Change is afoot: Universities and unions design a new pension plan

(This article is from the WLUFA Advocate January 2016 4.6.)

By Marc Kilgour, Mathematics

The University Pension Project (UPP) is an effort to create a new pension option for Ontario universities. An alternative to the current system in which each university manages its own pension plan(s), the new plan would be common to all of the province’s universities that choose to join it. And it would be a Jointly Sponsored Pension Plan (JSPP)—a pension plan sponsored by both employers and employees. These features would permit more investment options and (with provincial government consent) would provide an exemption from solvency valuations and solvency funding requirements. The new plan—also called the UPP—would be open to all Ontario universities and all employee groups, and would be entirely voluntary. In particular, groups currently participating in the design of the plan are not obliged to join it should it eventually come into existence.
The UPP is being carried out by some universities (including Laurier), by the Ontario Confederation of University Faculty Associations representing faculty associations (including WLUFA), and by other unions. As a JSPP, the pension must have both an employer sponsor and a labour sponsor—boards that would have to agree on any changes to the plan. The roles of various labour groups in the labour sponsor are under discussion at the present time, as is the idea of involving non-organized employee groups. The project has received encouragement and some funding from two provincial ministries—Training, Colleges and Universities, and Finance.

In part, the UPP would create a new pension plan that would re-place existing plans for university employees, provided they choose to opt in. It would be a Defined Benefit (DB) plan; pensions would be earned based on service subsequent to joining the plan. The details are still under negotiation, but it appears that, compared to existing DB plans, the benefits will be fair and maybe even generous.

But that’s not all. The new plan would also take responsibility for all pensions earned at any participating university prior to joining the UPP according to the rules that applied to the service—whatever they were. In other words, existing pensions will be protected, both for retirees and for in-service employees. When a university joins the UPP, it would have to “write a cheque” to cover the entire (actuarially estimated) cost of its existing pension obligations. A university with a pension deficit would, of course, have to borrow the money or issue a bond. But it would gain some certainty about its pension liabilities, would be freed from the responsibility of investing pension funds, and no longer would be the sole sponsor of the plan. For existing pensioners, the situation would be essentially unchanged. For current employees, pensions already earned would be protected, while pensions earned in the future would be determined under the new plan.

Work on the UPP started in spring 2014. The design phase is now coming to an end, and re-ports are being filed. The next stage—the build phase—will be undertaken if the province provides additional funding, which seems likely. The build phase will likely last a year, and the subsequent stage—the implementation phase—about two more years. Thus, Jan. 1, 2019, is an optimistic starting date.

Is the UPP a good idea? Would WLUFA members be well served by such an arrangement? Personally, I’m not sure. It’s not clear whether the provisions of our existing plan are better or worse. In fact, the details of the new plan are still not certain, so it’s hard to make a comparison at present. Of course, the decision to join the UPP would be based on collective bargaining. Laurier may be eager to join the new system and “get out of the pension business,” and WLUFA may share this interest—or may be able to use it as lever-age in bargaining. Much remains to be seen. We live in interesting times!

Marc Kilgour has been a WLUFA appointee to the WLU Board Pension Committee for several years. He is also a member of the OCUFA Pension Policy and Research Group, which evolved into the faculty side in the UPP negotiations.

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