RAQ Writes to Trustees on Pension Plan Proposals

RAQ Writes to Trustees on Pension Plan Proposals

January 25, 2008.  RAQ President Arlene Aish, Pension Committee Chair Bill Wright, and Pension Committee Member Alan Green today released the letter they have written to Mr William Young, Chair of the Board of Trustees of Queen's University, expressing their dismay at the proposed changes in the governance of the Queen's Pension Plan.


Thursday, January 17, 2008 
 
Mr. William Young 
Chair, Board of Trustees 
Queen’s University 

Dear Mr. Young, 

The Retirees’ Association of Queen’s (RAQ) is a group of over 500 people who are former 
Queen’s faculty, administration and support staff members, and who are now on a Queen’s 
pension. RAQ has no official mandate to represent all retirees, but we do speak with very 
significant support. 

With few exceptions, these individuals have always felt he or she was part of a close-knit 
Queen’s community where the norm was a feeling of considerable mutual trust. Many are 
contributors, some substantially, to Queen’s fundraising efforts. It is essential that you, the 
Principal, and your Board of Trustee colleagues, fully realize that this goodwill has recently been 
badly shaken. 

For whatever reason, although lack of communications is certainly one, a significant number of 
retired staff have recently become upset, confused, apprehensive and even angry. Without any 
prior warning, we suddenly learned that the University was intending to make what we consider 
to be an unjustified and dangerous change to the way in which the Queen’s Pension Plan is to be 
governed. Why, why, why? 

This plan, established in 1968, has had a remarkably successful existence, and for a long time 
has been the envy of other Canadian universities. For many years the reputation of the Queen’s 
pension plan was used very successfully as a recruiting tool. Our pensions have benefited from 
wonderful investment experience over a long period of time. In a recent RAQ Newsletter, we 
reported that over the last sixteen years, pensions have doubled, while the C.P.I. is up only 40% 
over the same period. The proposed introduction of a Board Advisory Committee on Pensions 
(BAC) would appear to place the reliability and magnitude of future pension increases in danger 
by the prospect of the implementation of BAC-mandated changes in the investment policies of 
the QPP. The Pension Committee has always been highly respected and trusted by all plan 
members, knowing that invariably it has acted in the best interest of all plan members, both 
active and retired. Its current Chair, Bill Cannon, has, for many years, done an outstanding job. 
Alarm bells sounded, loud and clear, when it recently became known that this esteemed 
individual had submitted his resignation over this governance issue. 

Our reading of the proposed constitutions of the Pension Committee and the BAC leave us with 
many questions and considerable anxiety. Apart from our inability to understand the need for this 
new group, dominated by Board members, it would realistically appear that there is to be a transfer
of the effective investment powers and ultimate responsibility away from the Pension 
Committee, where it has so successfully existed for close to 40 years. The Pension Committee 
has broad representation from all stakeholder groups and transparent operations. The BAC would 
be a non representative group with little or no transparency. 

 The contents of paragraphs 11, 12, and 13 of the proposed BAC’s Constitution are extremely 
general and vague, but could easily be interpreted as virtually usurping the powers of the Pension 
Committee. Frankly, RAQ cannot imagine any changes to the investment policies and approach 
that the Pension Committee has followed for such a long time, that would not be detrimental to 
the interest of retirees receiving Queen’s pensions. It should be clearly understood that the 
monies in the plan belong to the plan members, and there is a very clear fiduciary responsibility 
to make certain that any actions taken are in their best interests. With no comment to date from 
the Board or the University on the investment policy changes that the new BAC might dictate to 
the Pension Committee, our members are left to speculate on what harm may come to the future 
growth in their pensions as a result of the motivations and actions of those Board members who 
are apparently pushing for the creation of the BAC. 

We believe that it would be wrong for final investment policy decisions to be made by any other 
body than the Pension Committee, which stands in a fiduciary or trust relationship with all of the 
stakeholders of the Queen’s Pension Plan (retirees, active members/current staff, and the 
University/Board). The Pension Committee has representation from all stakeholder groups 
(including 5 out of 11 members from the Board and Administration), and is accountable to all of 
them. If any one stakeholder alone (e.g. the University Administration or a small group of Board 
members) had the ultimate authority for formulating the investment policy decisions, that trust 
relationship would be destroyed. Not only that, but a conflict of interest situation would 
inevitably follow because the interests of the University/Board are not always compatible with 
the interests of the members of the QPP as a whole. Therefore, we believe that no changes 
whatsoever in the powers, effective responsibility, structure or governance of the Pension 
Committee should occur, especially when the current structure has operated so successfully over 
so long. 

