Future of Government Pensions (PS, CF & RCMP) & CF pension "double-dip"

[George Wallace]

Strangely enough despite the gloom and doom neither the loss of double dippers nor the Mayan calender have brought about the end of the world.

We haven't gotten through the 21st just yet.  >


Yes, we are seeing changes.  Short term losses will be recouped, I am sure, as younger members step in to fill vacancies.  The initial loss of experience will hurt for a while, but like FRP and other cases in our long history, we have managed to 'soldier on' and rebuild that experience improving on it.  Look at our history.  We almost stood down our military completely after the First and Second World Wars.  Korea came along.  After Korea, we saw sixty to seventy years of the Public calling for the "Peace Dividend", but we managed to fill our roles in NATO, as UN Peacekeepers and as warfighters.  New, fresh faces have always come up to fill the gaps and gain new experiences.

As a Double Dipper there for a while, I still see that there can be Double Dippers filling Class B positions, following the rules as laid out.  They just can not work more than 365 days without the fear of losing their pensions.  I am sure there are some very creative methods by which imaginative MOUs and SOUs can be written up.  If a Class B Annuitant worked 334 days as an Ops WO, took December off and went to Mexico for the holidays, and returned in January or February to fill a one year position as Trg WO, would that not fall within the guidelines?  Sort of like a "No Cost Posting" for the Regular Force Member.  What would the JAG say?  I wonder.

 

[CombatDoc]

As a Double Dipper there for a while, I still see that there can be Double Dippers filling Class B positions, following the rules as laid out.  They just can not work more than 365 days without the fear of losing their pensions.  I am sure there are some very creative methods by which imaginative MOUs and SOUs can be written up.  If a Class B Annuitant worked 334 days as an Ops WO, took December off and went to Mexico for the holidays, and returned in January or February to fill a one year position as Trg WO, would that not fall within the guidelines?  Sort of like a "No Cost Posting" for the Regular Force Member.  What would the JAG say?  I wonder.

IIRC, that loophole is going to be closed by requiring a minimum time between contracts.  Although your proposal may fall within the guidelines per the letter of law, it violates the spirit.  Hopefully one of the admin folks who are in the know will chime in.

 

[McG]

I believe the coordinating instructions already do close that loop hole.
I know a few people who have gone Reg F to Cl B since the change, so it has not been the doom & gloom predicted by some.  I also know of annuitants who have switched to 5 Cl A half-days per week.  In my mind, that does a much better job of meeting the letter and spirit of the new direction.

 

[a_majoor]

The State of Kansas shows how government pensions might evolve in Canada, since we are under similar economic and fiscal pressures. The Canadian equivalent to a 401k is the RRSP, and Canada already has legislation for Group RRSP accounts which would cover many of the issues identified in this article.

Whatever you might think of various pension plans, the crunch points are:

a. Canadian government pensions are not fully funded; indeed the unfunded liability of pensions and benefits is thought to be the same size as the National Debt

b. Pension administration is very expensive. This is a year over year expense which costs millions for every agency which has a pension plan.

http://blogs.the-american-interest.com/wrm/2012/12/22/next-step-in-kansas-red-revolution-end-state-pensions/

Next Step in Kansas’ Red Revolution: End State Pensions?
Walter Russell Mead

Since the right wing of Kansas’ Republican party gained control over the state government last month (defeating both Democrats and moderate Republicans to establish perhaps the most pro-Tea Party state government anywhere in the United States), we’ve been keeping an eye on developments there that could tell us what Tea Party governance would look like.

A new proposal on state pensions from the Kansas Chamber of Commerce offers a clue: the proposal would substitute defined contribution plans for the current defined benefit plan that goes to state retirees. For those of you not fully up on pension minutiae, this matters. In a defined benefit program, your employer promises a fixed stream of payments (usually with cost of living adjustments to take care of inflation) to employees when they retire. The amount of your payment is based on a formula that looks at things like your length of service and your pre-retirement pay.

This used to be the standard pension system in the private economy as well as for government workers. It is a very “blue model” system: it assumes a world of lifetime employment and stable employers. Often, defined benefit pensions emerged from negotiations between unions and employers.

