“Our organization has been lobbying the government to make changes to the Canada Pension Plan (CPP), along with other like-minded groups. For those people who aren’t able to participate in a DB plan, there is one plan that every working Canadian can participate in, and that is the CPP.” – William Harford, president of the Municipal Retirees Organization Ontario

By John Devine

(June 13, 2013) Reacting to efforts by groups campaigning to dismantle traditional public sector pensions, William Harford, president of the Municipal Retirees Organization Ontario (MROO), says there’s nothing fair about denying someone adequate retirement income at the end of a working career.
And, he adds, there’s nothing fair about telling taxpayers they will be on the hook for public sector pensions when they won’t.

“I have been a member of OMERS since its inception back in 1966, when it became compulsory, and have always been of the opinion that we have to be vigilant about watching for people who want to take away the defined benefit model,” which he described as an excellent vehicle for the provision of adequate retirement income. 

MROO represents thousands of retired municipal workers across Ontario receiving an Ontario Municipal Employees Retirement System pension. Harford spoke to ARIA recently about what he and other DB advocates see as myths and misinformation being spread about public pensions.
Contributions, from employee and employer, fund benefits, but not as much as the return on investments made by the plan, which account for the bulk of a pension promise. Taxpayers aren’t on the hook for unfunded liabilities, although they do contribute to the plan, as the public sector employer is the government. However, that funding relationship is the same as that between any employee and employer in private sector plans, Harford points out.
Writing an opinion piece for Benefits Canada, Debunking public sector DB pension plan myths, Harford lays out how the plan is funded and details its overall benefits to the Canadian economy. Letters he received from MROO members in Thunder Bay and Waterloo, reacting to claims by the group Fair Pensions for All that public sector DB plans aren’t sustainable, prompted him to speak out.
Not only are they sustainable, they represent good public and fiscal policy, says Harford. Retirees receiving adequate retirement income will not be a drain on public income supplements, and they will be able to contribute to the economy, mostly local, thereby providing a vital economic stimulus.
He is not the only DB advocate to point out that retirees with decent income benefit the economy; a study by the National Institute on Retirement Security, Pensionomics 2012, found that in 2009, spending from DB pensions contributed more than $1 trillion to the American economy and supported the creation of 6.5 million jobs.
In Canada, the market value of Canadian employer sponsored pension plans totalled $1.2 trillion by the end of last year – an increase of 9.3 per cent over the previous year, significantly reducing unfunded liabilities. The growing strength of public plans cuts into arguments that taxpayers will be on the hook for unfunded liabilities, DB proponents like Harford point out.
Even if investments weren’t providing healthier returns, taxpayers still wouldn’t need to ‘bail out’ the plans, Harford says, explaining that OMERS has a strategy in place to deal with its actuarial deficit, which involves temporary contribution hikes and benefit cuts. These measures will be reversed when the plan returns to surplus, he says.
Retirees are busy enjoying the fruits of their many years of service, and may not always pay attention to developments that threaten the DB model, says Harford, adding that is where groups like MROO play a role.
“I saw a real danger to the defined benefit pension plan, which is working very well, and is well funded and supported … as president of MROO, I started to broadcast this information – first to the board, and then to the members of the nine districts in Ontario, to bring their attention to this issue.”
Harford and other DB advocates worry that misinformation about public sector pension plans is fostering ‘pension envy’ among the growing number of Canadians who lack any type of workplace pension plan. It’s estimated that as many as 60-65 per cent of working Canadians, mostly in the private sector, don’t have access to an employer sponsored plan.
There is also general confusion about the realities of unfunded liabilities, he says.

“It’s primarily because people just don’t understand how the system works. A lot of people just think in the short term rather than the long term. If you bunch it all up, then you end up thinking you are going to owe a whole lot of money. But it’s a lot like owing a mortgage on your house. You may owe $100,000 on your house, but that doesn’t mean you have to pay that off tomorrow.” 

Pension plans have strategies to ensure benefit promises are both funded and sustainable over the long term, Harford and others point out. And, he adds, OMERS is not borrowing any money to cover pension benefits.
Harford also bristles when he hears the term, ‘Cadillac pension,’ meant to indicate a very generous benefit. The reality is that the average pension is $18,000 a year, with two thirds of that coming from investment returns.
Efforts to discredit the DB model not only endanger public sector pensions, but also moves the focus away from the main issue, retirement and pension experts say: the lack of adequate retirement income for so many Canadians.
“Our organization has been lobbying the government to make changes to the Canada Pension Plan (CPP), along with other like-minded groups. For those people who aren’t able to participate in a DB plan, there is one plan that every working Canadian can participate in, and that is the CPP.”
MROO wants to see the income replacement ratio hiked from 25 per cent to 40 per cent, says Harford. The portability of the plan would work well in today’s employment realities, which sees workers move from job to job. Enhancing the CPP would benefit younger Canadians who might never be members of an employer sponsored plan, he adds.
“It’s extremely important that the government moves in that direction.”

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