The Stel Salaried Pensioners Organization wishes to thank The Hamilton Spectator for permission to post the following article

The Stel Salaried Pensioners Organization wishes to thank The Hamilton Spectator for permission to post the following article by Reporter Gillian Livingston published in the February 22, 2003 edition

Feb. 22, 2004. 03:45 PM

Ontario not concerned about Teachers' pension plan shortfall, watching Stelco

By GILLIAN LIVINGSTON

WINDSOR, Ont. (CP) - The Ontario government isn't concerned about a pension shortfall at the Ontario Teachers' Pension Plan, but it is keeping watch on whether pension rules have to be revised in light of a major pension deficit at steelmaker Stelco Inc.

The plan is governed between the teachers and the government of Ontario so we have a seat at the table and I'm confident that the issues that confront the plan right now can be resolved,Finance Minister Greg Sorbara said while in Windsor, Ont. at the Ontario Liberal Party's annual meeting.

It's not something I think that gives rise to serious concern, said Sorbara, who called the plan's deficit an actuarial shortfall.

Late last week, Ontario Teachers' Pension Plan reported that for the first time since its creation in 1990 the plan's assets aren't big enough to cover the cost of future retiree benefits, creating a whopping $6.2-billion shortfall as of January.

Claude Lamoureux, president and chief executive of the Teachers' pension plan, blamed the shortfall on the downward shift in interest rates, combined with other changes, that have added about 35 per cent to the plan's cost of future benefits, a factor totally beyond our control.

The news of the pension deficit is a reversal from the plan's $1.5-billion surplus last year, and comes on the heels of the plan's 18 per cent rate of return in 2003, the third-best performance in its history.

The Ontario Teachers' Pension Plan is one of the strongest in the province and in the country, Sorbara said, adding that he believes the plan will be able to sort out these issues over time.

It had a very good year but we'll just wait and see what happens from here on in, he said.

Lamoureux echoed those comments, telling the province's teachers not to worry since the plan has $75.7 billion in assets and there's time to take corrective measures, if necessary.

Sorbara said he hasn't yet spoken to Lamoureux about the issue but added that he has absolute confidence in the way in which they're managing the plan.

Still, the issue of pension deficits is top of mind for the Ontario government as workers at Hamilton-based steelmaker Stelco Inc. (TSX:STE.A), which is restructuring under bankruptcy protection, are calling on the government to step up to the plate and guarantee its pensions as a way to help the company out of its financial woes.

So far the government hasn't promised a bailout package for the steelmaker.

Stelco may be the catalyst that has us review some of the regulatory aspects of the (Pension Benefits Guarantee Fund) and regulating pensions generally, Sorbara said.

Stelco, which filed for protection from its creditors last month, has a pension shortfall that's estimated at about $1.3 billion.

Its unions have called on the Ontario government to dip into its Pension Benefits Guarantee Fund, which provides partial pension security in case a company goes bankrupt, to ensure its workers and retirees get their pensions.

There's certain issues directly related to the pensions we regulate including the so-called 'too big to fail' category of plans, including Stelco, that we may want to have a look at, Sorbara said.

A rule brought in by the New Democrats in the early '90s allowed companies to take holidays on making pension contributions if they met certain criteria, such as size.

In addition, the structure and funding of the Pension Benefits Guarantee Fund may be something we want to have a look at, he said.

Stelco workers have raised concerns that the fund won't have enough money in its coffers if the company goes under. Pension plans regulated by the province contribute specific amounts to the fund depending on their type and size.

We're constantly reviewing these things, Sorbara said.

Sometimes when you have an issue like Stelco, that inspires you into a more careful look at whether or not certain regulatory changes would be appropriate, he said.

So we're at that stage.