In the private economy, the defined benefit system is in rapid retreat. Employers don’t like these pensions because they are both risky and expensive to manage. If the investments set aside to pay future pension obligations don’t perform well enough, companies have to divert current earnings to them or, worse, borrow money to make up the gap. Another problem with these pensions is that they create problems for companies facing fast technological change. Automakers, for example, need many fewer workers today than they did thirty years ago to produce cars; as a result the proportion of pensioners to active workers has shot up, and companies are stuck with legacy labor costs which make it more difficult for them to compete or attract new capital. Lengthening lifespans are also a problem; one of the risks companies bear under this system is that workers may live much longer than expected, turning a projected 15 year retirement into a 30 year post working lifespan. That is a very good thing in itself, but it’s a problem for a company trying to balance its books.

Employee calculations are also changing. While defined benefit pensions offer some security and predictability, most workers now expect to change jobs many times during a career. Job hoppers can get seriously penalized in a defined benefit system built around the needs of workers who plan to stick with one company for their whole career. It’s also become clear that these defined benefit plans are riskier than they look; today’s tumultuous economy means that many companies are at risk of bankruptcy, and when the company from which you’ve retired goes broke, your pension is anything but secure.

The alternative pension system that has gradually grown up to replace the old one with many private employers is called a defined contribution system. The amount you and your employer pay into the fund (in for-profit companies this is usually known as a 401(k)) is defined; the amount you get in retirement is based on how your investments do.

The new system on balance works better for most employers and employees in the private sector. While employees face the risk that their retirement funds may not grow as much as hoped, or could shrink in a big crash, these pensions are portable. You don’t lose your benefits when you transfer from one employer to another. You bear investment risk, but you are protected from the risk that your old employer goes bankrupt. And you have a fairly clear idea how much your investments are worth at any point so you can make your decision about when and how to retire based on a pretty good assessment of what your situation is.

State and government employees have by and large been untouched in the Great Pension Shift. Government workers tend to be lifers more than workers in the private labor force and governments (until recently) didn’t pose much of a bankruptcy risk, so the predictability and security of defined benefit pensions works on average better for government workers than for people in the private sector. Additionally, as we’ve noted before in VM, government pension programs are often quite generous. It’s easier for politicians to promise large pension benefits to be paid later than to raise wages for which money must be found today. Thus over the years unions and politicians have collaborated to raise worker expectations about future pensions—without necessarily making the financial provisions that ensure these pensions will actually be paid.

For these reasons and others, Kansas public unions are going to cry bloody murder if and as this pension bill moves toward passage. Via Meadia isn’t a card carrying Tea Partier and there are a lot of Tea Party ideas that give us pause. A lot of pause. However, we agree with the Kansas Chamber of Commerce that the switch to a defined contribution program makes sense—provided the program offers low and moderate income workers a reasonable path to an appropriate and secure retirement.

We particularly think this matters when it comes to teacher retirement. The truth is that many teachers should not be lifers. Some teachers age like fine wines, becoming more experienced, more professional, more engaged with each year in the classroom. At sixty or seventy they can engage their students better than bright eyed college grads still wet behind the ears. These teachers are national treasures and it is to them we need to look for the guidance, examples and leadership that young teachers need. But for many others in the field, what started as a vocation turns into a chore. Teaching is routine, dull, and they are tired of dealing with their students.

Unfortunately, the blue model system that offers lifetime tenure—and heavily penalizes people who switch fields—actively works to keep people in the classroom who should be moving on. The threat that losing your job also means losing some or all of your pension rights is one reason that teachers and teacher unions fight so hard against dismissals. Shifting to a defined contribution system that lets midcareer people leave teaching (or other forms of government service) for other fields without paying a pension price is an important government reform that helps everybody involved.

Some people will call the Kansas legislature radical if it transitions to a defined contribution system. Via Meadia will disagree. This isn’t radicalism; it is sound common sense.

 

[Monsoon]

a. Canadian government pensions are not fully funded; indeed the unfunded liability of pensions and benefits is thought to be the same size as the National Debt

Where are you getting this from? As I understand it, far from being underfunded, the federal government clawed $28B in an actuarial surplus back from the PS pension fund between 1995 and 2006. This was the basis of a lawsuit between the public sector unions and the federal government (which the government recently won).

