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A nixed walkout meant Hilton Barbour’s daughters Savanna and Monet, went to school Friday.Chris Young

The province of Ontario has struck a deal with the Ontario Teachers' Federation that will limit the government's financial exposure to any deficits that crop up in the Ontario Teachers' Pension Plan over five years.

The deal is similar to those the province struck last year with other public-sector pension plans that it jointly sponsors, but Teachers' is much larger than those plans, making this agreement much more meaningful to the government as it seeks to deal with its $12-billion deficit. It comes as governments and corporations across the country are grappling with a looming retirement savings crisis, with Canadians living longer at a time when low stock market returns and interest rates are pinching returns.

The Globe and Mail reported on March 5 that the two sides were negotiating this pension agreement, after prior talks had fallen apart at the height of labour unrest between Ontario and its teachers' unions, which have been locked in a battle over separate contract issues.

"By working together, teachers and the government were able to find common ground with respect to the Ontario Teachers' Pension Plan," Ontario Minister of Finance Charles Sousa said in a press release. "This agreement allows the government of Ontario to meet its commitment to taxpayers and maintain contributions in public sector pension plans as announced in the 2012 budget."

The province's contribution to the pension plan has been rising in recent years, as the fund has coped with recurring shortfalls. Last year's budget allocated $1.46-billion to match teachers' contributions to their plan in 2012-13. Since 2006, both government and employee contributions have gone from 8.9 per cent of teachers' annual income (above maximum pensionable earnings under the Canada Pension Plan) to 12.75 per cent, and that will increase to 13.1 per cent by next year under a former agreement.

Ontario Teachers' Federation (OTF) president Terry Hamilton said it's important that the government will be taking into account actions that were recently taken to deal boost the pension plan's funded status. "This provides teachers with even more protection and that was important to us in these discussions," Mr. Hamilton stated in a press release.

In February the government and the OTF agreed to eliminate the guarantee that members' benefits will be adjusted for inflation, a move that they said wiped out the $9.6-billion deficit that the plan had as of Jan. 1, 2012. They also agreed to study ways to put a permanent stop to the fund's deficits by, among other things, researching topics such as the shift in the number of years that teachers are working compared to the number of years that they receive benefits.

In 1990, teachers worked, on average, for 29 years and received retirement benefits for 25 years; by 2011, they worked for 26 years and drew pensions for 30 years. The profession skews toward women and its members tend to be healthy, resulting in long life expectancy.