Eliminate exclusive public sector pension plans

As governments have grown larger over the years, their legions of employees have been able to command enviable employment perks coerced frequently using the "collective bargaining" tactics of their unions. The generous Defined Benefits pension plans are a good example of such perks. However, in 2011, when virtually no private sector company can afford to offer Defined Benefits pension plans, they continue to exist on an exclusive basis for most Ontario's public sector employees.

Many government workers will attempt to justify this perk on the basis that they are "public servants" mandated to deliver essential services to all citizens. Yet, those citizens with a sound grasp of Economics will understand that it is the private sector worker who creates the wealth that accounts for our standard of living and, without this continuous stream of wealth creation, there would be no source of tax revenues to fund the jobs or employment benefits of our tens of thousands of public sector employees in Ontario.

The way I see it, all Ontario citizens are all in the same boat - working hard to create a better life for ourselves and our families. For this reason, I cannot justify why a public sector worker should benefit from a perk that is not available to all private sector workers.

Let's consider the case of the Defined Benefit Plan of the Ontario Teachers' Pension Plan (OTPP).

Eligible for the OTPP's Defined Benefit Plan are 178,000 teachers in elementary and secondary schools in Ontario. The Ontario government, and designated private schools and organizations, match the teachers’ contributions.  The Defined Benefit Plan pays out $4.5 billion in pension benefits annually to 117,000 pensioners, including survivor pensions.


The OTPP's Defined Benefit Plan is a very attractive perk for all eligible Ontario teachers and is likely one of the main reasons why many teachers enter, and/or stay in the teaching profession. However, because 50% of its funding comes from the government, then it is a perk that benefits one group of citizens (teachers) at the expense of Ontario taxpayers. 


As another consideration, what happens if a day comes when the OTPP is forced to default on its payment obligations due to insufficient funding? Are the Ontario taxpayers on the hook to make up the difference? And if so, why?

To rectify this inequity and risk liability for all Ontario taxpayers, I propose that all Ontario Pension Plans be mandated to:

1. Offer only Defined Contribution plans for all future new hires in order to eliminate the risks of future payment defaults. 
2. Accept contributions solely from the employee/plan participants ( ie. accept no matching contributions from the government for public sector employees)
3. Accept any Ontario citizen as a customer. 
4. Offer all retirement products/plan services on a competitive basis ( ie no monopoly advantages to be allowed).

The above 4 suggestions are intended to ensure that no group of taxpayers receive an employment benefit that is not available to all taxpayers. After all, if we are all forced to pay taxes or face potential jail time for tax evasion, then there is absolutely no justification for providing "public servants" with any tax-funded perks that are not available to all taxpayers.   If this means that fewer citizens will be attracted to employment in the Ontario Public Service, then I wish them godspeed in their chosen employment. The Ontario Government will simply need to adapt "do more with less" as is the case with all non-monopoly private enterprises. The resulting leaner public sector, consisting of employees who want their jobs for the merits of the job itself rather than its employment perks, would be a welcome change in Ontario.

For those of you interested in further reading on this topic, please see "Freedom 55 is Still a Possibility for Some" by Dan Kelly printed on FP8 in the August 2nd edition of the Financial Post at http://digital.nationalpost.com/epaper/viewer.aspx.