"This strategic investment will help ensure the health of the plan now and in the future. It is a win for teachers, retired teachers and all Manitobans," Bjornson said.

In 2006-07, Manitoba's total costs for TRAF were forecast to be $224 million including the increase in the unfunded liability. Addressing the unfunded liability now holds the line on these costs for 2007-08 and prevents the cost to Manitobans from growing to $280 million annually in the next five years, said Bjornson.

"As a part of this government's ongoing commitment to balanced budgets and to sound financial management practices, government will continue the process, begun in 2000, of addressing its unfunded pension liabilities," Selinger said. "Addressing the unfunded liability today will keep the summary net debt at the current level and will help significantly moderate future costs."

Actuarial firm Hewitt Associates was asked by the province to provide independent advice on the impact to Manitoba of accelerating the funding of its pension obligations. Projection of the province's pension costs for the next 50 years confirmed that due to the low cost of long-term debt financing, accelerated funding is financially beneficial to the province.

"Strengthening the funding of the province's pension obligations is also consistent with the transformation in public sector pension plan funding that has been occurring in Canada for several years," said Allan Brown of Hewitt Associates. In 2001, Manitoba set out the first debt-reduction plan to address both the general purpose debt and the unfunded pension liability. Today's announcement builds and strengthens that plan, said Selinger.

As well, the Teachers' Pension Task Force will make recommendations regarding the long-term health of the fund including its ability to pay a cost-of-living allowance in future years. The employer portion of TRAF has been unfunded since the early 1960s. Selinger noted that the province continues to work on a similar solution for the unfunded pension liability of the Civil Service Superannuation Fund and expects to address this obligation in future years.
 

RTAM President Con Lynch Responds
The Minister’s announcement does not directly solve the problem of the under funding of
 the PAA Account.  However, it does improve the environment within which negotiations with MTS and the government can take place regarding the COLA.  It improves it in two ways.   

First, it addresses directly the government’s unfunded liability to the plan.  This unfunded liability is the government’s share of payments to retired members.  Since the pension plan was established, the government’s share has been paid on a ‘pay-as-you-go’ basis out of general revenues.   

The government began to invest its liability for new members into a trust fund that is administered by TRAF.  This trust fund ensures that the government retains ownership of the funds.  The government has chosen to place the announced $1.5 billion into this trust fund, ensuring the financial health of the plan.  Because TRAF has a very good return on its investments, it also ensures that this money is earning interest at a higher rate than what the government is paying for the borrowed money.   

The appointment of Tim Sale to the Pension Task Force (PTF) to facilitate the PTF negotiations also is a positive step.  RTAM believes that this appointment signals the government’s desire to reach a negotiated agreement about how to solve the problems with the current structure and funding of the PAA. 

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