Report from the Chair – March 20, 2012:
“All registered pension plans in Ontario are required to file with Financial Services Commission of Ontario (FSCO) an actuarial valuation every three years. Our current valuation report has been prepared for the plan-year end-date of June 30, 2011. The Trustees have reviewed the draft valuation prepared by our actuary. Two large issues of concern were apparent.
Firstly, while the going-concern basis found that our funding liabilities have been met, the solvency basis found a deficiency. The solvency valuation financial position stated that the plan had approximate assets of $21 million with liabilities of $23 million ($11 million accounts for active and deferred members, $12 million accounts for retired members). With the liabilities exceeding the assets by $2 million, the plan has a solvency deficiency that must be addressed.
Secondly, the report highlighted a growing contribution margin issue. The actuary defined the annual cost to fund one year’s future benefit for all active members. The valuation report showed that, at present, our contribution rates add up to 8.74% of payroll (active membership contributions combined with the employer’s matching contributions), with a current service cost of 10.81%. Therefore the cost to fund the benefit is greater than the total contributions received, for a contribution margin of approximately 2%.
The Trustees are now required to bring forth proposals as to how we plan to address these two issues. The options available include increasing contributions, decreasing the future benefit formulas, and freezing pension indexing. The Trustees are currently working with the actuary to cost the options to determine which combination will prove to be the most effective. Once the costing analysis is completed, the Trustees will bring forth proposals to amend the plan such that the best option can be adopted. All amendment proposals must be approved and passed by the membership to take effect. All approved amendments will be filed with FSCO, pending its approval.
Please note, the Ministry of Finance has updated the laws that govern our pension plan in regards to member approval for plan amendments relating to funding relief measures. The changes that need to be made to our plan to address the solvency deficit and contribution margins will require that 1/3 of the plan stakeholders (active, deferred, retired) not disapprove the changes to the plan. If we are not successful in meeting this requirement, FSCO has the authority to decide how the plan will make up the shortfalls via current and future benefit reductions. It is therefore extremely important that all plan members attend the special meeting so that we decide the direction for our plan. The emergency special meeting is scheduled for Sunday April 15th at 1pm in the Moot Court of the Law Building. Prior to the meeting, the Trustees will call each plan member to remind them of the upcoming meeting date. A notice will be posted at all the Union Boards. A flyer will be created to hand out to the active members, and mailed out to the retiree and deferred members.”
Chairperson, CUPE Local 1001 Pension Plan