OCUFA Report: Why the “crisis” in university pension plans?

A disturbing trend is showing up at faculty bargaining tables across the province with more and more university administrations demanding pension concessions. They claim that pension plans are “underfunded,” and so pension plan members must increase their contributions, accept reduced pensions, or do both.

The trouble with these demands is that university administrators are blowing the difficulties faced by some university pension plans way out of proportion.

Take Queen’s University, for example. The Queen’s University Faculty Association is now at the bargaining table, and last week the employer tabled a demand for pension plan restructuring.

But here’s the thing: the Queen’s pension plan would likely not qualify for solvency relief under Ontario’s new pension regulations. And Queen’s is not alone. Faculty pension plans at the University of Windsor and elsewhere are in the same condition.

What’s going on here?

The real issue here is not the state of pension funds. The real issue is chronic government underfunding of the university sector. University administrators, lacking funding increases that keep pace with rising enrolments, look to the expense side of the balance sheet to reduce costs. And that’s how pension plans become targets.
OCUFA has been urging the government to increase its funding to universities, with some success, most notably Ontario’s 2005 Reaching Higher program. But that was more than six years ago, and enrolments are skyrocketing (with the government acting as an energetic recruiter, especially at the graduate level). OCUFA estimates that more than a billion dollars of additional funding is needed annually simply to return to the state of affairs 10 years ago, let alone 20 or 30 years ago.
Ontario faculty have demonstrated many times over the years that when there is areal problem with a pension plan’s finances, they are perfectly willing to accept their fair share of the responsibility entailed in closing a funding gap. But to be asked to contribute more and receive less in order to make up for the government’s failure to fund universities adequately is unacceptable.
Moreover, the government’s new regulations (177/11 and 178/11) dealing with Ontario university pension shortfalls is producing, as OCUFA predicted, a turbulent labour relations environment, with university administrators exploiting this overblown pension “crisis” to go after employee pension plans.

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1 Response to OCUFA Report: Why the “crisis” in university pension plans?

  1. Lorne Carmichael says:

    It’s surely true to say that our current difficulties could be solved with a big increase in taxpayer support. But with the impending decrepitude of the baby boomers and the resulting political demands for health care in Ontario, prospects for this are bleak. We are forced to deal with these issues ourselves.

    It’s simple arithmetic that If revenues are not going up then expenses have to fall, and compensation is the biggest expense at Queen’s. Of all the various ways to reduce compensation that are currently on the table, pension reform is actually the best, for several reasons. First, administrators are covered by this plan alongside faculty and everyone else. It is significant that with their proposals for pension reform, administrators are offering to cut their own compensation. It’s an indication of how seriously scared they are about the financial future of Queen’s

    Second, given the defined contribution nature of the Queen’s pension plan, if we make a big increase in contributions and markets do well, (i.e. – “continue to rise) then much of the money (plus earnings) will end up in our money purchase accounts. The extra contributions are not equivalent to a cut in take home pay – if markets do well they will show up as an increase in our personal savings. If markets do not do well, then without the increased premiums the plan would be in even worse shape.

    The administration’s proposal on compensation would give us basically no nominal increases over four years. Administrators have also given themselves no increases, but this could change. I would prefer to see a more formal arrangement like the “Q-Days” offer that was rejected by QUFA some time ago. I prefer it, again, because it affects administrators as well as faculty. Perhaps QUFA’s negotiators could re-introduce their proposal on compensation but with the addition of an unpaid week off for administrators and faculty. It would be interesting and useful to see the response. This has the second advantage that base salaries for (e.g.) pension calculations would be higher.

    Queen’s will get it’s budget in order. If it can’t be done in the ways I’ve outlined above, or something similar, then it will be done by not paying faculty for some weeks or months. This is by far the worst option for Queen’s and all members of our community for so many reasons, but it is the one QUFA will choose when given the chance.

    The QUFA executive will choose to strike because it cares less about what is good for Queen’s than about what might look good in the eyes of other faculty unions in Ontario.

    The coming weeks will see a descent into madness.

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