 

[a_majoor]

This is an ongoing area of concern; I've located a 2008 article which lays out the then figures, you can decide for yourself if effective action has been taken to close the unfunded liabilities gap:

http://www.canada.com/story_print.html?id=d254af34-6191-4989-8d36-54a3b23be2ce&sponsor=

Unfunded liabilities dwarf public debt and are growing

How would you feel if the Canadian government sent you a letter suggesting you owe an extra $150,000?

By The Calgary HeraldMay 22, 2008

How would you feel if the Canadian government sent you a letter suggesting you owe an extra $150,000?

No doubt few, if any, Canadians would welcome that news. But that's the situation facing Canadian taxpayers as each of us is on the hook for another $150,211 in liabilities that our governments have racked up in debt and unfunded program obligations.

Unless immediate action is taken to reduce Canada's liabilities, young Canadians will be hit with a significantly larger tax bill in the future.

The good news is that Canadians have largely come to realize the seriousness of continually increasing government debt.

Indeed most governments are making an effort to balance their books and some are paying down debt. At the federal level, many consider running a deficit (increasing the debt) a sure way to commit political suicide.

Across all Canadian governments -- the sum of federal, provincial and local -- net direct debt declined from $800 billion to $791 billion between 2000-01 and 2004-05. While $791 billion ($48,922 per taxpayer) is not exactly insignificant, it is not the greatest liability concern for Canadians.

In addition to the national debt, Canadian governments have committed themselves to providing programs that are not fully funded. That is, we've collectively promised to provide a host of programs which current tax rates leave unfunded.

Consider the Old Age Security (OAS) program, the "cornerstone" of Canada's retirement income system. Old Age Security pensions are available to all Canadian citizens and legal residents 65 years and older, providing they have lived in Canada for a minimum of 10 years of their adult lives.

The problem with Old Age Security benefits is they are paid for out of current federal tax revenue.

At their inception, programs like OAS were based on the assumption that the demographics prevailing in the 1960s would persist. It was considered favourable social and economic policy to transfer a small amount of money from a large group of younger workers to benefit a small group of relatively poor retirees.

Unfortunately, demographic assumptions have proven false.

In 1956, only 7.7 per cent of Canadians were over 65 years old. That proportion increased to 13.3 per cent in 2006 and is expected to rise to 26.5 per cent by 2040.

This change in Canada's demographic makeup has and will continue to increase the portion of federal revenues needed to fund OAS benefits. We estimate that the difference between the stream of promised benefits and the expected future stream of revenues -- the unfunded liability of the OAS program -- currently stands at $356 billion.

Canada's Medicare obligations suffer the same ills.

In 2006-07, Medicare consumed 19.1 per cent of total federal, provincial and local government revenue. Given that those over 65 years old account for approximately 44 per cent of all health spending, and the fact that the percentage of the population over 65 years old will increase dramatically, the portion of revenue currently used to fund Medicare will not be sufficient to deliver future medical expenses. As such, Medicare's unfunded liability stands at $364 billion.

Adding the unfunded liabilities of the Old Age Security program and Medicare to that of the Canada Pension Plan ($538 billion) puts total Canadian unfunded liabilities at $1.3 trillion.

Further, these unfunded liabilities have increased by more than 20 per cent over the most recent five years for which data are available (2000-2004).

Unfunded liabilities, coupled with the national debt, put Canadians on the hook for liabilities totalling $2.4 trillion or approximately $150,000 per taxpayer.

Our hope is that the massive fiscal hole created by the unfunded liabilities of government programs begins to receive the same attention as Canada's debt.

Awareness of the debt on the part of the public helped push federal and provincial governments to stop using deficit financing and to begin decreasing Canada's debt burden. Given the magnitude of the unfunded liabilities, Canadians have little choice. Without fundamental reform of government programs such as Medicare and OAS, young Canadians will be digging much deeper into their pockets to pay their future tax bill.

