Earlier letter from MTS President Pat Isaak
to retired teachers
Dear retired teacher,
In December 2007, the provincial government released a report that contains a plan to provide retired teachers with an improved cost of living adjustment. The proposal could put more money in the pockets of retired teachers this year. MTS supports the recommendations contained in the report and is urging the Retired Teachers’ Association of Manitoba to accept them, as well.
Please read the enclosed report, and make up your own mind. It contains eight recommendations:
“Implementation of these recommendations in 2008 would allow COLAs to immediately reach the proposed ceiling of 2/3rds of CPI in 2008, assuming that CPI remains below 3%. At the same time they will begin the process of slowly rebuilding the PAA over a ten year time frame so that further improvements could be discussed at that time.” (Page 8)
Former cabinet minster Tim Sale was asked in March of 2007 to assist MTS, RTAM and the government to address the pension adjustment account (PAA) and COLA issue. The parties considered many options. In his report, Mr. Sale outlined the factors that led to the current difficulties. Beginning in 1984 the plan paid out 100 per cent or close to 100 per cent COLAs every year. This occurred despite the actuary’s warnings that the plan was designed to pay only a two-thirds COLA.
Mr. Sale also commented on RTAM’s stance on the COLA issue:
“RTAM officials, faced with the dilemma of a weak PAA have taken a militant stand that this problem must be resolved; and have sought 100% COLA guarantees. Retired teachers have adopted the position that “we have paid for COLA and we should get it”. Unfortunately, this is not completely accurate. The COLA plan provides for a Fund, the PAA, which was initially established by capital payments in the 1970s, and the earnings of which are used to pay past COLAs. If there are excess earnings above what is needed for past COLAs, these earnings can be combined with current 16.6% of current contributions to make each year’s new COLA award. Thus, retired members’ contributions have not actually built up funds for new COLAs. Rather, they have paid (actually, they have underpaid) for COLAs now in force.
“This may be somewhat understandable, given that full COLAs were paid until 1998, in spite of the former Actuary’s warnings that this payout level was not sustainable. Most retired teachers would not likely, have seen these warnings. While RTAM’s position may be recognized as a bargaining stance, it is simply not realistic given the weak state of the PAA. In fact, no teachers’ retirement plan in Canada provides unlimited 100% COLA guarantees. However, it is also clear that the current PAA COLA capacity places Manitoba far down in inter-provincial comparisons. I believe that all parties to the present discussions agree that it is desirable to improve this situation incrementally, and then to put in place policies that will ensure that past problems do not reoccur.”
The Manitoba Teachers’ Society made a significant concession during discussions. RTAM requested a change to how the PAA was calculated. Currently the Pension Adjustment Account that funds COLA earns only the fixed income rate of the pension plan fund, currently two per cent lower than the total return of the fund. After much discussion, The Manitoba Teachers’ Society agreed To RTAM’s proposal that this policy should be changed and that the PAA should be granted the better of the equity or fixed income returns for the main fund for a period of time. This was a major compromise on the part of the Society and will put more money in the PAA to pay COLAs.
Implementing the Tim Sale report is a win-win-win for government, 15,000 active teachers and 11,000 retired Manitoba teachers. It balances the need to provide an improved COLA for retired teachers with the amount of money that active teachers and government are required to pay to support it.
For the sake of the 11,000 retired teachers and every teacher who will retire one day I am appealing to you to contact RTAM and ask their executive to support the Sale report’s proposal. It is the only way we will get an improved COLA quickly.
RTAM
#204 - 2281 Portage Avenue
Winnipeg, Manitoba, R3J 0M1
Winnipeg Voice Mail/Office Phone: (204) 889-3660
MB Toll Free Voice Mail: 1-888-393-8082
RTAM Office email: rtam@mts.net