MYTHS ABOUT OUR PENSION PLAN (9)

cupe1975Negotiations/Bargaining, Pensions

MYTH

CUPE did not propose a “true” Jointly-Sponsored Pension Plan since surpluses are spent on member benefits and do not benefit the University

 FACT

Our proposal was a jointly-sponsored plan with a very conservative approach to surplus use, which we specifically chose to better meet the University’s stated concerns about risk. Plan surpluses can be used for different things – they can be spent on benefit improvements, used to reduce or eliminate required contributions to the plan (a contribution holiday), or they can remain in the plan to act as a buffer against future downturns. The University is incorrect that we proposed surpluses would only be spent on benefits. Our proposal actually said that all surpluses would not be spent and would remain in the plan (as a buffer against future downturns) until the plan was 120% funded. This is a very conservative approach. Having this buffer would help in keeping the plan out of deficit in a future downturn. Most other jointly-sponsored plans in the country would start “spending” surplus on benefit improvements at much lower levels. Having a high buffer like this, however, would help prevent contributions from rising in response to a future market downturn (i.e. directly addressing the main concern the University raised about pension costs). We could have left this buffer out and said that all plan surplus was for benefit improvements, but we did not. We set this high bar that directly benefits the University by helping to keep contributions stable. The University’s critique on this point reveals the reality that they don’t like our proposed restrictions on their ability to take even more contribution holidays in the future. We also indicated at the table that we were prepared to talk more about the surplus provision if the University was not satisfied with it, but the University never engaged on this point, rejected our position and is now raising these points in public instead of at the bargaining table.