Niels Veldhuis and Milagros Palacios are economists with the Fraser Institute and co-authors of Canadian Government Debt 2008 available at www.fraserinstitute.org.

and more recently:

http://m.theglobeandmail.com/globe-investor/investment-ideas/can-canada-go-the-way-of-greece/article4179962/?service=mobile

Can Canada go the way of Greece?

George Athanassakos

Special to The Globe and Mail

Last updated Thursday, Sep. 06 2012, 11:06 AM EDT

Riot police are engulfed in flames as they are hit with a molotov cocktail near the Greek parliament in Athens (PASCAL ROSSIGNOL)

Canadian politicians are patting themselves on the back as Canada has avoided many of the problems the rest of the developed world has experienced in recent years. They attribute this to the better fiscal management and regulatory system that they have stewarded in this country. Greece, on the other hand, has been a poster child of a mismanaged economy. But could Canada have just been lucky?

There are distinct similarities between the two countries to justify asking the question: Can Canada go the way of Greece when our luck runs out? Canada may be on a higher deck, but we are on the same boat.

An overleveraged economy Attention has focused on the federal government debt in Canada as a percentage of GDP to signify the super solvency of the Canadian economy, but how about other government debt? How about household debt? The debt picture in Canada changes dramatically when we add total government debt to total household debt.

In this case, total debt to GDP looks quite similar between Canada and Greece: 203 per cent for Canada vs. 195 per cent for Greece. In fact, Canada is in the top five countries in the world when you include government and household debt; Greece is not.

And we should not forget the cost of the future promises made by governments, such as social security, health care, government pensions, etc. that have to be added to the official debt figures. For example, Canada’s net liability for unfunded pensions to all government workers amounts to $422-billion. Moreover, Canada Mortgage and Housing Corporation (CMHC), whose liabilities are fully backed by the government of Canada, has a mortgage insurance book that is equivalent to more than $500-billion. While Greece has huge unfunded liabilities, it has no equivalent to CHMC debt.

Declining manufacturing sector Trade employs more Canadians than any other sector in the economy according to recent figures by Statistics Canada. However, the same report showed that in October, factory employment and production hit a 35-year low as more plants closed. As a share to GDP manufacturing stands at 12.8 per cent.

The Greek manufacturing sector has also been on the decline, standing at 13.8 per cent as a share of GDP - the percentage of employees in manufacturing to total employment is 10 per cent. Services as a percentage of GDP account for 71.8 per cent in Canada and for 78.8 per cent in Greece. Employment in services to total employment is 78.4 per cent and 65.1 per cent, respectively.

Canada’s economy is dominated by energy and material producers, the type of companies most vulnerable to a global slowdown. Canada’s major export category is materials, amounting to 23.8 per cent of exports. The major import category is machinery & equipment, constituting 27.5 per cent of imports. Greece’s major export category is agricultural products and beverages, while the major import category is machinery & equipment and fuels.

Low productivity and high unit labour costs Unit labour costs are the best estimate of employee costs faced by firms. They are a function of hourly wages and productivity gains. Unit labour costs have been flat at the 2008 level for Greece (even though they have skyrocketed since the early 1990s), as opposed to their main euro partners whose unit labour costs increased by 5 per cent over the same period. In Canada, unit labour costs rose by about 6 per cent since 2008 vs. about 2.5 per cent for the U.S., Canada’s key trading partner. GDP per hour worked is about 26 per cent higher in the U.S. than in Canada and 50 per cent higher in Germany than in Greece, as per OECD statistics. Canada is not as innovative and productive as the U.S. The same applies to Greece vis-à-vis its main euro partners.

An over-bloated, highly unionized and handsomely paid public sector In Canada, public sector employment to total employment is 20.6 per cent. For public sector employees, the unionization rate is 72 per cent. In the economy as a whole, the per cent of unionized labour in total labour is 29.7 per cent. Public sector employment to total employment in Greece is 22.1 per cent. The unionization rate is 60 per cent for public sector employees. Overall, 23 per cent of the Greek labour force is unionized.

