Administration to pay back red pension funds

Roughly half a billion in debt will be paid by 2029

Queen’s is required to pay $22 million annually to pay down the solvency deficit.
Queen’s is required to pay $22 million annually to pay down the solvency deficit.

The University has agreed to repay $456 million in deficits accrued from operating the Queen’s Pension Plan (QPP) beginning in 2015 — but any effects the lost funds may have on students remain unknown.

The QPP serves staff and faculty. Members contribute seven per cent of their annual base salary, up to the federal Year’s Maximum Pensionable Earnings (YMPE), as well as nine per cent of earnings over that maximum. The University contributes six per cent of earnings up to YMPE and 7.5 per cent over.

The University has a 15-year repayment schedule for going concern deficits — estimated at $164 million — and 10 years, extended from five under temporary solvency relief measures, to repay the solvency deficits — estimated at $292 million.

While the solvency deficit refers to a total amount owed to members should it stop operating entirely, the going concern deficit refers to total current and future contributions versus monies currently able to be paid out.

The QPP first ran red in 2004, owing to increased lifespan of contributors and overall market volatility, and its deficits now total $456 million.

Repayments will begin in 2015-16 as part of the University’s budget planning for the 2015-16 academic year. The first proposed repayment for Sept. 2015 will total $22 million, to be deducted from the University’s overall operating budget, which fluctuates around $475 million. The repayment is estimated to constitute 6.5 per cent of all paid salaries at Queen’s.

The $22 million repayment will be added to the $40 million paid out as part of pension plans for the year, bringing the total amount to $62 million spent on the QPP for the 2015-16 academic year.

Planning for the 2015-16 University budget follows the Senate’s approval of the 2015-16 enrolment plan in April, which aims to increase full-time enrolment from 21,441 undergraduate and graduate students in fall 2014 to 22,199 in fall 2015.

Shared services are currently working on their budget submissions, while Faculties and Schools are set to do so in the fall.

The Board of Trustees will be presented with the final budget for approval in May 2015.

Caroline Davis, vice-principal of finance and administration and Alan Harrison, provost and vice-principal of academics, told the Journal jointly via email that the pension solvency deficit first sprung from the 2008 global financial crisis “as a result of negative investment returns in 2008 and 2009, and very low interest rates.”

“[The two types of deficits] are equally important in that regulations require special payments to pay down both deficits, but one — solvency — is significantly higher and the university’s exemption from making payments towards this deficit is temporary and expires in 2015,” they stated further.

The distribution of QPP’s $22 million expense to pay down the solvency and going concern deficits between shared services, faculties and schools hasn’t been determined.

“The budget planning process is underway and the information obtained throughout this process will inform the decision on the distribution of the additional $22 million annual pension expense,” they said.

“Part of the budget planning process is to determine the impacts of the additional pension expense on each shared service unit and faculty.”

They added that it’s too soon to know what those impacts will be.

Another challenge facing the University in the budget planning process is a $242 million deferred maintenance backlog.

Deferred maintenance spending is allocated from the University’s operating budget, as well as almost $1.1 million from its share of the Ministry of Training Colleges and Universities’ annual allocation to address deferred maintenance.

Davis and Harrison said that prior to the provincial election call, there was notification that this amount would increase.

“This puts annual deferred maintenance spending at approximately $7.4 million, the highest it has been for a number of years.”

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