TORONTO, Feb. 7, 2013 /CNW/ - The co-sponsors (Partners) of the Ontario Teachers' Pension Plan (Plan),
the Government of Ontario and the Ontario Teachers' Federation (OTF),
have announced Plan changes that will eliminate a deficit, as of
January 1, 2012, and permit the filing of a balanced valuation with the
Ontario pension regulator.
A preliminary 2012 valuation showed that, despite earning $11.7 billion
in 2011, the $117 billion fund had a deficit of approximately $9.6
billion. The Plan's liabilities are very sensitive to interest rates,
and the current low interest rate environment has led to a series of
deficits, despite excellent investment returns achieved by the Plan in
recent years. The Partners recognized the need to take action now to
balance the Plan's assets and liabilities and to reduce the Plan's risk
profile so that it will remain financially viable long into the future.
To eliminate the deficit, the Partners have expanded the conditional
nature of the inflation protection that is paid on benefits, based on
the availability of sufficient funding in the Plan. This change will
provide greater flexibility in addressing future funding challenges.
The changes announced today mean that inflation protection on pension
service accruing after 2013 will depend entirely upon the Plan's funded
status. According to OTF President Terry Hamilton, "Both Partners are
hopeful that the strength of the Plan will allow retirees to receive
full inflation protection in the future."
"The filing of a balanced valuation as of January 1, 2012 is a positive
step toward our Plan's long-term funding stability," said Hamilton.
"With the persistence of low interest rates, the Plan may continue to
experience future deficits. For this reason, the Partners intend to
study all of the factors that contribute to funding shortfalls,
including increased teacher life expectancies, Plan demographics and
the balance between the average number of years worked versus those
spent in retirement. We will be surveying active Plan members in the
fall of 2013 to better understand their perspectives on these issues.
The Plan is ahead of many others in understanding the impact of
longevity on funding, and the Partners have already begun to address
changes in demographic patterns."
The Partners will be assisted in this study by Dr. Harry Arthurs as well
as by senior management at the Plan. "Dr. Arthurs' knowledge and
expertise, most recently as Chair of the Ontario Expert Commission on
Pensions, will be invaluable to the Partners," said Hamilton.
"The Government of Ontario and OTF have worked together constructively
to identify Plan changes that respond to prevailing economic conditions
in a way that is fair to all members and to the taxpayers of Ontario,"
stated Kathleen Wynne, Premier-designate. "The investment track record
of the Ontario Teachers' Pension Plan is acknowledged to be one of the
best in the world, yet it is clear that its funding challenges cannot
be solved by investment returns alone. Today's announcement reflects
collaboration between the Government and Ontario's teachers to ensure
that a well-governed and well-designed defined benefit plan can remain
viable and affordable by evolving in response to changing conditions."
The Ontario Teachers' Federation represents all active and retired
members of OTPP. The OTF Affiliates are l'Association des enseignantes
et des enseignants franco-ontariens (AEFO), the Elementary Teachers'
Federation of Ontario (ETFO), the Ontario English Catholic Teachers'
Association (OECTA), and the Ontario Secondary School Teachers'
SOURCE: Ontario Teachers' Federation
For further information:
Ministry of Education