According to the Canadian Federation of Independent Business, federal government workers’ total compensation (which includes benefits and shorter week hours) is 41.7 per cent higher than similar jobs in the private sector, whereas municipal workers make 35.9 per cent more and provincial workers 24.9 per cent more. Figures are similar for Greece.

Both Canada and Greece regularly experience labour unrest and militancy in trade unions, especially public sector unions. According to Statistics Canada, 2010 saw 175 strikes and lockouts in Canada involving about 1209 person-days lost . The Economist reports that in 2010 Canada was at the top of selected countries for most days lost to strikes. The U.S. had only 5 per cent of the days lost compared with Canada. Greece, on the other hand, also fond of strikes with militant unions, is the country with more strikes and days lost to strikes than any other country in the EU.

Finally, government plays a big role in both countries. For example, total government spending as a percentage of GDP is 49.8 per cent in Greece vs. 47 per cent for Canada.

Canada thus far has been lucky to avoid the crises faced by other Western countries. It has been lucky because (a) the housing sector has not tanked due to significant inflow of foreign money in the sector, and (b) the commodity cycle has been on the upswing the last 10 years due to the increased demands on commodities by China and India. Both of these positive forces can change at any time. The over-investment in the housing sector in Canada -- and in many sectors, including housing -- in China is not good news for Canada. What will happen to the Canadian economy if these two vital sectors turn negative?

George Athanassakos, gathanassakos@ivey.uwo.ca, is a Professor of Finance and holds the Ben Graham Chair in Value Investing at the Richard Ivey School of Business, The University of Western Ontario.

 

[Monsoon]

This is an ongoing area of concern; I've located a 2008 article which lays out the then figures, you can decide for yourself if effective action has been taken to close the unfunded liabilities gap:

Oh - you're talking about unfunded pension liabilities in all levels of government (this is particularly a problem at the municipal level). However, it's not a problem at the federal level.

 

[a_majoor]

It must depend on your definition of "not a problem"

http://www.cdhowe.org/ottawa%E2%80%99s-pension-gap-the-growing-and-under-reported-cost-of-federal-employee-pensions/16001

Ottawa’s Pension Gap: The Growing and Under-reported Cost of Federal Employee Pensions

2011 – Alexandre Laurin and William B.P. Robson

The federal government’s unfunded  liabilities for its employee pension plans  total $227 billion, far more than reported, according to a report released today by the C.D. Howe Institute. In “Ottawa’s Pension Gap: The Growing and Under-reported Cost of Federal Employee Pensions,” authors Alexandre Laurin and William Robson find that, using fair-value accounting like private-sector plans which value assets and liabilities using current market prices and interest rates, Ottawa’s unfunded employee pension obligations are $80 billion more than reported in the Public Accounts.

For the report go to: http://www.cdhowe.org/pdf/ebrief_127.pdf

 

[DBA]

All that PDF does is show the unfunded liabilities if the current historically low rates of return persist. They won't just as periods of high rates of returns don't.  Averaging or smoothing over a longer period will likely be a more reliable estimate of returns over multiple decades and prevent extremes of projecting decades of 20%+ returns or decades of 1% or less returns.

As for OAS and other entitlement programs they look to be on a more solid footing with the recent tweaks like raising OAS eligibility from 65 to 67 gradually in 2023 to 2028.

 

[BernDawg]

I have a ponderance.  Upon my retirement, should it take some (months or longer) to recieve my first pension payment retroactive back to the first month following my release or what?

In my case it was about 12 weeks and the first cheque had the 12 weeks of pension on it. Make sure you read all of the literature they give you at the release section. I missed a little tid- bit about filling out the form that stated that you were NOT drawing CPP and the amount of the monthly annuity was reduced from the get-go. The issue was easily rectified with a quick call to the CF Pension office and a faxed form resulting in another small chunk of back-pension.

 

[McG]

The media has found what it describes as a problem in the government's plan to give priority hire status to medically releasing service personnel who are moving the the PS.  The media is wrong.  They have found a problem, but it is purely a pension problem.

New wrinkle develops in plan to fast-track veterans into civil service
Murray Brewster, The Canadian Press
CTV News
22 Feb 2015

OTTAWA -- Another wrinkle has developed in the Harper government's push to give veterans preferred status for federal jobs: for many reservists, not all of their military pension counts towards their eventual civil service retirement.

