Advocacy and Sector Fiscal Sustainability
As part of our advocacy on behalf of the sector, the BCCPA has been working on a number of policy issues over the last several months. Here are links to a few of the items we have been working on:
2015 BC Budget Submission pending link
MSP Payments – We have been alerted by several members over the last couple of weeks that Health Authority funding is not covering the additional cost of recent Medical Services Plan premium increases. The BCCPA is looking into this situation – however, if you have also experienced this, please notify our Director of Policy, Michael Kary, as soon as possible at firstname.lastname@example.org.
HEABC/AAG Meeting – The BCCPA recently attended the regular Affiliates Group meeting convened by the Health Employers Association of BC. During the meeting, we raised concerns regarding the current structure and gaps in the BC Care Aide Registry. In particular, as it pertains to care aides working for multiple employers who have been taken off the Registry due to an infraction.
The HEABC also requested our feedback regarding possible changes to the BC Municipal Pension Plan. Here is an excerpt from their note to AAG members:
“As discussed on the conference call today, there have been ongoing discussions between the Plan Partners and HEABC on the priorities of the Municipal Pension Plan (MPP), in particular the funding of the Inflation Adjustment Account (IAA), which is used to provide COLA (cost of living adjustments) to retirees. If funding to this account is not increased, it is projected to run out of money in approximately 20 years. This would result in employee pensions not being protected against inflation. Effectively full COLA is not sustainable within the current funding structure, so the MPP Board has recently made a decision to move to a sustainable COLA approach, effective January 1, 2016.
Only the Plan Partners can increase contributions to the IAA, therefore, the MPP Board put this matter in front of the Plan Partners for consideration. HEABC is included in these discussions because we are a signatory to the Joint Trust Agreement (JTA). The JTA was created when the MPP moved to joint trusteeship in 2001 and it contains transition language. Included in the JTA transition language are terms which govern what should occur with emerging surpluses. The JTA language does not easily lend itself to any contribution reductions in response to surpluses and so contribution rates only move in one direction (i.e. They must increase in response to valuation deficits, but they cannot correspondingly decrease in response to valuation surpluses).
Discussions between the Plan Partners, which include HEABC, government, the union of BC municipalities and the unions, have been underway for over 2 years and, until late last Friday, appeared to be stalled. In the interim, because of the lack of progress, the MPP Board made the decision to move to a sustainable COLA approach which, based on the most recent valuation, would cap the level of COLA to a maximum of 1.65%. As this is below the Bank of Canada’s inflation target of 2%, there would be a real risk of pensions losing value over the life of the pension benefit.
On Monday, to our pleasant surprise, an agreement was struck by the Plan Partners to amend some of the transition language within the JTA that governs the plan. The two main points are as follows:
- 1. That the actuarial surplus that is expected in the December 31, 2014 valuation be set aside in a rate stabilization account to a maximum of $2.5B. Any surplus above that is to be allocated to the Inflation Adjustment Account.
- 2. That the premium surcharge that has been in effect since 2003 continue and be allocated to the Inflation Adjustment Account to bring the sustainable COLA from 1.65% to 1.95% which is close to the Bank of Canada target rate. Valuation deficits are amortized over 15 years. Therefore, the corresponding deficit surcharge that resulted from the 2003 valuation will be fully amortized in 2018.
In discussions with Plan Partners to date, it has only been possible to reach agreement on addressing the sustainable COLA issue and the creation of a rate stabilization fund, to reduce the prospect of future contribution rate increases. Discussions are intended to continue to deal with other issues in the JTA.
It has been communicated to the pension plan retirees that the Inflation Adjustment Account has to be capped, but not the level. The annual meeting of the MPP Board is scheduled for October 16, 2014 at which time the Board is anxious to communicate further on its sustainable COLA decision and to confirm the initial required COLA cap of 1.65%. Therefore, all the parties to the JTA have been asked to indicate prior to this meeting whether they are willing to support the changes outlined above. If this goes through, it would mean the planned communication at the MPP AGM would also be revised accordingly. The Board feels strongly that a cap of 1.95% will be received much more favourably by members and retirees.”