The deal will be phased in over five years and will see an increase in contribution rates among members of the Public Service Pension Plan.
The government says current retirees will not be affected by the deal and changes to early retirement provisions are covered by the five-year transition period.
The Newfoundland and Labrador Association of Public and Private Employees, also known as NAPE, says the unions successfully maintained a defined benefit plan for government workers after some business groups lobbied for a defined contribution plan.
Association president Carol Furlong says the government has agreed to put almost $2.7 billion in special payments into the plan through annual instalments of $195 million over 30 years.
Contribution rate increases from the plan's members will amount to about $1.13 billion over the same period.
In return, Furlong said Tuesday that the unions have agreed to take a greater responsibility in the plan through a joint trustee agreement that will see future deficits and surpluses shared equally.
The unfunded pension liability in the plan stood at $3.2 billion when the last actuarial evaluation was done and it accounted for almost 75 per cent of the government's net debt in March.
Furlong said the government could have made changes to the plan through legislation without the consent of the unions.
"These reforms are coming, regardless of who is in power," she said in a video message posted online to the union's members.
"We believe that this offer is more lucrative than any other we would receive."
The increase in contribution rates will come into effect on Jan. 1.
The government began consultations in 2012 with NAPE, the Newfoundland and Labrador Nurses' Union, the Canadian Union of Public Employees, the Association of Allied Health Professionals, the International Brotherhood of Electrical Workers and the Newfoundland and Labrador Public Sector Pensioners' Association on the future of the plan.
Premier Tom Marshall said getting members of the plan to take greater responsibility for its financial position was important.
"In reaching this agreement, we are protecting a defined benefit pension plan for current and future Public Service Pension Plan members and we are working to address the most significant financial issue facing the province," he said in a statement.
"This agreement is contingent on joint trusteeship, meaning that both government and members will share responsibility for the plan equally, and deficits will no longer rest solely on the taxpayers of Newfoundland and Labrador."