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July 30, 1997
(Finance)

Minister announces changes to Public Service Pension Plan (PSPP)

Finance Minister Paul Dicks announced today that measures have been put in place to address the $1.1 billion unfunded liability of the Public Service Pension Plan. These measures include special payments by government, as well as an increase in contributions from both employers and their employees.

"Government has committed to repaying every cent of the $500 million of pre-1980 debt," said the minister. "This is the debt, including interest, that has accumulated as a result of government using employee contributions to cover operating expenditures prior to 1980. Starting this year, the government will contribute $30 million. In 1998/99 government will repay another $30 million, and every year after that will continue with payments of at least $40 million per year until the pre-1980 debt is repaid. This repayment does not affect the province's budgetary position, as it is a payment towards the existing pension liability."

In addition to the pre-1980 debt, $600 million in unfunded liability remains. To address this debt, government will implement a contribution increase of one-quarter per cent in each of the next four years for both employees and their employers. "This increase will commence on January 1, 1998," said the minister, "and will result in a modest contribution increase. For example, an employee earning $30,000 a year will contribute an extra $2.88 bi-weekly in 1998."

"Without these changes, our actuarial experts tell us the plan will run out of money by 2019," added Mr. Dicks. "These measures will extend the life of the plan beyond 2030, and are projected to increase the funded level to almost 60 per cent by 2010."

This plan covers approximately 23,000 full time employees of gvernment and its agencies, including hospital boards, community colleges, Newfoundland Hydro and Newfoundland Housing Corporation. In addition, approximately 8,000 pensioners receive benefits under the plan.

Contact: Paula Dyke, Communications, (709) 729-0329.