tag:blogger.com,1999:blog-1262113763277382013.post4681832240387893679..comments2023-08-29T06:44:46.986-03:00Comments on Stand Your Ground: Lobby Group Pushes For A Mammoth Pension PlanUnknownnoreply@blogger.comBlogger1125tag:blogger.com,1999:blog-1262113763277382013.post-44723588192474852172009-05-25T10:12:30.317-03:002009-05-25T10:12:30.317-03:00It is good to have non-experts listening to the av...It is good to have non-experts listening to the avalanche of current public discussions on the pension crisis and proposed solutions thereto. It is hoped they will listen to the proper answers to the questions they raise and to the clarifications that some of their statements require.<br /><br />The CPP was implemented on a quasi pay-as-you-go (paygo) basis rather than a fully funded basis. With the paygo approach, contributions for a given year are essentially equal to the benefits paid during that year. Therefore, paygo contribution rates are lower in the early years following implementation but increase gradually as the plan matures. Ultimately, the paygo rate is higher than the full cost rate because with advance funding, investment earnings help reducing future costs.<br /><br />If the CPP had been implemented on a full funding basis in the first instance, the contribution rate would then have been 6% (3% employees, 3% employers). And it would still be 6% to day if it were not for the 1998 reform that reduced benefits by about 9%. The CPP full cost rate, as conveyed in the CPP statutory actuarial reports, is 5.4% (i.e. 91% of 6%).<br /><br />To expand the CPP benefit rate from 25% to 70%, the extra 45% benefit rate would therefore cost 9.9%, i.e. (70-25) divided by 25, times 5.5%.<br /><br />CARP'S proposed expansion of the CPP is quite different from Keith Ambachtsheer's proposed CSPP, which is a Defined Contribution (DC) Plan as opposed to a Defined Benefit plan (DB). The CSPP would not be administered though the existing CPP and would cost more than the CPP because its investments would be made in less risky areas and under each individual contributor's control.Bernard Dussaulthttps://www.blogger.com/profile/13182301234206148564noreply@blogger.com