Jointly-Sponsored Pension Plans (JSPPs)
As many of you may recall, we communicated with our members last year about a proposed university sector jointly-sponsored pension plan (JSPP), which was being discussed by the Council of Ontario Universities (COU) and Ontario Confederation of University Faculty Associations (OCUFA). A JSPP is a pension plan in which the employer or employers and employees share decisions and financial risks (usually 50-50). A university sector JSPP is multi-employer JSPP in which several universities join a single pension plan and establish it as a JSPP.
From the beginning, COU and OCUFA have agreed to a set of principles to guide the development of the University Pensions Project (UPP) JSPP. These are:
- Participation [of a university] in a sector-wide or multi-employer JSPP, as defined by the Pension Benefits Act, will be voluntary and open to all pension plan types and all employee groups.
- Existing university pension plans are generally subject to collective bargaining, and pension rights are embedded in collective agreements negotiated locally. Collective bargaining and local decision-making processes are the legitimate means for determining the future direction of Ontario university pensions.
- A university-sector or multi-employer JSPP will be non-statutory.
- The plan should be established through a process of negotiation between the parties who will be joining the plan (or agents of the parties).
- The government would need to provide legislation of general application to facilitate the framework for the creation of such a plan.
- A university-sector or multi-employer JSPP will receive an exemption from solvency valuations and funding.
- This is the funding basis for all of the public sector JSPPs currently in existence.
- This would be in keeping with the government’s objective to support efforts to convert single-employer plans to jointly-sponsored plans.
- A university-sector or multi-employer JSPP will include a guaranteed formula pension.
- This principle currently holds for all existing defined benefit and hybrid university pension plans, with the exception of the defined contribution plans.
- A university-sector or multi-employer JSPP will be fully funded on a going concern basis at inception.
- This is a necessary pre-condition for establishing a fair relationship between the parties entering the plan (between universities and plan members and between each of the universities).
- This provides a foundation for the parties to negotiate how future gains and losses on the liabilities and assets transferred into the JSPP are treated for funding purposes in the ongoing JSPP.
- The sector will act to develop a full funding strategy, with the assistance of the government as necessary.
- Under this new equal partnership arrangement, each of the parties involved (plan members and their representatives, plan sponsors and administrators, and government) need to understand the potential benefits and negative implications of any proposal to create a university-sector or multi-employer JSPP, so that an informed decision as to whether or not to proceed can be made.
- All data that is being used to inform decision-making will be made available to the parties involved.
In the December 2014/January 2015 MUFA Newsletter, Michel Grignon (Economics and member of the MUFA Executive) explained the nature of the JSPP proposal and these discussions. Since then, COU and OCUFA have met again to further elaborate the framework that will guide the formal design and building of the new JSPP. The result of these discussions is a more detailed draft document that outlines the principles that COU and OCUFA have agreed to guide the design of the new UPP JSPP.
In this document, the UPP JSPP, which will outline its own guidelines for applications to join, the proposal includes the following provisions for a University which seeks to join the new JSPP:
30. In order for an Employer to participate in the New Plan, the Employer:
(a) must meet all legislative and local collective bargaining requirements with respect to its unions, faculty associations, and any other groups with bargaining rights;
(b) must have entered into an asset transfer agreement with the Sponsors;
(c) the requirements of the [Pension Benefits Act-] PBA for a conversion and asset transfer must be satisfied. (Section V. 30. p. 8)
The intent of this statement, which both COU and OCUFA have endorsed, is to ensure that Universities cannot apply to join the proposed UPP JSPP without negotiating and getting the approval of all organized groups on campus, such as MUFA.
That draft document also includes an outline of the pension contribution rates and benefits currently envisioned for the proposed JSPP (p. 11-12) as well as some of the outstanding issues yet to be resolved (p. 13-14). The chart below, which is based on that included in the draft UPP design framework, includes the current JSPP proposal with the current pension benefits of MUFA members.
