Youth Services Bureau looks to merge with CAAT to mitigate solvency deficit

Members of the Youth Services Bureau of Ottawa pension will be voting this fall on whether to join the Colleges of Applied Arts and Technology pension plan.

The organization, which has been in place since July 1972, is considering the merger as a way to mitigate the defined benefit plan’s impact on its operating budget, says finance director Wes Richardson. “Basically, we’ve managed it since that time with outside consultants for administration, actuarial, things like that. But over the last 10 years, the decrease in the interest rate has caused an incredible increase in the solvency payments required to fund the deficits.”

Read: Pension solvency liabilities rise amid low interest rates, returns: report

The Youth Services Bureau has already implemented a number of strategies. It increased member contributions, raised its retirement age to 65 from 60 and took advantage of any relief measures offered by the provincial regulator. The plan also moved to a career-average framework from a final-salary approach for the purpose of calculating the pension benefits.

Despite these changes, which mostly took place in 2011, the organization didn’t see a change in its pension deficit, which sat at $10.3 million on its lastest statement in September 2016, according to Richardson. “It was having just too much of an impact on our program budgets with regards to the cost of our benefits,” he says. “To give you an idea, for a full-time staff, our benefit rate was about 30 per cent, and half that number was pension. So it’s not sustainable.”

The organization’s pension advisory committee considered a number of options, such as closing the plan, converting it to a defined contribution arrangement and cutting the benefits even further. When the Ontario government introduced regulations permitting the merger of single-employer and jointly sponsored plans, the Youth Services Bureau looked into the possibility of joining one of the province’s largest public sector arrangements. It considered the Ontario Municipal Employees Retirement System, the Healthcare of Ontario Pension Plan, OPSEU Pension Trust and the college plan.

Read: Transfer of DC plan assets improved under Ontario’s current regime

“We settled in on CAAT because their philosophy fit very closely with how we manage our plan or at least try to,” says Richardson. “The other big one for our membership is that CAAT was willing to take over and administer our plan with no loss of past service for our members . . . whereas, all the other ones wanted us to buy in . . . as if we were in their plan. For anybody with service, we estimated we would lose about 40 per cent of our service. You can’t sell that to the membership.”

The Youth Services Bureau has about 300 active, retired and deferred members, 80 per cent of whom are part of the Canadian Union of Public Employees Local 2195. Richardson notes any changes to the plan will require union ratification, as with a collective bargaining agreement.

The organization introduced the merger to pension members in June through a series of presentations. The colleges plan sent out information packages this week. There’s now a 90-day window for members to vote. “We’re going to set up a series of information sessions to answer people’s questions, because now people are going to have personalized statements, so it’s going to trigger a lot of questions from our membership,” says Richardson.

“What they’re trying to do, too, is showing them the last amount reported on their pension statement from our plan, what it would look like with CAAT and then we’re trying to forecast, until their retirement date, the value of their pension, so they can see the growth in the plan and what benefits they’ll get from CAAT.”

Read: ROM pension members join CAAT Pension Plan

Richardson is hopeful pension members will accept the merger, noting it will give the plan more stability and predictability in terms of costs. In addition, the administration of the plan was taking up a lot of resources. “And it’s fairly costly to manage your own plan,” says Richardson, noting expenses include external consultants, an annual audit and reporting to the Financial Services Commission of Ontario.

If the voting process is successful, the merger will be effective Jan. 1, 2018.