Beth Lepage, a former air force captain, said a portion of her Canadian Forces pension -- accumulated as a part-time member -- can't be converted because of a difference in the way government and military retirement benefits are calculated.

Lepage said she believes that will be a significant barrier to ex-soldiers with both full- and part-time service applying for federal jobs, a transition the Conservative government says it's eager to facilitate.

In order to fix the problem, the federal Treasury Board would have to rewrite the regulations governing how pension funds are converted -- something it has so far refused to do.

"I may not be an Afghanistan veteran, but I served my country for just under 24 years," Lepage said in an interview.

"The government is holding tens of thousands of dollars I took out of my RRSP a few years ago. They're making the interest on it. So, I feel like they're holding my pension hostage. They're aware of the problem and don't have any plans to do anything about it."

There are approximately 30 cases similar to Lepage's in the system right now, The Canadian Press has learned. Lepage predicts it will become a bigger problem as more ex-soldiers with mixed-service time look to take advantage of the fast-track offer of federal jobs.

"Many, many reservists served in Afghanistan and should they apply to come over to the civil service, they could be in the same boat I am," she said.

"They'll naturally want to bring their pension and it'll be, 'Too bad, so sad, we're not going to have any way for you to collect it."'

Military ombudsman Gary Walbourne said he doesn't understand why the government is reluctant to make what he believes would be a relatively easy fix.

"There is a good potential that this can become a larger problem than it is," he said.

But several defence sources say National Defence was told by Treasury Board that it "doesn't consider it a big enough problem," and has even rebuffed an offer by defence bureaucrats to rewrite the regulations for them.

Treasury Board spokeswoman Lisa Murphy said reservists with more than six months full-time service can elect to convert their pension and that the department "is not presently considering any changes to the legislation governing the public service pension plan in respect to part-time service."

The nub of the problem seems to be that since there is no formal part-time work in the federal government, Treasury Board has no mechanism to convert that military service into a full-time equivalent.

...

Lepage originally joined the military in 1983 and served as a regular member, but spent several years on part-time status as a reservist when she had children. She joined the public service nearly eight years ago and applied later to convert her pension; that's when the trouble started.

In order to move her military pension between the two plans, Lepage was required to buy back the time. But since not all of it could be migrated -- and until the regulation is changed -- she will be entitled to a smaller pension based only on her full-time service.

http://www.ctvnews.ca/politics/new-wrinkle-develops-in-plan-to-fast-track-veterans-into-civil-service-1.2247705

 

[Monsoon]

Saw that one. It's not even a "pension problem" really - people transferring to the PS are under no obligation to transfer their CAF pension over the PS plan. Doing so just allows them to draw benefits under the PS plan earlier, but in principle they can just choose to draw both pensions in parallel at a later date if they feel the transfer offer isn't good enough. It's just a matter of choices.

 

[Remius]

Saw that one. It's not even a "pension problem" really - people transferring to the PS are under no obligation to transfer their CAF pension over the PS plan. Doing so just allows them to draw benefits under the PS plan earlier, but in principle they can just choose to draw both pensions in parallel at a later date if they feel the transfer offer isn't good enough. It's just a matter of choices.

It is sort of.  You can only buy back class b time over 180 days or continuous unbroken time that amounts to 180 day or more.  You can't buy back class day time.  As well only regular force types can  forfeit and convert their pension.  Reservists cannot do that for now.

 

[Monsoon]

It is sort of.  You can only buy back class b time over 180 days or continuous unbroken time that amounts to 180 day or more.  You can't buy back class day time.  As well only regular force types can  forfeit and convert their pension.  Reservists cannot do that for now.

Reservists sure can - my brother converted his reserve time to PS (though he was only a Part I.1 contributor; that may make the difference). You're right that the conversion is only for 180+ days unbroken service, but like I said the very real alternative is not to convert the pension from CAF to PS and draw them as two separate pensions whenever you separately qualify for each of them. The lack of convertability of the CAF pension to private sector plans hasn't been upheld as a bigger barrier to entry for people moving that way; like I say, it's just a matter of choices.

