Human Resources

Human Resources

Human Resources

site header

Background on Solvency Deficit and the University Pension Plan (UPP)

A solvency deficit means that, if the pension plan were closed up today, it would not be able to pay all of the benefits owed to the plan’s members. As of August 31, 2017, the Queen’s Pension Plan (QPP) had a solvency deficit of $313 million.

Like many other pension plans across Canada, the QPP was severely impacted by the global financial crisis of 2008. The solvency deficit is, in part, a product of that crisis. Negative investment returns in 2008 and 2009, combined with the very low interest rates that continue today, have put us into a situation where the plan’s liabilities – what it owes to current and future retirees – exceed the value of its assets – the amount of money in the plan.

With a large solvency deficit, Queen’s is required to make significant additional payments into its pension plan. Under Ontario’s existing but temporary solvency relief rules, the university’s annual special payments are expected to be $19 million per year starting in 2018, down slightly from the current $20.7 million per year. Annual special payments of approximately $50 million per year would be required if no solvency relief program was in place.

These payments are currently absorbed into departmental budgets and so have a significant impact on the university’s operations – all units across the university were asked to plan for the impact of these payments as part of the 2015-16 budget planning process.

The only way Queen’s can avoid having to make special solvency payments completely would be to move to a jointly sponsored pension plan (JSPP) in which the requirement to make such payments is waived. The 2014 Ontario budget included legislation to permit both JSPP conversions as well as mergers to existing solvency-exempt plans – the colleges' pension plan (CAAT), for example, has approached a number of universities (including Queen's) with an offer to merge with their existing JSPP.Since then, the Council of Ontario Universities and the Ontario Confederation of University Faculty Associations, along with the active participation of individual universities and bargaining units, have been working diligently on the creation of a JSPP for the university sector in Ontario. Now known as the University Pension Plan (UPP), the project has made significant progress including the addition of a website to share information while design and governance issues are finalized in advance of the anticipated consent process.

Ultimately, the transfer to a new sector-specific JSPP (or a merger with an existing plan like CAAT) will create a more sustainable pension plan with stable contributions, shared employer-employee governance, and other benefits for plan members.

It is important to note that if any of these options is eventually pursued, changes to the plan would not reduce benefits that active members have already earned, nor would there be any impact on pensions in payment.

For more information, or to ask questions related to your specific pension situation, please contact Bob Weisnagel, Director, Pensions & Insurance, by email or by phone at ext. 74184.