UNIVERSITY OF TORONTO TOWN HALL PRESENTATION n the University Pensin Plan (UPP) This is a presentatin prepared by the University f Trnt fr its emplyees and retirees and is based n the University f Trnt Pensin Plan nly. This presentatin is nt applicable t emplyees at any ther university r participating in anther university s pensin plan. This presentatin is fr general infrmatin nly and is nt legal advice and in the case f any cnflict between this presentatin and the ntices required under the PBA fr cnsent t transitin t the UPP, r the definitive dcuments created by the UPP, the ntices and definitive dcuments will prevail. These slides are part f a University f Trnt presentatin and are incmplete withut accmpanying ral cmmentary.
2 f 39 Agenda Intrductins Presentatin Why A Jintly Spnsred Pensin Plan? University Pensin Plan Details Examples Cntributin Rates Gvernance and Transparency Members Cnsent Questins
What is a Jintly Spnsred Pensin 3 f 39 Plan (JSPP)? A JSPP is a pensin plan that ffers defined benefits and is jintly spnsred, gverned, and funded by the emplyers and plan members. A member s retirement benefit under a JSPP is based n a pre-set frmula, typically with reference t years f pensinable service and earnings. There are several large Ontari pensin plans which are JSPPs, including: Ontari Teachers Pensin Plan; OPSEU Pensin Plan (public service); HOOPP (healthcare); OMERS (municipal); and, CAAT (clleges). These plans have a lng histry and are internatinally respected fr their ability t prvide secure pensins.
Why A Jintly Spnsred Pensin Plan? 4 f 39
Why change t a JSPP? 5 f 39 Traditinal pensin plans face significant sustainability pressures that highlight the need fr a new mdel t prvide pensins fr the future. Here s why: Years f lw interest rates, vlatile investment markets and rising life expectancy have led t funding shrtfalls and climbing cntributin rates fr mst traditinal pensin plans; Ontari s pensin funding rules are a significant financial burden fr universities, and are designed fr single emplyer plans that are vulnerable t bankruptcy and plan wind-up; In the private sectr, defined benefit cverage has significantly declined creating a pensin gap between the public and private sectrs; In the public sectr, directin is away frm the mdel under which emplyer bears all the risk; Ontari Gvernment and stakehlders at the three universities bradly supprt the mve t a new mdel and are cmmitted t wrking tgether; Gal is a sectr-wide plan ne that is pen t any ther Ontari university cnsistent with the general trend f plan cnslidatin.
What are the advantages f the 6 f 39 University Pensin Plan (UPP)? The UPP ffers the fllwing key advantages: Prtectin f defined benefit pensins under a new mdel fr the sectr; Jint gvernance, where university administratins, and emplyee grups have an equal say in plan design, funding and administratin; Greater transparency int plan peratins, funding, and decisin-making thrugh jint gvernance and pen infrmatin-sharing; Clear and explicit sharing f risk between emplyers and plan members; Mre stable and predictable cntributins frm emplyers and plan members; Relief frm sme f the financial pressures n universities caused by Ontari s current pensin funding rules; Efficiencies and ecnmies f scale a much larger plan means greater efficiency in plan administratin and access t higher-return investment pprtunities, which, in turn, will help address increasing csts.
Which universities and emplyee grups wuld be eligible t jin the UPP? 7 f 39 Currently, Queen s University, the University f Guelph, the University f Trnt, the faculty assciatins, USW, and ther staff grups, including representatives f nn-uninized emplyees at thse universities are wrking tgether tward being the first participants in the UPP; Other unins representing emplyees at the three universities are currently cnsidering their participatin; Once perating, the UPP wuld be pen t ther universities and emplyee grups as well; Emplyees f the University f Trnt must be a member f the University f Trnt Pensin Plan ( Plan ) r eligible t becme a member in rder t be a member f the UPP.
What is the current Plan? 8 f 39 The current University f Trnt Pensin Plan ffers defined benefits and is spnsred by the Gverning Cuncil f the University f Trnt; The Plan is funded thrugh member cntributins (as set ut in the Plan) with the University funding the balance f the Plan s cst, including all deficits; A member s retirement benefit under the Plan is based n a pre-set frmula based n years f pensinable service and earnings.
