Councillors take aim at city pensions

[Yoho]

Time to adjust council and city employee pension plans?

https://calgaryherald.com/news/local...-city-pensions

[Allos]

Good. About time! Can't just ask citizens to keep paying in this "difficult time" while mayor/ counsellors enjoying fat benefits.

[boogerz]

[snip]

[Zarley]

Finally someone on council is willing to confront of of the biggest fiscal problems that the city is facing, an issue that the current mayor and council have ignored and allowed to compound over the last decade. DB pensions are a thing of the past and completely unsustainable.

[Flamenspiel]

It should go up and down the line though, not just politicians. They should all be getting regular RRSP type pensions, the increase in public sector costs are unsustainable.

[Slava]

Originally Posted by Flamenspiel

It should go up and down the line though, not just politicians. They should all be getting regular RRSP type pensions, the increase in public sector payrolls is unsustainable.

I think that is what the argument is though. They need to implement this so that they don't look hypocritical when they propose that to the other employees.

[Northendzone]

in some fairness to the city employees i do not believe that they receive perks like bonuses and of course there are no stock options. These are two comp items that (some) employees in the private sector get.

it would be an interesting exercise to track two employees of similar age and similar base earnings thru their career and see who is better off financially at age 65.

i go back and fourth about elected officials pay. on one hand they do seem to put in a lot of hours, and i think you want to ensure they are well compensated or else we get larry the cable guy as mayor.

but the reality is that the cost of benefits - generous pension plans and generally better than average benefit plans that mostly cover 100% of most things with little employee contributions are getting more and more expensive.

[Shazam]

They can keep their pensions. They just need to contribute more from their salaries.

[Nufy]

Nothing will come of this.

We'll get the same canned answer...

"Our compensation is determined by an independent review board, we only act on their recommendations."

[Slava]

Originally Posted by Northendzone

in some fairness to the city employees i do not believe that they receive perks like bonuses and of course there are no stock options. These are two comp items that (some) employees in the private sector get.

it would be an interesting exercise to track two employees of similar age and similar base earnings thru their career and see who is better off financially at age 65.

i go back and fourth about elected officials pay. on one hand they do seem to put in a lot of hours, and i think you want to ensure they are well compensated or else we get larry the cable guy as mayor.

but the reality is that the cost of benefits - generous pension plans and generally better than average benefit plans that mostly cover 100% of most things with little employee contributions are getting more and more expensive.

I think that these are two different discussions though. I want people to be well compensated for their roles of course and want qualified people in those positions.

The issue with the DB pensions in general though is a large one. People are living longer, with greatly increased healthcare costs and both of those things are a large impact on the retirement provisions that come with these plans. Obviously the longer lifespan means that "we" pay for the retirees for a longer period and the just costs an ever increasing amount of money. That's the lions share of the problem. The health issue matters as well though. A lot of these plans offer full benefits for retirees, and as their healthcare costs increase substantially in retirement, that adds to the costs as well. It's something that has to be examined and preferably with outside consultations. I'm not enthralled with the idea that people make their own decisions on these issues because it leads to a pretty obvious conflict of interest.

And to be clear, I think that Farkas made a mistake in declining the pension. I don't think that he (or anyone) should get zero. That's political grandstanding and the truth is if he were to serve for a number of terms, why should he get zero to prove this point? That seems unnecessarily harsh, but I guess it's his retirement and his decision.

[NuclearFart]

Originally Posted by Flamenspiel

It should go up and down the line though, not just politicians. They should all be getting regular RRSP type pensions, the increase in public sector costs are unsustainable.

Speaking with friends who work at the city, that pension is one of the few perks that actually attracts quality talent to the low salary, no bonus/stock options, typical of municipal job remuneration. Take that away, and there will be an outflow of skill back into the private sector.

[Nufy]

Originally Posted by NuclearFart

Speaking with friends who work at the city, that pension is one of the few perks that actually attracts quality talent to the low salary, no bonus/stock options, typical of municipal job remuneration. Take that away, and there will be an outflow of skill back into the private sector.

What private sector is hiring city workers these days...

[CliffFletcher]

Originally Posted by NuclearFart

Speaking with friends who work at the city, that pension is one of the few perks that actually attracts quality talent to the low salary, no bonus/stock options, typical of municipal job remuneration. Take that away, and there will be an outflow of skill back into the private sector.

