other changes, including offering a thrift savings plan that resembles a 401(k). The earliest a federal worker can retire with a full pension is at 55, with 30 years of service.
Three Highest Years
The amount of a federal retiree’s pensions is generally based on his or her three highest-paying years; the commission on fiscal responsibility has recommended switching that to five years as part of a plan to trim benefit costs by as much as $70 billion over 10 years.
“The average American would probably be delighted to trade plans,” said Joshua D. Rauh, a finance professor at Northwestern University’s Kellogg School.
The federal pension shortfall is reflected in other levels of government, such as the California Public Employees’ Retirement System (Calpers), the nation’s largest. Calpers pays 536,234 retired state workers an average annual pension of $27,984. California employees contribute between 5 and 11 percent of their salary to retirement.
Like the federal program, California pensions are based on the top three highest-paying years. State employees with more than 25 years of service may base their pension on the single highest year of pay. The California fund currently faces a $51.2 billion shortfall.
“Retirees and employees are going to take some kind of hit,” Dave Snell, head of the National Active and Retired Federal Employees Association’s retirement benefits service department, said in a telephone interview. “Congress is honing its blade.”
Wow, no wonder the Treasury is dipping into federal pensions to avoid debt, it's a goddamn cash cow! Here you have millions of Americans struggling to find work and some of these retired politicians are collecting outrageous pensions, more than what they were making while in office. It's precisely this stuff that outrages hard working citizens. Pension reforms in Canada and the US can't come soon enough, but be careful, don't throw the baby out with the bathwater.
Below, Global News reports on MPs' pensions and CTV Morning Live's Kurt Stoodley talks with Gregory Thomas of the Canadian Taxpayers Federation. Mr. Thomas' comments on the Chief Actuary of Canada's proposal on MP pensions are priceless.
After reading all this, I feel like a fool for not running for office in Quebec, missing the opportunity to work alongside newcomer Ruth Ellen Brosseau. She has the cutest 'snout' I've ever seen on any Canadian MP. -:)