Ontario Is A Model For California’s Pension Plans
Just three months after its 2015 year-end, the Ontario Teachers’ Pension Plan issued an annual report with up-to-date funding information. Meanwhile, in California we are still waiting for our largest pension fund, CalPERS, to issue a funding report for a fiscal year that ended 15 months ago. Our second largest pension fund, CalSTRS, took nine months to issue its report.
Pasted below is Ontario Teachers’ Funding Valuation Summary. Observers accustomed to obscurantist reporting by CalPERS and CalSTRS will notice unusual clarity and two other differences:
Discount Rate: Ontario Teachers’ employs a 4.80 percent discount rate. In contrast, CalPERS and CalSTRS employ a 7.50 percent discount rate. That higher rate deceives governments and citizens about the true size of pension promises until it’s too late, as explained here.
Surplus: Ontario Teachers’ has a surplus while CalPERS and CalSTRS have enormous deficits. That too is the consequence of the use of honest assumptions in the past, as explained here.
Defined benefit pension plans can work just fine. They just need to be honestly reported, managed, funded and governed. Failure to do so crushes public schools, colleges, universities and other public services.