I don't see a lot of people advocating removing public sector pensions altogether. But they have to be sustainable. It's all well and good to promise a comfortable pension from age 56 to 90. But what happens if payouts continue to rise faster than contributions? If pensions bankrupt the municipality?

If I were a member of a public sector union, I'd prefer a modest rollback of the plan to finding out at 63 that the system is not sustainable and I'll have to accept 25 cents on the dollar or take nothing. The Boomers are going to leave a smouldering wreck of a many pensions and other entitlements.

[NuclearFart]

Not my field of expertise, but trading, accounting, banking & law are what I am told.

But that's besides the point - its not just about during a downturn. During the natural economic cycles you are going to bleed talent with long term retention of the bums. Its not as though the city would ever reinstate pensions during the good times.

[jgotti]

Originally Posted by Allos

Good. About time! Can't just ask citizens to keep paying in this "difficult time" while mayor/ counsellors enjoying fat benefits.

ya because city workers don't pay taxes

[NuclearFart]

Originally Posted by CliffFletcher

I don't see a lot of people advocating removing public sector pensions altogether. But they have to be sustainable. It's all well and good to promise a comfortable pension from age 56 to 90. But what happens if payouts continue to rise faster than contributions? If pensions bankrupt the municipality?

If I were a member of a public sector union, I'd prefer a modest rollback of the plan to finding out at 63 that the system is not sustainable and I'll have to accept 25 cents on the dollar or take nothing. The Boomers are going to leave a smouldering wreck of a many pensions and other entitlements.

I'm not arguing that pensions are financially responsible or sustainable. For the record I largely agree with your stance.

The only point I'm making is that pensions are one of the few incentives that will attract quality talent to the public sector. If the city destroys or diminishes the pensions, they will have to introduce other forms of compensation to stay competitive during the economic cycles.

[GGG]

Originally Posted by CliffFletcher

I don't see a lot of people advocating removing public sector pensions altogether. But they have to be sustainable. It's all well and good to promise a comfortable pension from age 56 to 90. But what happens if payouts continue to rise faster than contributions? If pensions bankrupt the municipality?

If I were a member of a public sector union, I'd prefer a modest rollback of the plan to finding out at 63 that the system is not sustainable and I'll have to accept 25 cents on the dollar or take nothing. The Boomers are going to leave a smouldering wreck of a many pensions and other entitlements.

Isn’t this just an actuarial problem. Pick inflation, rate or return and lifespan conservatively and there shouldn’t be issues. The historical problem of DB pensions was they relied on an ever expanding workforce to pay for the pensions rather than relying on savings today to pay for pensions of the future.

Defined contribution plans do shift risk from the public to individuals but someone planning their own retirement makes a much less informed set of assumptions than actuaries do. If you look at the city council pension it’s 30% of base pay with 1/3 paid by employees. That amount is crazy high.

[nik-]

this is such populist nonsense.

[Slava]

Originally Posted by GGG

Isn’t this just an actuarial problem. Pick inflation, rate or return and lifespan conservatively and there shouldn’t be issues. The historical problem of DB pensions was they relied on an ever expanding workforce to pay for the pensions rather than relying on savings today to pay for pensions of the future.

Defined contribution plans do shift risk from the public to individuals but someone planning their own retirement makes a much less informed set of assumptions than actuaries do. If you look at the city council pension it’s 30% of base pay with 1/3 paid by employees. That amount is crazy high.

Well the actuaries might be a piece of it, but there's another issue that is going to be a problem for people and their retirement projections in general. The truth is that we've just seen a massive return from bonds over the past ~30 years that is almost surely not going to take place going forward. Interest rates went from being at historical highs to historical lows over that period and I think that impacted the returns for a lot of these pensions. They're typically fairly heavily invested in bonds because they need the surety that comes with those securities, and they had a great tailwind. It's not to suggest that they can't see some gains as the reinvestment returns going forward should increase as rates rise, but do they increase fast enough to compensate for the decline on the other side of the ledger? I'm not so sure.

I think that is a great challenge for these mandates going forward. The required return will be significant to ensure that they are properly and stably funded, but in a low rate environment that's not going to be easy. Interesting times to say the least.

[Fuzz]

Originally Posted by nik-

this is such populist nonsense.

If it is just Council, then ya. If it is looking at all city departments, I don't think it is a bad idea to at least look into it and compare to other cities, and align ourselves with their standards.