Myths vs. Facts

Myth: The Teachers' pension plan won't be around when I retire.

Fact:

The pension plan is sustainable — it just may look different in the future than it does now. The Ontario Teachers' Federation and the Ontario government are committed to adapting the pension plan so it remains viable and affordable for all generations of teachers.

Myth: The Teachers' pension plan is going broke.

Fact:

The pension plan has $129.5 billion in assets, enough to pay pensions for many years. But shortfalls are projected to arise when we look ahead 70 years or more, when today's newest teachers will still be collecting their pensions.

At least once every three years, the pension plan must show it will have sufficient assets to meets its long-term pension obligations to all current members. If there's a projected shortfall, it must be eliminated.

Myth: The Ontario government pays a higher contribution rate than teachers do.

Fact:

The contribution rate is the same for members and the government, as well as other employers such as private schools. In 2013, teachers will contribute an average of almost 12% of their annual salary to the pension plan. The Ontario government and other employers match total annual member contributions.

Myth: Teachers' pensions can be reduced to deal with a funding shortfall.

Fact:

The value of pension benefits already earned by working and retired members cannot be reduced under current Ontario law. Only future contribution rates and pension benefits not yet earned can be adjusted during a teacher's career.

Myth: Funding problems will disappear when the economy improves.

Fact:

Not necessarily. Interest rates are used as a starting point to estimate the cost of future pensions. Those rates are at historical lows and are a major cause of recurring shortfalls. If rates rise over the next few years, the plan's funding position will improve. But demographic factors, including longer periods of retirement, are also contributing to recurring funding shortfalls.

Myth: If the pension plan made more money, we wouldn't have a funding problem.

Fact:

The pension plan is projecting funding shortfalls, despite leading investment performance.

CEM Benchmarking Inc., an independent authority on pension fund benchmarking, once again ranked Teachers' number one for 10-year investment returns and number one for money earned above benchmarks, in its survey of 330 pension funds in 2011.

Myth: Actuaries are to blame for recurring funding shortfalls in the Teachers' plan.

Fact:

No one is to blame. No one can accurately predict the future. Actuarial assumptions used to value pension assets and liabilities must be reasonable and provide a plausible snapshot of the future. However, experience will almost always be different than projections. Assumptions are revised when needed to reflect actual experience and plan changes.

Key assumptions made in the 1970s for the Teachers' pension plan have been largely accurate, with one exception: predictions about life expectancy. Plan members are living for longer than anyone projected. Future mortality is almost impossible to predict, in part due to medical advances and changes in lifestyle.

Myth: A previous government contributed to the shortfall by removing money from the pension fund.

Fact:

The government did not remove any money from the pension fund. To eliminate a shortfall that existed when the pension plan became an independent organization in 1990, the government agreed to make special payments to the fund and then used its share of surplus funds between 1993 and 1999 to eliminate the remaining pre-1990 deficit. (OTF used its share of the surplus for benefit enhancements, such as a permanent 85 factor and higher pensions after age 65.)