The University is offering a “competitive pension plan”
The University has offered two different pension plans (Defined Contribution or Target Benefit) that share the same basic legal structure. In both proposed plans: 1) the University bears no risks and 2) plan members bear all of the risks. This is a complete change from your current DB plan, which provides secure, promised pension benefits that members can count on through their entire retirement. The University says they do not want any pension risk. They would prefer to see plan members with no real pension security, where your life in retirement will be tied to the whims of the stock and bond markets. These insecure types of pensions are not in any way comparable to the current DB plan.
Upending the structure of the plan is apparently not enough, however. In both scenarios, the University also proposes lower contribution rates, which would save the University millions of dollars per year. For the average CUPE 1975 member, the employer would save about $2000 per year! (in addition to dumping all of the pension risk onto plan members).
Roughly speaking, the “Target” benefit option actually aims to deliver about 25% less than your current DB plan does! And since the benefits are not promised like your DB benefits are, you may very well receive less than this. It’s all up to the markets and if you happen to work and retire at the “right” time.
The DC option is even worse. We can’t say what it will deliver compared to the DB plan, since the benefits here are wholly dependent on market returns. This uncertainty is exactly why we don’t like DC plans. Given the contribution rates and the structure of the plan, the proposed DC plan is probably worth some 40-50% less than the DB plan you currently have.
Complete risk shifting, massive cost savings and huge reductions in benefit value do not result in a “competitive” pension plan to your current DB plan!
|CURRENT PLAN||UNIVERSITY PROPOSALS|
|Current Defined Benefit (DB)||Defined Contribution (DC)||Target Benefit (TB)|
|Ongoing Cost to University (as % of Payroll)||11.37%||6.82%||7.5%|
|Annual University Savings (as % of Payroll)||N/A||4.55%||3.87%|
|Annual University Savings (for an average CUPE member salary $50,000)||N/A||$2275||$1935|