Quick action is required to reverse the underfunding of the plan and make the most of the solvency relief options that have been put forward by the Ontario government. The plan’s actuaries have confirmed that the university needs to have a remediation plan in place as quickly as possible to help prevent the problem from escalating to unmanageable levels.
The law requires the valuation of pension plans every three years.
The QPP is due for its next valuation at the end of next month – on August 31, 2011. The valuation is a “snapshot” of the financial state of the plan on that date. August 31 is, therefore, critical because the state of the plan on that date will determine what additional contributions the university will be required, by law, to make over the next three years. Those additional contributions are required to bridge the gap between what the plan has in it and what the provincial law says must be in it – and the larger the payments, the greater the impact on the university’s operating budget.
If nothing is done, and the government’s solvency conditions aren’t met, the university’s contributions would have to rise to over 30% of payroll to meet our funding obligations (right now, the university contributes about 10% of payroll while employees contribute 5% of their pay). That would mean an additional $70 million annually would be drawn away from the Queen’s operating budget. The current total operating budget is just under $400 million.