Dealing with the deficit
With the university now planning for the impact of additional special payments to the Queen’s Pension Plan in 2015, Senior Communications Officer Craig Leroux spoke with Vice-Principal (Finance and Administration) Caroline Davis for an update on the plan’s solvency deficit.
Craig Leroux: When we spoke in November, the Queen’s Pension Plan’s (QPP) solvency deficit was $459 million. Where does it stand now?
Caroline Davis: First of all, it is important to understand that a solvency deficit means that, if the plan were closed up today, it would not have enough money to immediately pay all the benefits owed to plan members. The QPP also has a going concern deficit, which means that even if the plan operates indefinitely, additional money is required to cover those benefits. The government requires the university to make special payments into the plan to pay down both deficits.
As of Aug. 31, 2013 the QPP’s going concern deficit was $164 million and its solvency deficit was $292 million. It is good news that the solvency deficit has gone down from $459 million in 2012, but many factors, including interest rates and the value of the plan’s investments, can make the deficits go up or down in the future.
CL: What do these deficits mean for plan members and the university?
CD: For the university, these deficits will mean additional special payments beginning in 2015, amounting to an additional annual expense of $22 million, which is 6.5 per cent of our salary base. This will have a significant impact on the university’s operating budget.
For plan members, it is in everyone’s interest to ensure that the pension plan is adequately funded, so it is there for us over the long term.
CL: What are the options for dealing with these additional payments?
CD: Provost Alan Harrison is currently leading the 2015-16 budget process which asks all units to plan for the impacts of these additional payments on their budgets.
The only way to avoid additional solvency payments entirely would be to transfer to a jointly sponsored pension plan (JSPP) with a permanent exemption from funding solvency deficits. That’s an option that we’ve been discussing, but it will require legislative changes from the government and the consent of bargaining units. In any event, the benefits that plan members have already earned are protected by law.
CL: Are there specific JSPPs being considered?
CD: The Council of Ontario Universities is looking at creating a JSPP for the Ontario university sector, and that’s going to be a lengthy process. CAAT, the pension plan for Ontario’s colleges has approached Queen’s and other universities with a proposal to merge with their plan. CAAT already has a permanent solvency exemption, shared governance between employers and employees, and is fully funded on a going concern basis.
CL: Where can plan members get more information?
CD: The pension website has detailed information about the QPP, and anyone with questions about the deficit or their particular pension situation can contact Bob Weisnagel, Director, Pensions & Insurance, by email or by phone at ext. 74184.