$3.6M cost as new MHAs grandfathered into more lucrative pension plan

The House of Assembly management commission has altered the recommendation of an independent committee, opting to keep newly-elected MHAs in the existing pension plan — something that may carry a price tag of $3.6 million.

The members compensation review committee had recommended that MHAs first elected in the November 2015 provincial election fall under a new pension system.

That new system is less lucrative. It would take MHAs longer to accrue benefits, and sets a minimum age of 60 to draw a pension.  

The management commission voted to accept the recommended new MHA pension plan — but only for members elected in the future.

The decision affects 20 MHAs first elected in the last general election just over a year ago. 19 of them are Liberals; one is a Tory.

'I think it's unfair'

Government House Leader Andrew Parsons said the recommendation was unfair.

"I think there's a number of members in this House who, when they signed up to run in the last general election, they knew what they were getting into, in the sense that they could make employment plans, make financial plans," Parsons said.

I think it's unfair for these members, who signed up for one thing, to have it changed mid-stream.- Government House Leader Andrew Parsons

Parsons, a Liberal MHA and cabinet minister, suggested the changes could even be deemed a form of constructive dismissal, if it were to be done in certain workplace situations.

Constructive dismissal occurs when an employer changes terms of employment or doesn't comply with a contract, effectively forcing an employee to quit.

"I have no issue with the plan being changed going forward, not a problem," Parsons said.

"But I think it's unfair for these members, who signed up for one thing, to have it changed mid-stream."

Tory MHA Keith Hutchings agreed.

"The retroactivity concerns me," Hutchings said. "They came into a position, they were elected. The benefit plan and pension was in place. They paid into it, as my colleague has said, for the year. And now we're going to go retroactive. To me, it doesn't seem fair."

'Financially unstable and unsustainable'

Sandra Burke, a St. John's lawyer who chaired the independent review committee, acknowledged that the recommended changes are "significant."

But she added that they were within the committee's mandate, and are necessary.

... the MHA pension plan is financially unstable and unsustainable in its current form.- Review committee chair Sandra Burke

"They were done with the salary and severance benefits in mind, and based on the fact that the MHA pension plan is financially unstable and unsustainable in its current form," Burke told the commission.

She said the recommendation was guided by the fact that the provincial deficit was announced at $1.83 billion this past spring.

And grandfathering newly-elected MHAs into the old plan comes with a cost, Burke added.

"It would add an additional financial burden of $3.6 million to the plan's unfunded liability, all of which, of course, is borne by the people of this province."

The MHA pension plan has an unfunded liability of $100 million, and a funded ratio of just 17 per cent.

That means there is a "funding deficiency" of 83 per cent.

Change passes 3 votes to 1

The management commission vote to grandfather rookie MHAs into the old pension plan was passed by a margin of three to one.

Liberal Andrew Parsons and Tories Keith Hutchings and Paul Davis voted in favour of the change. New Democrat Lorraine Michael voted against.

Liberals Siobhan Coady and Mark Browne also sit on the management commission. They both left the House chamber and did not vote, because they are affected by the change.

The management commission is the all-party group of MHAs that oversees the administration of the legislature. It was set up in the wake of the House of Assembly spending scandal to replace the secretive internal economy commission, which made decisions behind closed doors.