Pensioners challenge government on unfunded liability and “ex gratia” pensions – October 5, 2011


October 5, 2011

Pensioners challenge government on unfunded liability and “ex gratia”

The Provincial Government is continuing to confuse the general public by wielding “unfunded liabilities” like a stick, to beat down the legitimate aspirations of public sector pensioners.

However, this is pure deceit, says Ralph Morris of the Pensioners’ Coalition.

“The Premier and her Finance Minister refer to ‘unfunded liabilities’, and how those liabilities will increase if pensioners are granted a moderate increase,” said Morris, who is President of NAPE Retirees Local 7002. “However, having liabilities for annual leave, sick leave and overtime does not stop the Government from granting pay increases to its current employees. So why use it as an excuse to stop an increase for pensioners?”

Government has tremendous discretion is this matter, Morris said, and has exercised this discretion numerous times over the years, in awarding “ex gratia” or free pensions to individuals who have not contributed to the Public Sector Pooled Pension Fund. Today, hundreds of people are receiving these free pensions.

“Sometimes, these pensions were deserved by their service to the people of the province, and we take no issue with them. Other times though, they were apparently given as patronage for political cronies. And in some cases they were unexplainable. For example, we have heard allegations that certain retired clergy were given years of pensionable service credit for their religious life towards a provincial pension, and persons with the former Salt Fish Corporation and those who were given war service credit were also
given similar perks. We do take issue with how these ex gratia pensions are funded, because they are shuffled off to the Pooled Pension Fund, which is paid for by contributions from workers.”

Ex gratia payments are awarded at the sole discretion of the finance minister, and are thus open to political abuse at pensioners’ expense. And because they are not earned, they are a major contributor to the pension fund’s unfunded liability.

“The provincial government has been very willing over the years to award ex gratia pensions, at the expense of the Pooled Pension Fund,” Morris said. “If the provincial government takes no issue with that, we don¹t understand how they can refuse to grant modest increases to pensioners.”

One of Government’s tactics is to imply that pensions are paid from the public purse, Morris added. “They are not. Pensions are paid from the Pooled Pension Fund, which has been pillaged and abused by government over the years. If there is an unfunded liability, it is government’s fault. Don¹t blame pensioners! We did not sign up for this, despite what government says – all pension plans were imposed through the legislature. It is time for the province to right this wrong, and stop spreading misinformation about unfunded liabilities. If they don’t, pensioners will express their frustration on election day.”

For more information, contact:
Ralph Morris, President NAPE Retirees Local 7002


What is an Unfunded Liability? According to Alison Coffin, author of the
“Economic Study on the Implications of Past Governments’ Actions on the
Present State of the Pooled Pension Fund”, commissioned by the Newfoundland
and Labrador Public Sector Pensioners’ Association, an unfunded liability is
calculated by determining the value of pension benefits to be paid out in
the future as determined by an actuary, based on information about life
expectancy, health and other factors. A simple example would be to multiply
the number of years a person is expected to live past retirement by their
annual pension payments. In layman’s terms, an “unfunded liability” is a
projected expense that a company, business, or government could expect to
incur if all its employees cashed in at once their benefits, such as annual
leave, sick leave or overtime. With respect to pension benefits, it is the
actuarial calculation of the value of future benefits payable, less the net
assets of the fund at a given balance date. As there is continuing income
into a pension fund and a continuing need for government services, the
likelihood of Government shutting down and having to honour these
commitments to its employees or pensioners at one time would be highly

Background on unfunded liabilities and ex gratia pensions:

* Government did not match employees’ contributions from 1967 to 1981;
* Government deposited workers contributions into the general revenues of
the Province from 1967 to 1981 and used these monies to build the province’s
infrastructure, never repaying these monies to the Pension Fund;
* Government gave itself a holiday (again) from making its contributions
from 1991 to 1993;
* Government manipulated the pension plan during the 1980’s and 1990’s to
grant pensions to persons who had worked less than the required number of
pensionable years as a part of its austerity measures to cut back on public
service jobs and save money;
* Government has deposited the unfunded liability of the Memorial University
Pension Fund ($62.5M ) into the Public Sector Pooled Pension Fund;
* Government funds the pension payments for Provincial Court Judges and
MHA’s from the Public Sector Plan, allowing separate plans for Judges and
MHA’s to grow healthy funding levels for future use;
* Government legislated itself the right to grant pensions to persons who
never paid into the plan. Today, hundreds of persons are receiving these
free pensions. These ex-gratia (free) pensions are being funded by the paid
members of the plan but are granted on the approval of the Minister of
* Free pensions have been granted to persons who sailed dangerous waters
during the war years, i.e. railway, whaling and coastal freighters;
* Free pensions have also been granted to persons who served overseas during
the war years. Government has never placed money into the plan to pay these
pensions, which also are paid from the premiums of those who paid into the
* We understand that ex gratia pensions have been given to some retired
members of the clergy, and there are allegations that pensions were awarded
to political supporters who did not pay into the plan.
* The cost of administering the Public Sector Pension Plan is paid from the
Pension Fund, including the salaries and benefits of all employees of the
Pension Division of the Provincial Government. Members have funded the
recent salary increases of these employees, but cannot get a fair and just
increase for themselves.

The Pensioners’ Coalition includes:

Newfoundland and Labrador Public Sector Pensioners’ Association (NLPSPA)
Retired Teachers’ Association of Newfoundland and Labrador
Newfoundland and Labrador Association of Public Employees, Local 7002
Royal Newfoundland Constabulary Veterans Association
St. John’s Fire Fighters’ Retirees Association
Retired Correctional Officers
Silver Lights (NL Hydro, NALCOR)