The UPP will be a Jointly Sponsored Pension Plan (“JSPP”). Under the Pension Benefits Act, the employers and the members of a JSPP (or any representatives of the members) are jointly responsible for making all decisions about the terms and conditions of the JSPP and any amendments to the JSPP.
It is anticipated that the Joint Sponsors and the Board of Trustees of the UPP will be recruited and in place by January 1, 2020, in order to ensure the UPP is ready to accept contributions, assets and start pension accrual effective July 1, 2021.
There would be two sponsors of the UPP : The Employer Sponsor and the Employee Sponsor. Together, the Employer Sponsor and the Employee Sponsor are the Joint Sponsors. The Employer Sponsor and the Employee Sponsor will each create a six-person committee, the composition of which shall be determined by the particular Sponsor. However, in a two-Sponsor model, each Sponsor has a single vote. The two Sponsors would be jointly responsible for making all decisions about the terms and conditions of the UPP and any amendments to the UPP, including the UPP 's benefits and contributions, and its funding policy. The two Sponsors would also be responsible for the appointment of the trustees on the Board of Trustees, which will act as the Administrator of the UPP, as described below.
Key Features of the UPP Sponsors:
- Set benefits, contributions and funding policies for the UPP
- Have equal representation of the participating universities on one hand, and the faculty associations and unions on the other
- Responsible for appointing the Administrator (Board of Trustees)
- Representatives of the non-unionized employees will have access to information from the Sponsors and will meet with the Sponsors annually.
During the spring and summer of 2018, a working group comprised of representatives of Queen's University, University of Guelph, University of Toronto, the faculty associations, USW and non-unionized employees met to consider the composition and attributes of the Board of Trustees of the UPP. During these collaborative meetings, the working group heard presentations from, and engaged in discussion with, representatives from five of the existing JSPPs in Ontario. The purpose of the discussion was to learn about both the successes and the challenges experienced in the governance of these existing JSPPs.
Following these meetings, a Report was prepared by the working group. The working group Report was the basis upon which the parties subsequently came to an agreement with respect to the composition and attributes of the UPP Board of Trustees that is intended to be a leader in pension plan governance. The details of this agreement are posted in Schedule V to the Milestones Agreement between the parties, posted here.
The Administrator of the UPP will be a Board of Trustees, and the trustees would be appointed by the Employer Sponsor and Employee Sponsor, with a numerically independent Chair of the Board of Trustees appointed jointly by the two Sponsors. The trustees would be jointly responsible for making decisions about the day-to-day administration of the UPP and the investment of the assets of the UPP.
The Board of Trustees would consist of 14 trustees, including an independent chairperson appointed by the Joint Sponsors. Six trustees would be appointed by the Employer Sponsor, six trustees would be appointed by the Employee Sponsor, and one trustee would be nominated by the non-unionized members pursuant to a pre-determined process. The non-unionized member-nominated trustee would not have a tie-breaking or tie-making vote.
Key Features of the UPP Board of Trustees:
- Legal Administrator of the UPP, responsible for making decisions about administration (including the preparation of actuarial valuations, ensuring compliance with all applicable laws, investment of the UPP assets, and payment of pension benefits to members
- Will consist of 6 trustees appointed by the universities; 6 trustees appointed by the faculty associations and unions; and 1 trustee nominated by the non-unionized employees (without a tie breaking vote);
- Independent Chair of the Board of Trustees to be appointed jointly by the two Sponsors (first seven years);
- 14 Board members in total (first seven years).
At the time of conversion, each of the three university’s pension plans would undergo a valuation on a standardized basis. On conversion, any funding shortfall would be the responsibility of that university and would have to be paid down over 15 years.
After a transition period, employees and employers will share in new shortfalls and surpluses for benefits earned under the UPP, which may mean adjusting contributions and/or future benefits for active employees.
Funding regulations for Ontario’s large JSPPs are different from those for single-employer Defined Benefit plans in Ontario. All plans are required to complete a formal valuation of plan funding at least once every three years and file it with the Ontario regulator. This valuation tests the plan’s financial health based on two scenarios:
- which assumes the plan will continue to operate as expected for many years to come; and
- which assumes the plan ends on the date of the valuation.
For a single-employer pension plan, any going-concern or solvency shortfall reported in the valuation must be paid off within a set period. As a JSPP, however, the UPP would be exempt from solvency funding. Any going-concern shortfall in the UPP must be addressed by increasing contributions or decreasing future benefits paid to active members.