York University has received approval from the Ontario government for what is known as stage-one temporary pension solvency funding relief.
Under recent amendments made by the provincial government to the Pension Benefits Act, postsecondary institutions facing large solvency funding deficits for their pension plans were given an opportunity to apply for temporary funding relief.
As of Dec, 31, 2010, York University’s pension plan showed a deficit of $198.8 million calculated on a solvency/wind up basis and $217.2 million calculated on a going concern basis, according to actuarial valuation results.
Ontario’s stage-one approval means that York will be exempt from making higher levels of special solvency payments for three years from the Dec. 31, 2010 valuation. This will allow the University time to work with its employees to develop a sustainable pension plan.
At the end of the three-year window, universities would have an opportunity to apply for stage-two relief, which would allow a 10-year amortization of any remaining solvency deficit, rather than the normal five-year amortization period.
For more information, see the Ontario government’s announcement regarding pension solvency funding relief measures for the province’s universities.
York University has already started the process of addressing pension plan sustainability with its community. It convened a Board of Governors working group to focus on the pension plan sustainability issue. During the fall and winter semesters, a series of three different pension information sessions (27 sessions in total) were offered to the University community with more than 900 pension plan members attending. These sessions were recorded and are available for viewing online on the Pension & Benefits website.
The University has engaged Aon Hewitt, a firm independent of the pension plan’s actuary, to assist in reviewing the pension plan and assisting in looking at options to address pension plan issues. Starting in August 2010, meetings were held with all the University’s associations and unions to discuss the process for addressing pension plan sustainability, and to understand any concerns or issues. York also met with its associations and unions to review the province’s solvency relief measures and to discuss the contents of the University’s application for stage one relief for input prior to submitting the application to government.
A series of principles emerged from the meetings and discussions with York’s associations and unions to guide the ongoing work towards creating a sustainable pension plan. The following principles were included in the pension relief application:
- A commitment to an open, transparent and consultative process.
- No changes to the provisions for existing pensioners and protection of accrued pension benefits for active members in accordance with pension legislation.
- Maintenance of York’s current pension plan structure.
- Ensuring that the pension plan is financially sustainable in the long term and adaptable to changing circumstances, not just meeting the metrics of solvency funding;
- Protection of initial pension determined date of retirement;
- Provision for demographic equity;
- Managing complexity by giving consideration to administration and communication, and considering changes to pension plan governance as part of any changes made to the risk-sharing structure.
Pension Plan members can review an informative set of frequently asked questions posted on the Pension & Benefits website. York University’s application for pension solvency relief has also been posted online for pension plan members to review. Click here to download the document.