Ontario Teachers Pension Plan…(teachers need a Plan B)

Teachers’ pension plan projects $9.6 billion funding shortfall

(from OTPP website)

April 3, 2012 – The Ontario Teachers’ Pension Plan is projecting a $9.6 billion funding shortfall. The shortfall exists despite an 11.2% return on investments in 2011 and plan changes that eliminated a shortfall reported last year.

A shortfall occurs when plan liabilities (the estimated cost of future pensions) exceed projected plan assets. The $9.6 billion shortfall means the plan expects to have 94% of the assets required to meet its long-term pension obligations.

The Ontario Teachers’ Federation (OTF) and the Ontario government, which sponsor the Teachers’ plan, are studying options to keep the pension plan viable and affordable.

If a shortfall persists, as expected, OTF and the government must eliminate it by 2014, but they could decide to resolve it earlier. To eliminate a shortfall, OTF and the government can:

increase contribution rates;
further reduce inflation protection for pension credit earned after 2009;
reduce other pension benefits members will earn in the future; or,
adopt a combination of these options.
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What does this mean? In a nutshell, teachers need a Plan B (more cash set aside) as pension promises will be much less in the future…even with great returns.

Insurance costs as one example can left frozen if one gets own policy as an example.

see my story on annuities as an example http://www.milliondollarjourney.com/how-annuities-work.htm