I tend to be leery about discussions on the "fairness" of pensions - it's all actuarial. If you want more, you pay more into it, either in your own contributions or the government-side contributions that just come out of whatever pay adjustment you were going to get that year.

 

[Remius]

Reservists sure can - my brother converted his reserve time to PS (though he was only a Part I.1 contributor; that may make the difference). You're right that the conversion is only for 180+ days unbroken service, but like I said the very real alternative is not to convert the pension from CAF to PS and draw them as two separate pensions whenever you separately qualify for each of them. The lack of convertability of the CAF pension to private sector plans hasn't been upheld as a bigger barrier to entry for people moving that way; like I say, it's just a matter of choices.

I tend to be leery about discussions on the "fairness" of pensions - it's all actuarial. If you want more, you pay more into it, either in your own contributions or the government-side contributions that just come out of whatever pay adjustment you were going to get that year.

Reservists cannot forfeit their pension for conversion.  Not yet.  You can buy back reserve time that you have not elected to buy back though.  In my case I was able to buy back prior reserve service (service prior to 2007) that I had not elected to buy back through the rserve buy back. After 2007, I became a contributor to the pension.  That time cannot yet be converted to the PS plan. A regular force member who releases can forfeit his and convert its value but a reservist cannot yet (apparently it is currently being looked at) .

 

[dapaterson]

Be careful what you wish for. If rules change to permit her to buy back those part time years, then those years will count against the 35 year limit.
Right now she has a pension for those years plus can get full years in the PSSA to the 35 year limit, I suspect counting the part time years would significantly reduce her ultimate pension.

 

[McG]

Is PS pension not best 5 years?

 

[dapaterson]

Federal pensions are based on the average of your best five consecutive years of earnings.  However, you are limited to 35 years of pensionable service.  If you were to include years of part-time service, the benefit for those part-time years are pro-rated based on the proportion of the year you worked.  In other words, you've got thirty five calendar years to accumulate service; but if you only work partial years within those 35 years, your benefits for those partial years are pro-rated.

So: Assume you work 15 years in the primary reserve, averaging 1/3 of a year of work in each year (and never exceeding 180 days).  Then you work 25 years in the public service.  (To keep things simple, we'll assume no overlap between the two).

Under the current system, the reserve service, pensionable under part I.1 of the CFSA, does not count against the 35 year limit for all federal plans.  So the individual would receive a pension under part I.1, plus a PSSA pension of 25 years x 2% per year = 50% of their best five in the public service.  The full 25 years in the public service would be counted for PSSA purposes.

If they were able to transfer their part-time pension to the PSSA, they'd get: 15 x 1/3 = 5 years full-time equivalent credit from their reserve time, and then 20 years from the PSSA - since at that point, 15 + 20 = 35 year limit.  They would accrue no further pension benefits for the final five years of their public service career, and would end up with a 50% PSSA pension and zero CFSA pension.

 

[a_majoor]

I think a much more important issue is one which gets very little attention: the huge "unfunded liability" gap between what pension obligations exist to the military, the RCMP and Federal civil service and the funding that actually exists to cover that (currently @ $500 billion or so dollars).

At some point, the ability to pay for pension obligations may simply no longer exist, especially as the number of people drawing pensions outnumber the number of people paying in (the current Ponzi scheme model). You can see what can happen with the examples of Detroit or the array of bankrupt cities in California, where pension obligations and other spending eventually overwhelmed the existing tax base.

 

[Remius]

I think a much more important issue is one which gets very little attention: the huge "unfunded liability" gap between what pension obligations exist to the military, the RCMP and Federal civil service and the funding that actually exists to cover that (currently @ $500 billion or so dollars).

At some point, the ability to pay for pension obligations may simply no longer exist, especially as the number of people drawing pensions outnumber the number of people paying in (the current Ponzi scheme model). You can see what can happen with the examples of Detroit or the array of bankrupt cities in California, where pension obligations and other spending eventually overwhelmed the existing tax base.

That likely explains why we are paying more into those pensions.  is it enough maybe not.  But we are paying more into our pensions now.