Talks progress on Queen’s pension plan reform

New pension plan design may exempt the University from solvency deficits totalling $285 million

Comparison of current Queen’s Pension Plan and possible inter-university JSPP.
Comparison of current Queen’s Pension Plan and possible inter-university JSPP.

Queen’s is taking part in a university-sector plan that could exempt it from a $285 million solvency deficit — the amount the University would owe if the Queen’s Pension Plan (QPP) were to close right away.

Results from the University Pensions Project (UPP) — which will outline the costs and benefits of universities implementing a jointly sponsored pension plan (JSPP), as opposed to a single-employer pension plan (SEPP), like QPP — will be provided to the provincial government by October.

The Council of Ontario Universities and the Ontario Confederation of University Faculty Associations spearheaded the UPP in early 2014 in an effort to minimize pension deficits at Ontario universities. After an initial agreement was reached, a project oversight committee was formed, and the first plenary meeting was held in October.

“The [UPP] is looking at the feasibility of creating a new multi-employer, jointly sponsored pension plan [JSPP] for the sector that would provide secure retirement benefits for plan members and earn a permanent solvency exemption,” Caroline Davis, vice-principal of finance and administration, told the Journal via email.

In a SEPP like the QPP, deficits are the employer’s responsibility. In a JSPP, employer and member representatives share plan governance, funding and administration.

Movement away from a SEPP could exempt the University from solvency payments, if the UPP leads to a JSPP that is granted a solvency exemption. Several existing JSPPs receive solvency exemptions, due to a recommendation from the Expert Commission on Pensions that jointly governed pension plans be funded by more flexible rules.

Despite the University’s participation with the UPP, Davis said it’s too early to tell if the University will proceed with the JSPP.

“There are many other steps that would have to happen before Queen’s could decide whether or not to participate, including a decision from the government on whether the proposed plan would qualify for a solvency exemption and discussions with stakeholders at Queen’s,” Davis said.

Citing the possibility of a merger with the Ontario colleges’ pension plan CAAT, she said a new sector-wide JSPP is “just one option” — although member benefits under such a plan wouldn’t be reduced.

“If Queen’s joins a JSPP those existing benefits would be replicated within the new plan, and members would then start to earn benefits according to the benefit formula of the JSPP,” Davis said.

Preliminary results of an August 2014 actuarial valuation that looks at the financial state of the pension plan show that the QPP going concern deficit is at $175 million, and the solvency deficit is at $285 million. The going concern deficit represents what is owed if normal plan operations continue.

“The new plan would still have to be funded on a going concern basis,” Davis said.

She added that since one of the UPP’s principles is that a new JSPP be “fully funded” on a going concern basis when it’s created, Queen’s would have to “deal” with its going concern deficit before joining.

Four aspects of a JSPP framework will be discussed when designing the plan: benefits and features, actuarial and finance, governance and corporate structure.

Queen’s is “actively” involved in the process of creating a framework, Davis said, adding that she attends UPP plenary meetings alongside Associate Vice-Principal of Human Resources Al Orth and a member of the Queen’s University Faculty Association.

“Everyone at the table has agreed to certain principles, such as voluntary participation and that a JSPP offer a secure, defined benefit pension formula,” Davis said.

“The project is in the process of working out the finer details in partnership with actuaries and lawyers who are pension experts.”

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