Most recent University Pensions Project JSPP Design Framework (6/2015)
Current McMaster plan provisions for MUFA members
18% contribution rate
20% contribution rate
McMaster (currently approximately 16-18% contribution depending on salary)
|Averaging period for earnings and YMPE||60 months||60 months||The average of the 48 highest months of regular annual salary while a Plan participant|
|Benefit rate per Year of Service on FAE up to AYMPE||1.50%||1.65%||1.4% of Best Average Salary up to the Average Year’s Maximum Pensionable Earnings (“Average YMPE”) times Pensionable Service plus,|
|Benefit rate per Year of Service on FAE in excess of AYMPE||2.00%||2.00%||2.0% of Best Average Salary in excess of the Average YMPE times Pensionable Service|
|Bridge Benefit per Year of Service||0.50% of FAE up to AYMPE||0.35% of FAE up to AYMPE||A Faculty Member who retires with an unreduced pension under the Special Retirement Date provisions will receive a bridge benefit equal to $19.00 per month per year of Pensionable Service accrued to June 30, 1996 to a maximum of 20 years of service.
The bridge benefit is payable from the later of the pension commencement date and Member’s attainment of age 60 and ceases on attainment of age 65 or death, if earlier.
|Maximum Pension||Indexed Income Tax Act maximum pension (applied before early retirement reductions)||Indexed Income Tax Act maximum pension (applied before early retirement reductions)||Same|
|Guaranteed normal form of payment—without spouse||Life guaranteed 10 years||60% survivor benefit||Life guaranteed 7 years (with some other options)|
|Guaranteed normal form of payment—with spouse||Life guaranteed 10 years||50% joint + survivor option, guaranteed at 100% for 7 years. After death, spouse gets 50% pension (with other options)|
|Eligibility for unreduced early retirement||Age 60 + 80 points (age + continuous service)||85 points (age + continuous service)||84-90 depending on dates of retirement (the rules of 85 or 90)|
|Reduced early retirement||5% per year from unreduced early retirement rate||Without 85 points, 5% penalty per year from age 65||Reduced by 0.5% for each month (equivalent 6% per year) per year from age 65|
|Indexation in the deferral period||None||None|
|Indexation after pension commencement – rate of indexation||75% of increase in CPI||75% of increase in CPI||Lesser of CPI or percentage that average rate of return exceeds 4.5%|
|Indexation after pension commencement – maximum increase||Maximum increase in CPI of 5%||None|
|Disability benefits||Continued accrual, employee contributions not required||Continued accrual, employee contributions not required|
|Interest rate on member contributions||CANSIM rates per PBA||CANSIM rates per PBA||i. A transfer of an amount equal to twice the Member’s required contributions plus Net Interest on the Fund to a locked-in retirement savings arrangement or other pension plan as permitted.
ii. A transfer of the commuted value of the Member’s deferred pension to a locked-in retirement arrangement or other pension plan as permitted. A deferred pension, payable at the Member’s normal retirement date, equal to the pension earned up to the date of termination. Hired post 2013, option i. excluded. ]
UPP discussion points
|Eligibility||Proposed plan includes all current members
Plan designed to permit expansion of coverage to employees not currently participating
POC research underway
|Cost sharing||Agreement on cost sharing for future accruals
No agreement on allocation (e.g. 50/50 or 45/55)
COU may consider transition from 45/55 to 50/50
|50/50 (currently for MUFA members)|
|Risk sharing||Tied to discussion on cost-sharing|
|Responsibility of future experience on past service liabilities and assets||In SEPPs, employers responsible; in JSPPs, responsibility generally shared
No agreement on ownership of future experience gains and losses on past service
If gains and losses eventually shared, should be a transition period
|Early retirement benefits||Agreement to provide subsidized early retirement
COU does not support unreduced pension with 85 points without minimum retirement age
|Indexing||No negative experience; indexing is not ad hoc|
OCUFA maintains a website with additional information about the University Pension Plan (UPP) JSPP process and proposal, including various project presentations and documents. The Ministry of Finance has also published regulations that will govern transitions from an employer-sponsored to a jointly-sponsored pension plan.
After consulting MUFA’s representatives on the McMaster University Pension Trust Committee, the MUFA Executive Committee is of the opinion that the proposed JSPP is not an appealing option for our members.