University Pensin Plan (UPP) Details 9 f 39
Hw des the current Plan and UPP 10 f 39 fit tgether? Pensin Fund Invested as One Fund Current Plan Pensinable Service Transferred Int UPP Accrued pensin benefits prtected and transferred t and paid frm UPP Pensin benefits fr this pensinable service cntinue t be calculated under current Plan prvisins + UPP Pensinable Service After Member Starts Earning Pensin (Expected t be July 1, 2021*) Harmnizatin f future benefit prvisins fr all participating universities/emplyees *July 1, 2021 is the Cnversin Date Jint Spnsrship and Gvernance
Hw d the current Plan and UPP fit 11 f 39 tgether? Pensin Fund Invested as One Fund Assets and Liabilities fr Pensin Benefits Transferred int UPP Assets and liabilities frm current Plan transferred int UPP Assets and Liabilities fr Pensin Benefits Earned frm Cnversin Date One jint cst and risk-sharing arrangement Ging cncern deficits brught int UPP remain respnsibility f universities funded by fixed special payments frm each university ver 15 years + 50/50 sharing Agreement n future gains and lsses n the assets and liabilities transferred in Jint Spnsrship and Gvernance
Hw will my pensin benefits be 12 f 39 determined? Current Plan Prvisins Pensin Benefits fr Pensinable Service Transferred int UPP Pensin Benefits Payable Frm UPP Cmbinatin f Pensin Benefits Calculated Under: UPP Prvisins Pensin Benefits fr Pensinable Service Earned frm Cnversin Date Benefit Frmula: 1.5% 1 r 1.6% f Best Average Earnings up t Average YMPE, plus 2.0% f Best Average Earnings in excess f Average YMPE Limited t maximum pensin permitted under Incme Tax Act 1 1.5% fr Faculty and Librarians and Research Assciates + Benefit Frmula: 1.6% f Best Average Earnings up t Average YMPE, plus 2.0% f Best Average Earnings in excess f Average YMPE Limited t maximum pensin permitted under Incme Tax Act
Hw will my pensin benefits be 13 f 39 determined? Current Plan Prvisins Pensin Benefits fr Pensinable Service Transferred int UPP Pensin Benefits Payable Frm UPP Cmbinatin f Pensin Benefits Calculated Under: UPP Prvisins Pensin Benefits fr Pensinable Service Earned frm Cnversin Date Best Average Earnings: Best 36 mnths f salary, calculated at retirement r earlier terminatin (salary fr future service under UPP recgnized fr this purpse) + Best Average Earnings: Best 48 mnths f salary, calculated at retirement r earlier terminatin (salary fr pre-upp service recgnized fr this purpse)
Hw will my pensin benefits be 14 f 39 determined? Pensin Benefits Payable Frm UPP Cmbinatin f Pensin Benefits Calculated Under: Current Plan Prvisins Pensin Benefits fr Pensinable Service Transferred int UPP UPP Prvisins Pensin Benefits fr Pensinable Service Earned frm Cnversin Date Average YMPE 1 : Average f YMPE in last 36 mnths f emplyment Average YMPE 1 : Average f YMPE in last 48 mnths f emplyment 1 Year s Maximum Pensinable Earnings under Canada Pensin Plan (CPP); referred t in Current Plan as CPP Maximum Salary + Fr pensinable service frm January 1, 2025 average will be based n Year s Additinal Maximum Pensinable Earnings (YAMPE) under CPP which is set at 114% f YMPE
Hw will my pensin benefits be 15 f 39 determined? Current Plan Prvisins Pensin Benefits fr Pensinable Service Transferred int UPP Pensin Benefits Payable Frm UPP Cmbinatin f Pensin Benefits Calculated Under: UPP Prvisins Pensin Benefits fr Pensinable Service Earned frm Cnversin Date Eligibility fr Unreduced Early Retirement fr This Prtin f Pensin Benefit: Age 60 and 80 age-plus-cntinuus service pints Age 60 and 10 years f pensinable service fr Faculty and Librarians Age 60 and 15 years f pensinable service fr P/M levels 6+ Service under UPP cunts fr purpses f determining eligibility + Eligibility fr Unreduced Early Retirement fr This Prtin f Pensin Benefit: Age 60 and 80 age-plus-cntinuus service pints Service transferred int UPP frm current Plan cunts fr purpses f determining eligibility Fr Faculty and Librarians and P/M levels 6+, if member is age 52 r ver n cnversin date, eligibility fr unreduced early retirement fr this prtin f benefit will be based n the earlier f the eligibility under the UPP and the eligibility under the current Plan prvisins ( grandparenting )
