Report from the Chair, November 25, 2012:
As presented at the Annual Pension Plan Meeting, November 25, 2012 “This past year has been a challenging one. During the past year the Board of Trustees assessed how the Plan can save money, responded to a difficult valuation result, and faced governmental regulatory pressures that have never been seen before.
November-December 2011 – We began the year by welcoming Alex Sorrentino and Tom Robinson as new trustees. Our change-over from SunLife (custodian) and Foyston Gordon and Payne (investment management) to RBC was completed. Angelo Martinello (investment manager) initiated an investment strategy of conservatism whereby he maintained a strong cash holding while slowly dollar costing into the equity markets. He continued on that plan throughout the year. He will further explain in his presentation. The Trustees updated and adopted our Statement of Investment Policies & Procedures (SIP &P). Talks began regarding the draft data analysis being collected for our valuation. We were on board to save significant service fees (investment management fees) with the removal of SunLife.
January-February 2012 – The Board of Trustees met with Buck Consultants (the actuaries) to review the valuation results. It was noted that the Plan did not have an unfunded liability in the going concern valuation but did have a deficit in the solvency valuation. (Please refer to report dated March 20, 2012 for further explanation) Also, the contribution shortfall had risen further from the last valuation. Buck recommended that we consider increasing contributions or decreasing benefits. It was noted that a contribution level rate of 12% of earnings (given the Employer’s contractual obligation of approximately 4.3%) would be ideal in attaining long term solvency. Buck also noted that Pension Benefits Act solvency relief regulations from 2009 had been renewed to allow registered pension plans extra time to pay back any solvency deficits. The Trustees researched and discussed multiple scenarios to address our valuation issues.
April 2012 – A special emergency meeting was held to discuss the results of the valuation. Information was presented regarding the options the members had to vote on. The members voted to increase contributions to a flat 7% of earnings. It was presented that the 4.3% from the Employer and the 7% from the employees equaled to less than the 12% ideal. The Trustees discussed that the strategy to make up the difference was to take a proposal to the collective bargaining table for a 1% increase to the Employer’s contribution rate.
May 2012 – The Trustees submitted the valuation to the regulatory authorities. The Provincial Budget was released. The Budget declares austerity measures in an attempt to pay down the deficit with the public sector being heavily mentioned; all non-compliance will be controlled by regulatory measures. What this means for the Plan is that our hope of attaining any benefit increases is gone.
June 2012 – The spring Budget results in numerous bills being tabled, one of which relates directly to us. The “Respecting Collective Bargaining Act” is draft legislation that removes the rights of Unions to collectively bargain to increase their wages or benefits without the approval of the government. Any contract language in Ontario that does so will be nullified by the Ministry authorities. This Act [if passed] further depletes our hope of accomplishing the goal of increasing Employer contributions.
July 2012 – The employee contribution increase takes effect. The Trustees meet with HR and payroll to ensure all aspects of the change are done correctly. The contributions from members on WSIB begin to be collected (deeming of these contributions have been cancelled effective July 1, 2012). Discussions are tabled about the effect of contribution obligations for part time members on WSIB.
September 2012 – The Trustees met with the actuaries who warned of a continued downward trend: interest rates remain low, liabilities calculations for solvency are getting more aggressive, investments are not returning. We were recommended to review an estimated financial position report to assess the damage. It was decided that we would hold off on having that report created until March or April. We attended a town hall teleconference of CUPE Ontario’s OUWCC (Ontario Universities Workers Co-coordinating Committee). The agenda was to discuss minimum framework requirements for pooling all CUPE University workers’ pension assets. The Trustees instructed Buck to perform the job of producing the past service purchase correspondence for our members (this practice was done by HR previously).
October 2012 – The Trustees dumped a long time project: the Reciprocal Transfer Agreement. We received approval of our valuation from theCanada Revenue Agency; we await approval from the Financial Services Commission of Ontario (FSCO).
November 2012 – The Union was notified that our custodial bargaining unit work will be contracted out. It was estimated that 29 of our jobs will be done by outside contractors. It was also made clear by the president of the University, Dr. Wildeman, that our local will not be used to perform custodial services in any of the new buildings located downtown. The effect of this on the plan is uncertain.
Going Forward – The Trustees’ plan to receive the estimated financial position that defines that liabilities and asset breakdown in March/April. The Trustees will bring forth information regarding what options exist for our plan’s future – pay to stay the same/change to a hybrid plan/change to a DC plan/pool our assets with other like plans – in May/June.
As you can see the initial strategies have been dismantled by unforeseen events. In the beginning of the year, our sentiment was that of optimism. We are now trying to determine what the best course is given all the difficult changes that have and will continue to take place. The Trustees will formulate options, but it is up to the membership to identify which plan is best.”
Board of Trustees,
CUPE Local 1001 Pension Plan