Saskatchewan teachers’ retirement plan hundreds of millions in the red

SASKATOON – An actuary report of the Saskatchewan teachers’ retirement plan (STRP) has come up red.

The report by Deanna Napen found the defined benefit plan had a deficit of $301.9 million on July 1, 2010, or a solvency rate of 88.7 per cent.

Napen found one of the challenges facing the plan is the baby boomer effect, with teachers retiring earlier and living longer.

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Another factor is a return on investment, which is around 2.5 per cent annually, down from the ten per cent annual return when the plan was created in 1991.

Lower returns have also led to more expensive pensions as a smaller base is covering a higher liability rate.

“There are lessons to be learned and we have to start looking at other opportunities than equities alone to manage volatility,” said Napen, adding that when liabilities grow faster than assets, it is no longer feasible to rely solely on current contribution payments to the plan.

Possible scenarios to increase the solvency rate back to 100 per cent include increased premiums or decreased benefits.

The STRP board of directors has recommended to the Saskatchewan Teachers’ Federation executive that an application be made for a three-year solvency moratorium under provincial legislation.