The rising costs associated with keeping the Winnipeg Police Pension Plan afloat have forced the city to approach its police unions about changing it.
Since the economic recession of 2008, years of low interest rates have made it difficult for many employers to meet the solvency commitments of their pension plans.
The City of Winnipeg has experienced particular difficulty meeting the demands of its police pension plan. First, the city is required to match employee contributions. The city must then top up contributions to whatever level needed to meet the actuarial requirements of the plan.
Since the economic recession, the city’s share of the police-pension burden has risen. So in 2011, city council approved a plan to exempt the Winnipeg Police Pension Plan from these solvency commitments.
At the time, a report to council noted it was not important for the police pension to be completely solvent because public-sector employers such as the City of Winnipeg rarely fail to meet their pension payout obligations.
In an email addressed to all members of city council on Friday, Winnipeg chief financial officer Mike Ruta declared this effort a failure. He also noted the city now spends $29.1 million to keep the Winnipeg Police Pension Plan afloat while pension plan members contribute $13 million.
Ruta warned he will now follow through on a second directive issued by city council in 2011: explore all options to find a way to reduce the financial impact of the police pension plan’s solvency deficiency.
“I will be contacting the Winnipeg Police Association (WPA) and Winnipeg Police Senior Officers Association (WPSOA) shortly to present options in respect of more affordable and sustainable changes to the plan,” Ruta wrote to members of council.
The five-year-old Winnipeg Police Pension Bylaw lays out some of the options at the city’s disposal. The city can amend the plan, merge it with another plan, divide it or even terminate it, as long as it does not reduce the benefits owing to any existing members of the plan. The bylaw also states the city can make these changes retroactively.
This sets the stage for a two-tier pension plan to be on the table as the city engages in contract negotiations with both unions. The collective agreements between the unions and the city expire on Christmas Eve.
Winnipeg Police Association vice-president Gord Van Mackelbergh said while contract negotiations prevent him from being able to address Ruta’s letter to council, the union has been upset by the city’s actions regarding the police pension in the past.
The city once took a holiday from paying into the pension without permission and has since declined to top it up, Van Mackelbergh said Tuesday.
“They have reaped the benefits and now they don’t want to live up to their responsibilities,” he said, adding the pension plan is entirely sustainable.
Winnipeg Mayor Brian Bowman, however, said he’s pleased the chief financial officer is speaking to the police unions about the police pension.
“I obviously believe that changes are needed to look out for the long-term sustainability of the plan for the benefit of taxpayers as well as the members,” Bowman said Tuesday after a news conference at the University of Manitoba.
The pension issue may also influence the final draft of Winnipeg’s 2017 operating budget, which will be presented at an executive policy committee meeting on Nov. 22.
Already this year, the city has paid out $3.7 million to cover an unfunded police pension liability. More payments like this are possible in the future, as long as interest rates remain low.
On Wednesday, incoming Winnipeg Police Chief Danny Smyth, who will be sworn in on Nov. 8, said he planned to ensure the Winnipeg Police Service operates in a fiscally responsible manner.