Hw will my pensin benefits be 16 f 39 determined? Current Plan Prvisins Pensin Benefits fr Pensinable Service Transferred int UPP Pensin Benefits Payable Frm UPP Cmbinatin f Pensin Benefits Calculated Under: UPP Prvisins Pensin Benefits fr Pensinable Service Earned frm Cnversin Date Reduced Early Retirement Benefits: Fr retirement n r after June 30th fllwing 55th birthday and befre eligibility fr unreduced early retirement benefits, pensin benefit earned t early retirement date reduced 5% fr each year that pensins start date precedes nrmal retirement date (June 30th fllwing 65th birthday)) + Reduced Early Retirement Benefits: Fr retirement n r after the last day f the mnth f 55th birthday and befre eligibility fr unreduced early retirement benefits, pensin benefit earned t early retirement date reduced 5% fr each year that pensin start date precedes nrmal retirement date (last day f the mnth f 65th birthday)
Hw will my pensin benefits be 17 f 39 determined? Current Plan Prvisins Pensin Benefits fr Pensinable Service Transferred Int UPP Pensin Benefits Payable Frm UPP Cmbinatin f Pensin Benefits Calculated Under: UPP Prvisins Pensin Benefits fr Pensinable Service Earned Frm Cnversin Date Nrmal Frm f Payment: Withut spuse at pensin cmmencement date lifetime pensin with a guarantee f at least 60 mnthly payments With spuse at date f pensin cmmencement date lifetime pensin with 60% cntinuing t surviving spuse n pensiner s death, actuarially adjusted if spuse is mre than 15 years yunger + Nrmal Frm f Payment: Withut spuse at pensin cmmencement date lifetime pensin with a guarantee f at least 120 mnthly payments With spuse at date f pensin cmmencement date lifetime pensin with 50% cntinuing t surviving spuse n pensiner s death, actuarially reduced if spuse is mre than 10 years yunger; legislated autmatic payment frm is 60% survivr pensin, actuarially reduced t reflect increase frm 50% t 60%
Hw will my pensin benefits be 18 f 39 determined? Current Plan Prvisins Pensin Benefits fr Pensinable Service Transferred int UPP Pensin Benefits Payable Frm UPP Cmbinatin f Pensin Benefits Calculated Under: UPP Prvisins Pensin Benefits fr Pensinable Service Earned frm Cnversin Date Indexatin f Pensins In Payment: Guaranteed indexatin at 75% f Increase in CPI up t 8% plus 60% f Increase in CPI abve 8% + Indexatin f Pensins In Payment: Funded cnditinal indexatin at 75% f Increase in CPI -- funded in cntributin rates based n lng-term actuarial assumptins and granted each year subject t funding plicy under which Plan Spnsrs jintly decide t reduce future indexatin adjustments belw 75% level given financial health f plan Transitinal rule: Plan Spnsrs have agreed nt t reduce indexatin belw 75% level in first 7 years
Hw will my pensin benefits be 19 f 39 determined? Current Plan Prvisins Pensin Benefits Fr Pensinable Service Transferred Int UPP Pensin Benefits Payable Frm UPP Cmbinatin f Pensin Benefits Calculated Under: UPP Prvisins Pensin Benefits fr Pensinable Service Earned Frm Cnversin Date Indexatin f Pensins in Deferral Perid: Indexatin applies in deferral perid between date f terminatin and date f pensin cmmencement + Indexatin f Pensins in Deferral Perid: Indexatin des nt apply in deferral perid between date f terminatin and date f pensin cmmencement
Examples 20 f 39
Hw will this actually affect benefits? 21 f 39 Example One Final Salary $ 75,000 $ 100,000 $ 125,000 $ 150,000 3-year Average $ 72,840 $ 97,120 $ 121,400 $ 145,680 4-year Average $ 71,790 $ 95,720 $ 119,650 $ 143,580 Annual Pensin Earned Per Year f Service Current Plan $ 1,180 $ 1,666 $ 2,151 $ 2,637 (1.5%/2.0%) UPP - Withut Spuse $ 1,216 $ 1,695 $ 2,173 $ 2,652 - With Spuse 1 $ 1,198 $ 1,670 $ 2,140 $ 2,612 1 Assumes retirement at age 65 with spuse 2 years yunger.
