In the early 1990s, the QPP, like many pension plans at that time, had an actuarial surplus on its defined benefit (minimum guarantee) side of the plan: $24.7 million at the time of the August 31, 1991 valuation. But new tax regulations that came into effect in 1992 limited the amount of surplus that could be carried forward as a reserve, and required pension plans to use a portion of that surplus to fund regular defined benefit contributions if the surplus exceeded a certain threshold. The QPP was in the position of having to deal with potential excess surplus from January 1, 1992 through February 29, 2004.
After consulting with all employee groups, the “savings” (funds from operations that would have been contributed to the QPP if not for the tax regulations) were allocated to employees in several ways – some received additional salary, while faculty created a dental plan. This period also saw a number of plan changes – recommended by the Pension Committee and agreed to by all employee groups – including improvements to the minimum guarantee formula, increases to the university money purchase contributions, and a reduction in the factors applied to the minimum guarantee on early retirement (6% per year was reduced to 2% for the five years prior to normal retirement). The net impact of these improvements reduced the surplus by several million dollars.
In addition, employee groups agreed to temporary employer contribution holidays on two occasions. During Ontario’s Social Contract years (1993 through 1996), employer contributions to the QPP were reduced by $2 million annually, and these funds were used to negate potential income and position losses resulting from the province’s wage freeze and unpaid holiday requirements.
Money from a second holiday (1997 through 2003) was used to pay for plan improvements proposed in part to mitigate Canada Pension Plan (CPP) changes, which led to higher contributions and lower pensions through the CPP.