In August 2017, U of T announced the establishment of a joint pension plan — aptly named the University Pension Plan (UPP) — with Queen’s University, the University of Guelph, and the United Steelworkers Union. Over a year and a half later, few details about the plan have been made widely available. Let’s take a deeper look inside the UPP and what it means for faculty and staff.
What is the UPP?
The proposed UPP follows a standard multi-employer, jointly sponsored pension plan (JSPP). Simply put, it collects all pension funds from faculty and staff of each university into a single pool, allowing employers equal governance and responsibility over the shared funds. Its goal is to reduce the risk of investing for a single employer while improving transparency and returns.
At the second U of T Planning and Budget Committee meeting on January 10, U of T Vice-President and Provost Cheryl Regehr said that all 22 Ontario universities and their major labour groups had initially been involved in the discussion of a JSPP; now, only three universities remain.
On U of T’s end, the development of the UPP has been a joint effort since 2014, involving the University of Toronto Faculty Association (UTFA) and the unions representing would-be members of the UPP.
While the UPP is a joint plan, it does not mean that members have joint liabilities. In an email to The Varsity, UTFA president Cynthia Messenger wrote, “The agreements that establish the plan call for each university to be fully responsible for the unfunded liabilities.”
Messenger added that “the UPP is not funded on the basis of cost sharing among universities.” This means that U of T, with the largest pension fund in the group, would not have to shoulder any financial burdens of the other members.
The UPP would allow for employees and employers to have equal governance over pensions. “Joint sponsorship and joint governance mean that no decision can be made about… the pension plan without the agreement of representatives of plan members,” Messenger wrote.
Why the UPP?
“It is clear that the traditional single-employer defined benefit pension plan is extremely vulnerable, both economically and politically,” Messenger said.
Concerns about increasing life expectancy — meaning more frequent payouts — and a trend of low interest rates are among the reasons behind the development of this plan. “The proposal for a jointly sponsored pension plan… gives UTFA members the opportunity to insulate themselves against negative change,” Messenger wrote.
The current provincial government has also been pushing for universities to transition to JSPPs. It claims that a JSPP would force universities to focus on education, rather than pensions. On this issue, Messenger wrote, “There is a risk that the provincial government might impose negative change on the sector’s existing single-university pension plans.”
Under U of T’s current pension plan, the university contributes a significant amount to the Pension Benefits Guarantee Fund (PBGF). These contributions protect employees’ pensions if their employer went out of business.
However, universities in the UPP would no longer make these contributions. “In order to get relief from those special payments [like the PBGF], the government was encouraging organizations like universities to move towards jointly sponsored pension plans,” Regehr said at the Planning and Budget meeting.
If one of the members became solvent — that is, had assets exceeding debt obligations — the JSPP would continue paying out pensions to their members, with no additional payments from the member required.
By easing the financial burden of its pension plan, U of T would be able to reallocate a portion of its funds into other initiatives, including educational strategies.
What’s the next step?
Recently, there have been two sets of negotiations regarding the UPP. The first involves the university administrations and their employees. Messenger said that these negotiations “reached a milestone in October when the design of the UPP was finalized.”
The second set of negotiations is between the individual bargaining units and employers at each of the three universities. According to Messenger, these “went into high gear in December” and have since been completed.
Now, ratification votes for United Steelworkers Union bargaining units and faculty associations will run through to February. Unrepresented employees and retirees will have their chance to vote on the UPP from April to the end of June. If the vote passes, the next step will land at the Financial Services Commission, which will consider the various possible methods of implementation and application that will result from the consent period.
“For [the] UTFA, the critical question is the security of a defined benefit pension plan for our members over the long term,” Messenger wrote. “What we have come up with is a plan that best protects the interests of plan members and… best protects their key interest — the future of their pension plan.”