Hw will this actually affect benefits? 22 f 39 Example Tw Final Salary $ 75,000 $ 100,000 $ 125,000 $ 150,000 3-year Average $ 72,840 $ 97,120 $ 121,400 $ 145,680 4-year Average $ 71,790 $ 95,720 $ 119,650 $ 143,580 Annual Pensin Earned Per Year f Service Current Plan $ 1,235 $ 1,721 $ 2,206 $ 2,692 (1.6%/2.0%) UPP - Withut Spuse $ 1,216 $ 1,695 $ 2,173 $ 2,652 - With Spuse 1 $ 1,198 $ 1,670 $ 2,140 $ 2,612 1 Assumes retirement at age 65 with spuse 2 years yunger.
Cntributin Rates 23 f 39
What will cntributin rates be 24 f 39 under the UPP? 50/50 sharing f cntributins. Cntributin rates fr bth members and universities estimated t be: 9.2% up t the YMPE, plus; 11.5% abve the YMPE Pensinable salary cap set at $165,000 in 2018 and increased each year at the same rate f increase in the Incme Tax Act maximum pensin. Increased member cntributin rates frm current level: 7.15% up t YMPE/9.50% abve YMPE fr members with 1.5% benefit frmula belw average YMPE; 7.70% up t YMPE/9.50% abve YMPE fr members with 1.6% benefit frmula belw average YMPE. YAMPE will be used as the breakpint starting in 2025.
What else d I need t knw? 25 f 39 Current Plan is cvered under the Pensin Benefits Guarantee Fund (PBGF): Fr pensin benefits up t $1,500 per mnth, PBGF wuld cver any unfunded prtin n Plan wind-up; Universities pay significant premiums t the PBGF; premiums unrelated t risk f emplyer inslvency. JSPPs are nt cvered under the PBGF: Multi-emplyer JSPPs like the UPP wuld nt be wund-up if ne f the participating emplyers became inslvent; accrued benefits wuld cntinue t be paid by JSPP; JSPP culd nt be wund-up unless emplyee and emplyer spnsrs agree; Accrued benefits can nly be reduced under a JSPP in the event f full wind-up f the JSPP where there are nt sufficient assets; Hwever, universities remain respnsible t fund accrued benefits transferred int the UPP in the event f a future windup f the UPP.
Gvernance and Transparency 26 f 39
Hw will the plan be gverned? 27 f 39 UPP will be a tw Spnsr mdel emplyers are ne Spnsr and emplyees are the ther Spnsr Jint Spnsrs (emplyee and emplyer representatives) Determine cntributins and benefit frmula Funding plicy Appint Administratr Administratr Bard f Trustees (appinted by Spnsrs) Actuarial valuatin Investment f assets Payment f benefits
Hw will the plan be gverned? 28 f 39 The UPP Jint Spnsrs: Set benefits, cntributins and funding plicies fr the UPP; Have equal representatin f the participating universities n ne hand, and the faculty assciatins and unins representing UPP members n the ther hand; Respnsible fr appinting Administratr (Bard f Trustees). Representatives f the nn-uninized emplyees will have access t infrmatin frm the Spnsrs and will meet with the Spnsrs annually; The UPP Bard f Trustees: Legal Administratr f the UPP respnsible fr making decisins abut administratin (including the preparatin f actuarial valuatins, ensuring cmpliance with all applicable laws, investment f the UPP assets, and payment f pensin benefits t members; Will cnsist f 6 Bard members appinted by the universities; 6 Bard members appinted by the faculty assciatins and unins; and 1 Bard member nminated by the nn-uninized emplyees (withut a tie breaking vte); Independent Chair f the Bard f Trustees t be appinted jintly by the Spnsrs (first seven years); 14 Bard members in ttal (first seven years) Bard f Trustees anticipated t be recruited and in place by January 1, 2020, tgether with the Spnsrs, in rder t ensure UPP is ready t accept cntributins, assets and start pensin accrual, effective July 1, 2021.
Members Cnsent 29 f 39
D I have any say in this? 30 f 39 In rder fr the prpsed cnversin t the UPP t prceed, there is a regulatry prcess. Under the Pensin Benefits Act prcess: All members, unins, retired members and frmer members must receive detailed ntificatin f the prpsed cnversin t the UPP; This ntice will cme t yu frm the University, as the current legal Administratr f the Plan; The required cntent f the ntices includes: The infrmatin abut the benefits prvided under yur current Plan; Actuarial infrmatin abut yur current Plan; Infrmatin abut the benefits t be prvided under the JSPP; and, The nature f a JSPP. The ntices must als cntain persnal data and calculatins cncerning the member s accrued pensin under yur current Plan, and the member s accrued pensin after jining the prpsed JSPP. The data and calculatins must be fresh in the ntices which means that the infrmatin n which they are based cannt be lder than 6 mnths.
