An update on pensions
More than 25 town halls hosted in 2011
Ryan McNutt - January 31, 2012
Over 1,000 attendees. More than 100 questions. And many, many updates to the PowerPoint presentation.
For the past year, Ken Burt, vice-president finance and administration, and Katherine Sheehan, assistant vice-president human resources, have been hosting town halls to discuss the state of the university’s pension plan with employees and to share information about options for changing how the plan is governed.
“Pension plans can be complicated at the best of times, so the best way to work through the issues our plan is facing is face-to-face, as a community,” explains Ms. Sheehan.
Throughout the 25-plus town halls, a few common themes emerged that will have to be addressed in any changes to the plan:
- Employees say they are not in a position to pay considerably more in contributions to the pension plan.
- They’re concerned about how to address past debt while also keeping payments to the plan affordable.
- Finally, while employees are open to governance changes (how decisions are made), they want to retain the ability to protect the benefits of the plan
The town hall sessions have concluded just as Dalhousie is preparing for conciliation with two of its employee groups. Sessions with the Dalhousie Faculty Association (DFA) begin this week, with conciliation scheduled with the Nova Scotia Government and General Employees Union (NSGEU, Local 77; Administrative and Technical Support) on February 20.
Pensions are expected to be a key topic of discussion. Ms. Sheehan and Mr. Burt say they’re optimistic that the negotiations will result in solutions that will address the concerns identified at the town hall sessions.
Read more: Dalhousie negotiations website
Read more: Dalhousie Pension Town Halls - key documents + Q&As
Looming solvency threat to university budget
The immediacy surrounding the pension topic relates to a solvency deficit in the university plan. Under provincial regulations, the university is expected to have enough money in the pension fund to pay all its obligations in the unlikely event that the university were to suddenly close. At last estimate (Sept. 30, 2011), Dalhousie was assessed as being $270 million short of that threshold.
Both the university and the DFA have lobbied the government for a permanent exemption from solvency requirements, as exists for universities in other provinces, but as of now Dalhousie’s temporary exemption is set to run out in March 2013. Unless market conditions have recovered dramatically by then—unlikely, says Mr. Burt, according to financial observers—Dalhousie will be expected to cut into its operating budget to make significant repayments into the pension fund, perhaps by as much as $50 million each year.
“It’s challenging enough for our community when the university is forced to find three or four per cent in savings, the sort that we’re looking likely at this year,” says Mr. Burt. “Without a change in our pension situation, we’d be looking at cutting 15 per cent or more from our budget to pay off our pension deficit.
“I’m almost at a loss for words as to how we’d address that. The consequences would be dramatic.”
A jointly-sponsored governance solution
When university leaders discuss moving to a jointly sponsored pension plan (JSPP)—where responsibility and decision making would be shared equally between the university and its employee groups—that looming March 2013 deadline is the key reason why. Under new proposed provincial regulations, JSPPs which are funded at 80 per cent will be exempt from the solvency test, meaning that if Dalhousie moved to a JSPP, the university would avoid having to cut catastrophically from its budget to make repayments.
“A new governance model does two things for the university, and solvency relief is the most immediate” says Mr. Burt. “But it’s also about addressing a pension governance status quo that isn’t working, and creating a model for decision making that keeps our plan sustainable for the future.”
Dalhousie’s current pension governance structure, which grants a veto on plan changes to each employee group and the university, has been unable to come up with solutions for addressing the current deficit. Under the status quo, one group can veto a decision that the majority of the employee groups and the university agree on.
No changes to pensions or benefits under discussion
Ms. Sheehan says that while many of the attendees she talked with at the town halls were understandably anxious about what a new governance model would mean for the plan, she says that any discussions about changes to contributions or benefits are premature.
“We haven’t talked about those kinds of specifics,” she says. “First, we need a framework to support those conversations – a framework that’s fair, that’s collaborative and that gives representatives from all member groups a hand in shaping our plan’s future. We think a JSPP is the best way to do this, because it also achieves solvency relief.”
While many companies and public sector organizations are rethinking or eliminating defined benefit pension plans, the university has no interest in following suit: Ms. Sheehan says that the defined benefit pension plan is a key driver of employee recruitment and retention and is highly valued by employees.
As the collective bargaining process moves along, the university has launched a negotiations website – dal.ca/negotiations – with status updates on collective bargaining and background on the university’s pension plan. Resources from the Town Halls (including responses to common questions) are also available at the Dalhousie Pension Plan website, and there have been several articles here on Dal News about the pension situation, including in-depth interviews with key leaders.
- Budget Advisory Committee delivers first report on 2012-13 budget (Jan. 26, 2011)
- Pension Q&A with Ken Burt (Oct. 12, 2011)
- Pensions: A starting point for discussions (March 2, 2011)
Keeping an open dialogue
Ms. Sheehan says that the continued interest in the town halls, and the pension issue more generally throughout the past year, is encouraging.
“The worst thing for us would be trying to have these conversations about pension changes in an environment where no one wanted to talk or listen. Instead, people have been eager to learn more about the choices ahead and share questions, concerns, hopes and worries.
“Hopefully we’ve done our part to answer them as best we can, and that together we can bring that same collaborative spirit to finding solutions that keep our plan, and university, sustainable.”
The key questions
(taken from dal.ca/negotiations)
What is the university asking from employees?
The university wants to change the governance structure of our pension plan, and we need agreement from all employee groups in order to do this. We are not proposing any changes to the pension plan benefit formula. We are suggesting a jointly-sponsored pension plan (JSPP) governance structure model, which will a) allow for solvency relief, and b) allow for the university and the employee groups to share responsibility for plan governance, administration, and terms.
Why do we have to change our governance structure?
The current governance structure is not working. We have a solvency deficit of $270 million, which the university is responsible for paying. In order to pay this, we will have to take money from our operating budget, which impacts programs and services. With recent proposed legislation, if we move to a JSPP model, as long as the pension plan is funded at 80 per cent, we will be exempt from the solvency test, which will reduce the amount we have to take from the operating budget.