A report on the Pension Benefits Guarantee Fund prepared for the Ontario government by EcklerLtd. sheds light on the nature of the PBGF reforms contained in Finance minister Dwight Duncan’s announcement this week.
The analysis concludes that on an actuarial present value basis, if treated as a private insurer, the PBGF would require an upfrontreserve net of current claims at January 1, 2010 of between $680 million and $1.023 billion to cover expected future claims, depending on the desired level of margin for adverse deviation.
With immediate one-time external funding to cover the anticipated 2010 claims, assessments
would be sufficient to cover most expected future claims, but would not be sufficient to cover a
future catastrophic claim. Hence, current assessments would be insufficient for the PBGF to be
sustainable over the long-run due to the volatile nature of future catastrophic claims.
In addition to one-time external funding to cover anticipated 2010 claims, an increase in overall assessments in the order of 450% could be sufficient over the long-run to cover existing funding loan repayments and expected future claims plus expenses at the present coverage level of $1,000. If coverage was increased to $2,500, a 650% increase in assessments would be required. In the absence of any future external funding, and at the present coverage level of $1,000, an increase in overall assessments in the order of 800% would be required to ensure the sustainability of the PBGF with a high degree of certainty. If coverage was increased to $2,500, a 1000% increase in assessments would be required.
Employers are realing under the basic premium increase from $1 to $5 per member. Unions and other employee groups have been lobbying for an increase of the monthly maximum PBGF benefits to $2,500. Based on the Eckler Report, Duncan said increasing benefits levels was too expensive.