D I have any say in this? 31 f 39 In additin t the ntices, there is als a cnsent/bjectin prcess At least 2/3 (tw-thirds) f all the active members f the current Plan give their cnsent; and, N mre than 1/3 (ne-third) f the retired members, frmer members and ther persns entitled t benefits under the current Plan (inactive members), as a grup, bject; Cnversin als requires the prir apprval f the Superintendent f Financial Services (the Superintendent.)
D I have any say in this? 32 f 39 Uninized Members Fr uninized members f the Plan: Yur unin must determine whether t cnsent n yur behalf; If yur unin cnsents n yur behalf, yu are deemed t cnsent; If yur unin des nt cnsent, yu are deemed nt t cnsent t the cnversin; Faculty and USW will be seeking ratificatin f members in late January/early February.
D I have any say in this? 33 f 39 Retired and Frmer Members Fr retired and frmer members f the Plan. Even if yu were uninized when yu were emplyed at the University, that unin will nt cnsent n yur behalf; Yu will have an individual right t bject t the cnversin; If n mre than 1/3 f the retired members, frmer members and ther persns entitled t benefits frm the current Plan bject, the inactive member threshld will be met and cnversin can g ahead (subject t the active member cnsent threshld).
D I have any say in this? 34 f 39 Nn-Uninized Members Fr nn-uninized members f the Plan: If yu are nn-uninized, yu will have an individual right t cnsent t the cnversin; Yur cnsent will be added t all f the deemed cnsents by uninized members t determine the ttal; If 2/3 r mre f the active members f the current Plan cnsent (r are deemed t cnsent in the case f uninized members), the active members cnsent threshld will be met and all members f the Plan are deemed t have cnsented t the cnversin; As lng as the inactive member bjectin threshld is met.
Hw will the new plan be apprved? 35 f 39 If bth the active member and inactive member cnsent threshlds are met then the next step is t apply t the Superintendent fr apprval. It is anticipated that the applicatin will be submitted by December 31, 2019. The apprval prcess is lengthy and detailed. In rder fr the Superintendent t grant apprval the university must demnstrate a number f criteria, including that: the required ntices prvided t members are accurate and cmplete the cmmuted value f the pensin benefits prvided under the UPP fr the transferred members is nt less than the cmmuted value f their pensin benefits under the current Plan every transferred member is entitled t credit in the UPP fr their membership in the current Plan fr the purpse f determining eligibility fr membership in and entitlement t benefits under the UPP the pensin benefits prvided under the UPP fr inactive members are, at a minimum, the same as the pensin benefits prvided fr them under the current Plan
What is the timing f all f this? 36 f 39 Faculty Assciatin / USW ratificatins January / February 2019. Ntices ut March 2019. Cnsent by June 2019. New JSPP registered January 1, 2020. Cntributins under UPP wuld nly start after regulatry apprval fr transfer f existing Plan assets t JSPP, anticipated t be July 1, 2021.
Where can I get mre infrmatin? 37 f 39 Infrmatin abut the prpsed pensin plan is available n the UPP website at www.universitypensin.ca, where yu can sign up t receive updates and submit questins. This presentatin will be psted n the UPP website by December 2018.
38 f 39 Questins? This is a presentatin prepared by the University f Trnt fr its emplyees and retirees and is based n the University f Trnt Pensin Plan nly. This presentatin is nt applicable t emplyees at any ther university r participating in anther university s pensin plan. This presentatin is fr general infrmatin nly and is nt legal advice and in the case f any cnflict between this presentatin and the ntices required under the PBA fr cnsent t transitin t the UPP, r the definitive dcuments created by the UPP, the ntices and definitive dcuments will prevail. These slides are part f a University f Trnt presentatin and are incmplete withut accmpanying ral cmmentary.
This is a presentatin prepared by the University f Trnt fr its emplyees and retirees and is based n the University f Trnt Pensin Plan nly. This presentatin is nt applicable t emplyees at any ther university r participating in anther university s pensin plan. This presentatin is fr general infrmatin nly and is nt legal advice and in the case f any cnflict between this presentatin and the ntices required under the PBA fr cnsent t transitin t the UPP, r the definitive dcuments created by the UPP, the ntices and definitive dcuments will prevail. These slides are part f a University f Trnt presentatin and are incmplete withut accmpanying ral cmmentary. 39 f 39