V-Ps discuss challenge of pension reform in latest update
In their most recent financial update to the Queen’s community, Provost and V-P (Academic) Bob Silverman and V-P (Finance and Administration) Caroline Davis explain in detail the challenges and dilemmas involving the current state of the university’s pension plan.
The need to make adjustments to the plan was already under discussion with employee groups when the global financial crisis struck in fall 2008. The plan’s market value is improving, but has still not recovered to 2007 levels.
“By summer 2010, it had become very clear that more substantial change, than was previously being considered, was going to be required to keep the plan afloat,” the V-Ps say.
The long-term projections for the Plan’s performance assumed a degree of growth during the last three years so the Plan is now sitting at well-below 2007 levels, while the demand for retirement benefits is still growing.
“That imbalance is not sustainable,” the V-Ps say.
The University is required to calculate two liabilities: the going concern liability (which assumes the plan will continue on into the future, as we all want it to) and the solvency liability (which assumes it would have to be wound up immediately). These calculations determine how much the employees and the University must contribute to the pension plan in the future. The next time we have to have the plan and its liabilities calculated is this coming August.
Universities are being allowed, with certain conditions, to defer solvency payments but we all still have to pay interest on the solvency liability and make going concern liability payments.
“If we can’t meet the conditions the government is imposing, starting one year after the August 31, 2011 valuation, the University’s contributions would have to rise to over 30% of payroll to meet our funding obligations,” says V-Ps Silverman and Davis. “That would mean an additional $70 million annually would be drawn away from our operating budget.”
The University administration has invited the unions and other employee groups back to the pension discussion table.
“We are hopeful of making progress and are anxious to resume talks,” say the V-Ps. “The financial projections make very clear the urgency of this need. We look forward to any and all suggestions on how to appropriately tackle this challenge. Our common interest is in ensuring the future financial health of the Plan (and, by extension, the plan’s members) while, at the same time, ensuring the future financial health of the University, itself.”