Susan Rowland, a Toronto lawyer who was chosen by province Premier David Alward to led a three-member task force on the issue, said the principles of the shared-risk plan can be applied to all pension plans.

"Under this model, employers and employees share the costs when the plan performs poorly and share the benefits when it does well," explained Rowland to cangovexec.net. "One of the characteristics of this model is that it can be adapted to most public- and private-sector plans."

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The New Brunswick plan has three key elements, as delineated in a recent paper produced by the Center for Retirement Research at Boston College: "a new design that splits plan benefits into highly secure 'base' benefits and moderately secure 'ancillary' benefits; 2) protocols that require pre-determined actions to change future benefits, contributions, and asset allocations in response to changes in the plan's financial condition; and 3) a new risk management regulatory framework to keep these plans on track."

Combining the Netherlands approach with a regulatory framework based on the stress tests Canada uses to oversee banks and insurance companies was "the key innovation" of the New Brunswick panel, the paper said. 

The two tiers of benefits come into play depending on the financial strength of the pension fund. Base benefits are only affected if the funded ratio drops to less than 100 percent two years in a row. If that occurs, contributions to the fund would rise by 1 percent, with employees and employers each paying half. Also, base benefits would be reduced and formulas for calculating payouts would change.

On the flip side, benefits would be added if the funded ratio were to rise above 105 percent.

Three large unions in the province – the Canadian Union of Public Employees, the New Brunswick Union of Public and Private Employees and the New Brunswick Nurses Union – signed on to the new pension format.

Contrast that to the typical experience in the U.S., where unions have fought pension changes that are often focused on cutting benefits while raising contributions paid by workers. In California, for instance, changes to the public employees' pension system, CalPERS, have brought lawsuits claiming reform passed by the legislature violate collective bargaining rights. A similar scenario is unfolding in the wake of the Detroit bankruptcy.

The New Brunswick unions, which represent 45,000 workers, offered their reasons for embracing the reform in a recent commentary article published in the Telegraph-Journal of New Brunswick.

The article said the plan model met "three key goals of our members. It is sustainable, affordable and secures retirement benefits for our members."

The union said that with the pension plans severely underfunded, they recognized reform was needed. A meeting with the task forced produced a common set of goals.

These included ensuring that any changes made would be incremental to protect those closer to retirement, as well as making sure those in the early and middle part of their careers would continue to be well served by any pension plan.

"The shared risk plan meets these goals and, although the exact details still need to be agreed upon, we can recommend it as a replacement for the current civil service pension plan," the union wrote.

The Center for Retirement Research sees an opportunity for U.S. pension plans to adopt a shared risk approach.

"For U.S. state and local plans to adopt a risk-sharing approach, sponsors must develop specific rules for adjusting benefits, contributions, and investment allocations," it said. "Establishing such rules is a thorny and difficult task, but is likely to produce a much more sensible outcome than lurching toward generous benefit expansions when times are good and dramatic benefit reductions when times are bad."