The single-employer defined benefit model doesn’t work for the university sector for one clear reason, says Cynthia Messenger, president of the University of Toronto’s Faculty Association.

“The model is flawed in one crucial way,” she says. “When the plan accrues debt, the university administration must repay that debt to the pension plan. And the only way they can do it, because they’re not a private corporation that can reach into profits, is to dip into the operating budget — that is, into the budgets of departments — and take the money out and put it into the pension plan. And that’s the part of the model that wasn’t going to survive in the long term.”

Read: Employee groups from Ontario universities vote to form new joint pension

Public universities’ budgets are funded with taxpayer dollars, as well as tuition from both domestic and international students. Successive Ontario governments have continually expressed the challenges of this system, says Messenger. “We needed a new model where the pension plan would be severed, over time, from the operating budget, where the pension plan would basically pay for itself.”

After many years of discussions, three Ontario universities are teaming up to create a jointly sponsored pension plan called the University Pension Plan. Faculty associations from the University of Toronto, Queen’s University and the University of Guelph, along with chapters of the United Steelworkers union representing employees from all three schools, voted in February in favour of introducing the new plan. 

Alex McKinnon, department leader for research, public policy and bargaining support at the United Steelworkers’ Canadian national office, has been working on this for close to a decade. “The process since then has had so many iterations, so many different people have been involved — universities, bargaining groups.”

Read: Several Ontario universities looking to form new JSPP

The original idea to form a JSPP was born after the 2008 financial crisis, he says. In 2010, the Ontario government was making some adjustments to allow for more flexibility in how existing plans managed the fallout. One option put forward was allowing smaller plans to join an existing JSPP.

“For me, that was the impetus that got my mind rolling,” says McKinnon. “And that’s why we inserted it into the Guelph bargaining. Interestingly enough, the outcome of that was the union was in favour of going to a JSPP and the employer wasn’t. Over the years, things have changed and the employer in Guelph has worked very hard and is onside, as are all the other employers.”

In his role at the United Steelworkers, where members are in both the private and public sectors, McKinnon has watched the private sector transition away from DB plans to defined contribution pensions. “I always say, those are good savings plans, but they’re not pension plans. And this was about how do we actually provide for a DB long-term sustainable retirement security for our members because we think this is the best model to do it.”

Read: A look at the City of York pension plan’s merger with OMERS

Meanwhile, the universities’ employee groups were feeling the squeeze as the schools asked for increased pension contributions from staff, says McKinnon.

“In 2014, the Steelworkers at the University of Toronto, and the [University of Toronto Faculty Association] got together and said, ‘We’ve got some pension issues. The employer keeps asking us for increased contributions. There has to be a better way.’ And we negotiated a cooperation agreement, which was kind of unheard of for the trade unions and faculty associations to seem like they would work together.”

Since then, several other universities came to the table, only to leave again, including Trent University, Wilfred Laurier University and King’s University College.

“We tried to narrow down the issues and ran into a bit of a roadblock,” says McKinnon. “And the three universities — Queen’s, Guelph and Toronto, the employers — got together and said, ‘Look, there’s a lot of cooks in the kitchen, maybe we should take these three universities,” because at all three universities we had actively engaged committees working on the JSPP.”

Coming up with a compromise that each employee group and union from the involved schools would be happy with proved too challenging, he says. “As soon as you open it up to a whole bunch of universities, everybody has their key features they’ve worked at and they don’t want that change. So if you start to cherry pick out of every single one of those, you end up with a pension cost that’s just not achievable.”

Read: Postmedia signs agreement to merge pension plans with CAAT

The hope is that once the JSPP is fully established, other universities will flock to it, adds McKinnon.

As the plan’s structure currently stands, the joint-governance model is its most important aspect, says Messenger, noting there are six seats on the employer side and six seats on the employee side. “Each side has a vote — this is the essential element in the joint governance . . . . We have nothing like that now. We have a very good pension committee that works well at U of T . . . but still, it’s a pension plan run by the administration; they’re responsible for it, they’re the plan administrator.”

While both Messenger and McKinnon are confident other universities will want to join the plan once it’s up and running, they also recognize the process will take time.

As well, Messenger emphasizes membership will be voluntary. “We wouldn’t want anyone forced into the plan. That’s the basis on which it was designed. In other words, we welcome other universities, other faculties, other unions into the plan. But the plan doesn’t depend on their entering the plan. The plan is sustainable with two or three, but one day we hope, and think, it would be wonderful if all universities in the province were to join the plan.”

Read: Pension stakeholders call on feds to remove barriers to longevity risk pooling

Copyright © 2019 Transcontinental Media G.P. Originally published on benefitscanada.com

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Ron Conlon:

Poor old university academics still can’t give the Colleges, OPSEU and our Canadian unions credit for clearing this success story and the pathway to modern defined benefit pension plans and pushing our governments to modernize JSSPs in the first place.

Monday, March 04 at 11:31 am | Reply

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