Indexing

Replace guaranteed indexing with conditional indexing for future pensions 

Under the current Plan, pensions paid to retirees rise automatically in step with annual increases in the Consumer Price Index (CPI) – a standard measure used to determine the amount that a typical consumer pays for a basket of retail goods and services. This is called “guaranteed” inflation indexing.
 
To help improve the Plan’s sustainability substantially, the SC Board is exploring the possibility of introducing “conditional indexing.” Unlike “de-indexing,” conditional indexing provides annual pension increases when the Plan is financially healthy. If the Plan gets into financial trouble, indexing can be reduced (or suspended) on a temporary basis. 

Rationale

Conditional indexing will be provided based on the financial health of the Plan. This essential safety valve will help to ensure more predictable (and stable) contribution levels over time. Just as important, it will help the Plan to better absorb future financial shocks that would otherwise prompt automatic benefit cuts.
 
It’s important to note that the change would have no impact on current retirees or on service up to the effective date of the change (e.g., January 1, 2021). In no case will pensions in pay be reduced from one year to the next.