|Date:||July 7, 2016|
|To:||University of Toronto Employees|
|From:||Angela Hildyard, Vice-President, Human Resources & Equity;
Paul Downes, Chair, Salary Benefits, Pensions and Workload Committee, UTFA
|Cc:||HR Divisional Offices; The Bulletin|
|Re:||Pension Plan Sustainability / JSPP Update|
The University Administration, UTFA, CUPE, USW, and a Representative of each of the non-unionized staff and retirees have been meeting as a joint working committee (JWC) to explore options and propose solutions towards ensuring that the University of Toronto Pension Plan (the U of T Plan or Plan) remains strong and sustainable. In particular, the JWC has discussed the pros and cons of converting the Plan from a single-employer pension plan to a jointly sponsored pension plan (JSPP) or becoming part of a multi-employer JSPP which would be created through the merger of several university pension plans.
The purpose of this communication is to update Plan members about these discussions.
The U of T Plan
The U of T Plan is a single employer defined benefit pension plan whereby U of T is both the plan sponsor and plan administrator. A JSPP is also a defined benefit plan, but it is jointly sponsored and governed by the employer and members. A multi-employer JSPP is similar but includes members from several different employers or organizations and, in this case, those employers would be other universities. The Ontario government has encouraged the concept of JSPP arrangements for all broader public sector employers.
Please note that regardless of any changes recommended to the U of T Plan or any changes we might recommend with respect to how it is governed, the current pension benefits payable to retired members and the current earned pension benefits for former members, must by law be preserved, and cannot be reduced as part of this process. Further, the earned pension benefits for existing members will also be, by law, preserved and will not be reduced regardless of any future changes to either benefits or governance structure.
Solvency Funding Rules
Like the U of T Plan, many university defined benefit pension plans in Ontario are under financial pressure. Some of this pressure comes from the requirement to fund the plan on a “wind-up” basis. This requirement mandates that the Plan contain sufficient funds to cover the earned benefits of all the current plan members as well as all existing retirees in the event the University ceased to exist. In order to meet this requirement, the Pension Benefits Act (PBA) requires something called solvency funding. Many provinces have exempted Universities from this often quite challenging solvency funding Requirement).
The Ontario government has not, to date, followed the approach taken in several other provinces to permanently exempt university pension plans from the Solvency Funding Requirement, but has allowed temporary solvency relief. In addition, the Ontario government has urged universities to seriously consider the JSPP model and indicated that if universities become part of a multi-employer JSPP (such as a university sector JSPP), and certain conditions are met, then the Solvency Requirement would be lifted for the multi-employer JSPP.
More recently, the Ontario government has announced that it is reviewing the solvency funding framework generally, which could alter the Solvency Requirement for single employer plans or JSPPs (whether single or multi-employer). It will be very important to understand the outcome of the government review and we are continuing to monitor this review carefully.
Joint Working Committee (JWC) Progress
Since early 2015, the JWC has made good progress exploring the various aspects of a joint sponsorship structure under the JSPP model.
We have involved pension experts to assist us in discussions on both the legal and actuarial aspects of the JSPP model. The JWC has met many times to discuss related documentation and analysis. The discussions have been detailed and comprehensive and have resulted in increased knowledge about the existing U of T Plan and the JSPP options, and have brought us closer to a common understanding of many of the critical issues associated with JSPPs. We stress that the JWC has not been contemplating material changes to the overall benefit levels under the Plan.
We have also participated in a number of sessions with other university administrations (led by the Council of Ontario Universities) and a coalition of unions (led by the Ontario Confederation of University Faculty Associations) organized to discuss potential JSPP options.
Establishing a JSPP is a complex process, and there is no “one-size-fits-all” solution. While we have made good progress, our discussions are not yet complete. The joint JWC is not yet in a position to bring forward any formal recommendations, and our work will continue over the next several months.
Legislative Updates and Key Considerations
Our work is guided by updates from the Ontario government that have been issued over the last few years, including the following:
- Government directives regarding a move towards a more equal sharing of employee/employer contributions as part of an entire set of changes including joint governance (see, for example, the 2012 Budget Statement)
- Bill 14: Building Opportunity and Securing our Future Act (Budget Measure, 2014), which received Royal Assent on July 24, 2014. Bill 14 includes amendments to the Pension Benefits Act regarding conversions of single-employer pension plans to JSPPs, and associated Regulations
- Government review of solvency funding regime announced as part of Fall Economic Statement (2015) and Ontario Budget (2016)
Once the JWC concludes its work and agrees upon a recommended approach, we will embark upon a broader consultation process with the U of T community, including with pension plan members. This would then be followed by the necessary U of T internal approval processes, union processes, and external approval processes.
There will be much work ahead as we continue to strive to provide pension plan benefits that are sustainable and affordable for both our Institution and Plan members. We will continue to provide updates as we progress.
Angela Hildyard and Paul Downes
Joint Working Committee on Pensions
For more information, please contact:
- Paul Downes, UTFA, email@example.com
- Jennifer Jenkins, UTFA, firstname.lastname@example.org
- Colleen Burke, USW, Colleen.email@example.com
- Alex McKinnon, USW, firstname.lastname@example.org
- Leanne MacMillan, CUPE, email@example.com
- Horatio Bot, Non-Unionized Staff Representative, firstname.lastname@example.org
- Mary Alice Guttman, Retiree Representative, email@example.com