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Project considers university-sector pension plan

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A project involving Ontario’s universities and their employee groups is currently underway to examine the feasibility of creating a new multi-employer, jointly sponsored pension plan (JSPP) for the university sector.

The goal of the project is to create a design for a plan that would provide a secure retirement future for members by providing a defined benefit pension, and also be a financially secure plan for the long term.

Such a plan would be voluntary for universities, and participating employer and member representatives would share responsibility for the plan’s governance, administration and funding.

“Establishing a framework for a new pension plan is a complex task, but the project is moving forward quite positively,” says Caroline Davis, Vice-Principal (Finance and Administration). “If the process is successful and a new university sector JSPP is created, it will still be up to each individual university to decide whether to participate. For Queen’s, it will be important that joining this JSPP would definitely lead to a solvency exemption.”

Queen’s, like other Ontario universities, has a significant solvency deficit in its pension plan. A solvency deficit means that, if the pension plan were closed up today, it would not have enough money to pay all of the benefits it owes to plan members. In some provinces, universities are exempt from funding their pension plans on a solvency basis, and they are only required to fund deficits on a going concern basis, which is a less onerous requirement that assumes the plan continues to operate normally.

“Queen’s solvency deficit will mean millions of dollars in additional annual pension payments over the coming years. That is money that would otherwise be available to fund the university’s operations,” says Vice-Principal Davis. “The university is committed to working with employee groups to explore all options that would result in a permanent solvency exemption.”

“Queen’s solvency deficit will mean millions of dollars in additional annual pension payments over the coming years. That is money that would otherwise be available to fund the university’s operations. The university is committed to working with employee groups to explore all options that would result in a permanent solvency exemption.”

- Caroline Davis, Vice-Principal (Finance and Administration)

Preliminary results from its 2014 actuarial valuation estimate that the Queen’s Pension Plan (QPP) has a solvency deficit of $285 million and a going concern deficit of $175 million. Combined special payments on the going concern and solvency deficits, assuming stage two relief is granted, would start in 2015 at $33.3 million annually. The option does exist to defer solvency payments for a further three years, and then pay the balance over the next seven.

The University Pensions Project is being led by the Council of Ontario Universities and the Ontario Confederation of University Faculty Associations, with the active participation of individual universities, faculty associations and employee unions. The project has received funding from the Government of Ontario and a final report to the government is due in the fall.

The Government of Ontario is responsible for deciding whether a new JSPP would receive a permanent solvency exemption, as well as for establishing the processes for universities, employee groups and retirees to consent to participation in a new JSPP. Whatever happens, pension benefits already earned under the QPP cannot be reduced under law and would be replicated within a new JSPP.

More information about the Queen’s Pension Plan and the solvency issue can be found on the Human Resources website, or by contacting Bob Weisnagel, Director, Pension Services, by email or at ext. 74184. Further information about the University Pension Project is available here.