Government bails out pensions

The association, which represents the board members of the province’s 62 nursing homes, said next week’s provincial budget will include a $10.6-million trust fund to subsidize the shortfall in the private pension plan for nursing home employees such as licensed practical nurses and housekeeping staff.

Government will cover the remainder of the $17.8-million deficiency by writing a cheque for $770,000 annually for the next 14 years, said association president Pat Diotte.

The claim comes just days after Finance Minister Victor Boudreau warned New Brunswickers to brace themselves for program cuts in the upcoming budget.

Government refused to confirm the association’s assertions as the provincial budget will be released on Tuesday.

Charles Cirtwill, acting president of the Atlantic Institute for Market Studies, said although the details are unclear, it seems there was a lack of safeguards applied to the plan.

“If this is an exercise in government being the last resort, then the burden shouldn’t be entirely on New Brunswick taxpayers. It should be shared among the employer, the employee and the government,” he said. “If, in fact, the government is going to be a player at all.”

He also questioned whether the money will be paid back to government once the markets rebound.

“You have the government coming to bail-out a private pension plan that isn’t necessarily, from a theoretical perspective, any better than a government coming to bail-out a private sector firm that’s run into difficulties,” he said. “This sets a precedent for next time, and you can be assured there’s going to be a next time. If you’re going to do it for these folks you have to be prepared to do it for everybody.”

Diotte said they didn’t receive the information from government, but from a credible “source.”

Although it’s considered a private pension plan, government has deemed the nursing homes’ required contributions to the plan as legitimate expenses. As a result, the cost is factored in to the subsidies the homes receive for each client, said Diotte.

The association, New Brunswick Nurses Union, the New Brunswick Union of Public and Private Employees and the provincial government have spent the last several months negotiating on how to deal with shortfalls in pension plans.

The $17.8 million deficiency is in the General and Service Employee Pension Plan. Diotte said both employees and employers were contributing the required amounts but that a change in the markets was to blame for the shortfall that has been a growing concern for several years.

The nursing homes were required to make up the shortfall in the plan, but as not-for-profit entities they simply couldn’t afford to dip into their budgets, he said.

“Some nursing homes would have been closing — they just didn’t have the money to pay their contribution,” he said. “They were ordered to pay it, to bring the pension plan to solvency but they just didn’t have the money.”

Although he insisted that the employers did everything they could to prevent the situation, Diotte said that government is working on developing some new funding “safeguards.”

As well, a working group comprised of the various organizations involved in developing the bail-out package engaged an independent actuary to recommend a strategy to avoid future pension deficits, he said.

It’s highly unusual for a third party to release details of a budget prior to the finance minister tabling the document.