U of G Starting Pension Discussions
October 28, 2010 - Campus Bulletin
Facing proposed provincial legislation, the University of Guelph is reviewing options for restructuring its pension plans.
In August, Ontario universities were granted the opportunity to receive temporary, conditional relief from making significant pension solvency payments that had been scheduled to begin under current legislation.
For U of G, existing requirements would have meant increasing its pension plan contributions from the current payment of $22 million a year to between $70 million and $100 million every year for the next five years.
To qualify for relief, sponsors of underfunded pension plans have been told by the province to develop strategies to provide for the long-term financial viability of their plans.
The government has suggested that options could include moving U of G’s defined-benefit plans from single-employer plans (plan is solely sponsored by the employer) to jointly sponsored pension plans (members and the employer share responsibility) or a combination of increasing pension contributions from both employees and employers and reducing benefits.
If temporary relief is granted by the Ministry of Finance, eligible universities will be allowed to make smaller payments on their pension liabilities for three years while their pension plans are restructured. If their efforts are successful by the end of that period, they will have 10 years (as opposed to the current five years) to fund any solvency deficits.
As provincial regulations are still forthcoming, the extent of any expected “relief” is unknown. But should U of G qualify, it’s expected it would have to pay an estimated $40 million a year for the three-year period.
To be considered for relief, the University must file a plan for changing its pensions at the beginning of 2011. The plan will be shared with members and employee groups.
“If we do not restructure our pension plans under this option, we will be required to meet the current filing requirements, which will cost us $70 million to $100 million a year,” says president Alastair Summerlee.
“This would seriously impair our ability to function as a university, forcing us to lay off people and cut programs and services and increase student/faculty ratios in order to maintain fiscal stability. The reality is we simply have no other option. We will have to make significant changes.”
U of G has been meeting with employee groups to inform people about the situation. A number of options are being discussed, including increasing contributions from both the University and employees and reducing benefits such as permanent early retirement options. A town hall meeting on pension plans is being planned for November.
The president emphasizes that any changes to benefits can be achieved only through negotiations with employee groups and can apply only to future earned service. The benefits of current retirees would not be affected.
“We are certainly not alone in this,” says Evan Siddall, chair of U of G’s Board of Governors. “Nearly every other university in Ontario with defined-benefit pension plans is facing significant problems. This will be an incredible challenge, but I am confident that, with the effort and co-operation of everyone at the University, we will continue to be successful.”
