Pensioner Issues - Trusteed Plan

ESTABLISHMENT OF A TRUSTEED PLAN

The University is proposing to implement a Defined Contribution (DC) plan retroactive to January 1, 2000. The benefits under the Defined Benefit (DB) plan will not be reduced and will continue to be guaranteed by the University. Based on advice received from the plan actuary, the implementation of a Defined Contribution plan will not negatively impact on the DB plan's ability to provide future cost of living increases to pensioners.

In the event that a Defined Contribution (DC) plan is implemented, the University is proposing to make a change in the governance of the Defined Benefit plan as follows:
a) With effect from January 1, 2001, or as soon as practicable thereafter, the current plan will be changed to a "trusteed" arrangement under which the operation of the plan would be in the hands of a Board of Trustees made up of representatives of employees, pensioners and the University. The structure would be such that the number of member representatives and University representatives would be equal with either an independent chair or a mechanism for dispute resolution built into the trust agreement. All decisions, except those that would cause an increase in the University's contribution rate, would be made by the Board of Trustees of the plan and would not be subject to the approval by the Board of Regents of the University. Any possible increase in the University's contribution rate would be subject to the collective bargaining process.
b) Under this arrangement, the University would have no claim on any new surplus arising from plan experience other than as described below. In the event of a deficiency in the plan which required additional funding, the University would be responsible for making these additional payments and, in the event of a subsequent surplus, would take a full or partial contribution holiday until such time as the additional payments plus interest at 7% per annum have been recouped.

Conclusion

Under a DC plan, the role of the University is considerably reduced and the proposed changes to the governance are a logical extension of that principal to the existing DB plan. With the closed end nature of the DB plan, pensioners will form an increasing percentage of the plan liabilities (they already account for 37%) and their representation on the Board of Trustees will be increased compared to that on the Pension Committee.

Human Resources