October 1, 1999 Volume 7, Number 3


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Court puts pension plan change on hold


Saskatchewan Court of Queen’s Bench Justice Ross Wimmer issued an injunction Sept. 28 preventing the University of Saskatchewan from making any changes to its Academic Pension Plan for at least two weeks.

Justice Wimmer’s order — made after U of S pensioners filed a lawsuit earlier in the day contesting the University’s right to split the pension plan into two plans — blocks any change until after an Oct. 14 court date to hear the pensioners’ legal challenge.

These developments follow the U of S Board of Governors' vote Sept. 23 giving final approval to the contentious splitting of the Academic Pension Plan.

Just one day after that Board vote, the pensioners’ group advised the University it would launch the lawsuit to try to stop the process.

The Board’s vote came after open University-sponsored pension information meetings were held on campus Sept. 21 and 22.

The vote gave final approval to splitting the current Academic Pension Plan into one for active members and one for retirees — with the active members having the further option of choosing to stay in a "defined-benefit" plan or opt into a "money-purchase" plan.

The University felt the split would allow each group to directly govern their own pension plan to meet their different goals.

The pensioners’ leader, retired Assoc. Dean for Research in the College of Agriculture, Doug Knott, says his group advised the University Sept. 24 it was launching the legal action immediately to challenge the legality of the pension changes.

And, "We asked them to hold off registering the (pension) amendment, so it doesn’t complicate the legal situation," Knott said.

"We were never able to get the University people to negotiate with us" on the pension details, so "we were left with no other option" than the lawsuit, Knott said.

There have been suggestions the new pension arrangement would provide adequate retirement money for active members and "Post-’93" retirees, but an inadequate amount for pensioners who retired from the existing defined-benefit plan.

But the University has argued the amounts — based on recommendations of the 1998 review by expert Dr. Eileen Gillese, Dean of Law at the University of Western Ontario — are considered sufficient for the pension needs of retirees.

Civil Engineering Prof. Emeritus Jack Wigham, who until Sept. 27 was President of the U of S Retirees Association, said Sept. 28 the pensioners believe that while the proposed new plans will be well-funded, the arrangement doesn’t provide money to make the current pensioners’ plan as lucrative.

Wigham also says the University stands to gain between $9.2 million and $31.3 million in excess money after the newly split Academic Pension Plans are set up, depending on how many active members opt to stay in a defined-benefit plan or move to a new money-purchase plan.

Yet, the pensioners say, the University isn’t using that windfall to top-up their old defined-benefit plan.

The apportionment of monies for the new plans follows the recommendations of Dean Gillese — but retirees' argue that Dean Gillese suggested she would have been more generous to pensioners, except that a prior agreement between the University and the Faculty Association limited her options.

If the Board of Governors’ approval of the split is allowed to go ahead, the University plans a four- to six-week communications plan to help people understand the new plans and make decisions about how they want to proceed with their own pension arrangements.

Wigham says "the whole pension situation has been in a state of turmoil for six years."

He confirmed that while the pensioners had decided to file a lawsuit, the "Post-93" group of retirees have decided not to take legal action.

The Splitting Process

One reason the University began the process to split the pension plan was because federal tax changes made a money-purchase pension plan more attractive than the existing defined-benefit plan.

Splitting the plans would also let retirees and active plan members each govern their own plans, with their own interests in mind.

The relevant tax changes took place in 1992, and the Board of Governors planned t split the plan before Dec. 31, 1999 to limit the tax implications for those active members who opt for the new money-purchase plan,

Five groups are involved in the pension reform process:

  • The Board of Governors

  • The Faculty Association

  • The retirees on pensions

  • The active plan members on in the Faculty Association

  • The Post-93 "cash-out" group, who under an earlier (P-55) plan amendment chose to withdraw funds from the old defined-benefit plan and put it into a money-purchase plan.

Dean Gillese was brought in as an independent expert, and the Board of Governors accepted her report as the blueprint for pension reform.

The changes to the plan are based on a valuation date of Dec. 31, 1998 — and anyone retiring after then is deemed to be an active member under the new arrangement.

The University expects that both the new defined-benefit plan and the new money-purchase plan will be fully financially viable.

And the University’s actuaries predict there is a high probability in the mid- to long-term that the current retirees’ pensions can be fully indexed to the rate of inflation. But in the short-term of the next two years, there is less chance this will be possible.

On Dec. 31, 1998 there were 365 U of S pensioners, with an annual trust fund pension of $9.9 million, and each with an average annual pension of $27,137.



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On Campus News is published by the Office of Communications, University of Saskatchewan.
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