We fully realize that a significant pension deficit exists, and the Board has every right and need 
to seek appropriate solutions. In spite of expressed opposition from some of its own members, 
RAQ has attempted to do its part by acknowledging the University’s right to switch from an 
arithmetic to a geometric method when calculating pension increases. We know that mortality 
experience, particularly at Queen’s, has been light, but this can be addressed, as it has in the past. 
Other reasons for the deficit, however, seem to us to be the sole responsibility of the University, 
and should not be borne by the plan members. Some of these reasons include: 
• Many appointments in recent years, particularly at senior levels, have come from 
outside the University. These are individuals with very high relative salaries, and they 
are of such an age that their service at retirement is quite short. Invariably the pensions 
paid to these individuals will be based on the defined benefit formula, and will result in 
a substantial draw against the minimum guarantee fund. 
• Until very recently, provisions in various collective and similar agreements, clearly 
identified that the provisions of the Queen’s Pension Plan were as laid down and 
determined by the University. The plan was always held in such regard that this was 
never an issue. Suddenly, and apparently not even a bargaining issue, this was 
dramatically changed when the unions ended up with what constitutes a veto power on 
all pension plan changes. We would suggest that this union clout and muscle has 
eliminated the ability of the University to make the changes necessary to face up to the 
deficit problem. The University should never have granted this concession, and retirees 
should not suffer any diminution in their pension increase prospects because of this 
mistake. 
• Rather than a deficit, in 1992 the Queen’s Pension Plan had a significant surplus in 
excess of $25 million. The University then received pension contribution holidays for 
the next few years. Again in 1996, the surplus, all in the minimum guarantee fund, was 
still at the $27 million level. At that point, the University was granted a further $6 
million contribution holiday, plan improvements were implemented, and some monies 
were used to provide for the buy-out provisions of early retirement schemes. Because of 
tax laws, the pension levels for pensioners were never increased and hence did not take 
any part in the “spending” of this surplus. This was in spite of the fact that much of the 
surplus was developed when these pensioners were active staff members. However 
when this turns to a deficit some ten years later, all of this history seems to have been 
forgotten and retiree pension may become targeted , unfairly and inappropriately, to 
“pay” for the Plan’s deficit 

We strongly believe adverse changes are unacceptable, and it is actually unethical to revise the 
rules after retirement. We are told that the introduction of a Board Advisory Committee on 
Pensions with its frightening mandate, is an effort to recognize “new and developing 21st century 
standards”. To us, these are meaningless generalities without any specified substance. We do not 
want to see petitions, threatened or actual lawsuits, or adversarial publicity in the local media or 
wherever. In our minds, however, these actions are inevitable, unless the Board takes early and 
decisive action to withdraw or substantially modify its BAC proposal. As we stated above, we 
firmly believe no changes whatsoever in the powers, effective responsibility, structure or 
governance of the current Pension Committee should occur. RAQ is firm in its resolve, but we 
would be delighted to assist in any possible way. Since its inception, our relationship with the 
University has been absolutely wonderful, and we are anxious to ensure that this is not 
jeopardized. 


 Arlene Aish                                        Alan Green                                     Bill Wright 
President, RAQ                                   RAQ Pensions                                Chair, RAQ Pensions 
                                                         and Benefits Committee                   and Benefits Committee 

cc Principal Karen Hitchcock 
 Vice-Principal Andrew Simpson 
 Vice-Principal Rod Morrison 
 W. Cannon, Chair Pension Committee 



March 14, 2008.  At its meeting on February 26, the Board of Trustees of Queen's University resolved the Pension Committee issue in response to submissions from RAQ and other interested parties.

Press Release from Board of Trustees

 


QUEEN'S NEWS CENTRE
Campus News

Update on Pension Committee governance

Friday March 14, 2008

A consensus on some key governance issues was reached recently at a Pension Committee meeting. There was agreement on the following key points from the February 26 meeting:

1) The Pension Committee will be the only board committee accountable for pension matters, and will continue to report to the Board of Trustees. There will be no separate Board Advisory Committee. The Pension Committee will continue exercising its established mandate in regards to pension administration and investment policies.

2) Membership of the Pension Committee will change as follows:
- The VP Operations and Finance and VP Human Resources, currently voting members, will now become ex-officio non-voting members.
- In place of these two positions, the Board will appoint two additional representatives, bringing the number of Board nominees to five representatives from three.

3) The total Pension Committee membership is unchanged at 11 voting members, and comprises:
- Six employee representatives as follows: 
• four plan members presently employed at Queen's, two from academic staff and two from unionized and non-unionized staff; 
• two former employees who are retired and receiving a Queen's pension. 
- Five Board nominees

Some key roles and responsibilities of the Pension Committee are as follows: 
• plan amendments 
• approval of actuarial (funding) reports 
• statement of investment policies and procedures 
• appointment of plan actuaries, custodians, and other service providers 
• hiring and firing of investment managers 
The list, while by no means exhaustive, is unchanged from the current mandate.

Actions

Actions to occur in the short term, and possibly before the May Board meeting will include creating a new constitution for the Pension Committee, and drafting guiding principles for committee members. These steps are part of a longer-term plan to create appropriate governance policies and principles for the Pension Committee. Bill Cannon, Chair of the Pension Committee, has agreed to remain in this key position, and will be an active participant in these deliberations. As drafts of key documents are prepared, they will be made available for review.

If you have any questions regarding this update please contact Bill Cannon (wcannon@business.queensu.ca), Andrew Simpson (vpof@post.queensu.ca) or Rod Morrison (mailto:morrison@queensu.ca) for more clarification.