BUFA Member: In the last Q&A about pensions, I read about the devastating effect of the maximum pension of $1722 per year of service in the Brandon University Pension Plan. Do other university pension plans have this problem?

Answer: According to an independent actuary retained by BUFA, most defined benefit pension plans set the maximum allowable pension as per the Income Tax Act of Canada maximum and do not set a lower numbered cap. Current legislation sets the limit at $2,222 per year of service, and this is indexed for inflation. The actuary commented that the Brandon University Plan is "somewhat unique" in this respect.

BUFA Member: What about other western Canadian university plans in particular?

Answer: All of the Alberta university plans, the University of Regina Plan, the University of Saskatchewan Plan, and the hybrid plan of the University of Manitoba are just subject to the Income Tax Act maximum. Since 2001, new members at the University of Winnipeg have had a defined contribution plan which also does not have our problem.

BUFA Member: I've also heard something about a pension reduction if one has a spouse. What's that all about?

Answer: At the present time, your pension is calculated and then the "form of the pension" is addressed. If you are single, your pension is for the rest of your life and is guaranteed for at least 5 years for your estate. However, if you have a spouse, the law requires that unless your spouse "signs off", you will have to take a different form of the pension such that if you die, your spouse will receive a reduced (normally 2/3) pension for the rest of his/her life. In order to get this so-called "joint and 2/3 survivor" form of the pension, the amount of the pension is further reduced, typically by about 15%.

BUFA Member: So I'm limited by the maximum allowable pension, and I have to worry about "joint and 2/3" too?

Answer: That's right. And don't forget the penalties if you fail to meet the requirements of age of 60 and the rule of 85 where your age plus years of service must be greater than or equal to 85. One more thing-- any indexing of your pension under the Brandon University Pension Plan is not guaranteed, but depends on the ups and downs of the stock market.

BUFA Member: So refresh my memory. What's BUFA trying to do about all of this?

Answer: Indexing of pensions for inflation is just too expensive at the present time, given our low interest rate environment. However, BUFA has tabled a proposal which will change the normal form of the pension to "joint and 2/3 survivor" without penalty in year one of the new contract. In year two BUFA has proposed raising the maximum allowable pension to $1972 per year of service, and to the present legal limit of $2222 per year of service in year three. While not indexed for inflation like the legislation, this proposal would effectively raise the pensionable salary amounts to about $112,000 in year two and to approximately $126,000 in year three. Of course, members would have to pay pension contributions on salary to the new maxima, whereas now, no contributions are paid by the member on salary over the $97,000 current limit.

BUFA Member: Why not start increasing the limits in year one?

Answer: That would be problematic for members because at the time of the settlement, members earning over $97,000 would then have to pay the back contributions which would be owed back to April 1.

BUFA Member: What's been the Employer's response to all of this?

Answer: Mr. Lamont stated that all of the pension improvements must be shared 50/50 or otherwise "It's a non-starter". He elaborated that first, BUFA members must pay an additional 0.5% into the Plan so that the Employer and member contributions are equal (at 7.5%), and then, the cost of any further improvements to be negotiated must be shared equally.

BUFA Member: Is it normal for contributions from both sides to be equal?

Answer: For many years, until the 2002 Collective Agreement, BUFA members paid 7% while the Employer only paid 6 1/2%. In that contract, two ½% increases by the Employer were negotiated. In many defined contribution plans, the Employer and the member contribute equally, although not always. For example at St. Francis Xavier, the members contribute 5% and the Employer 8%. In many defined benefit plans like ours, the Employer simply puts in sufficient extra monies to fund the plan and keep it solvent. In cases where the contributions are specified, we could point to places like Brock (6% by members, 9% by Employer), Mount Allison (6% by members, 7½% by Employer), University of Victoria (5% by members, 9%+ by Employer), etc. etc. You get the picture.

BUFA Member: What would it all cost anyway?

Answer: Calculations done by an actuary (not by BUFA) estimate that the whole package would average out to about 2% per year over the three years of the contract. The University's grant is up 7% this year and we've been continually told that salaries and benefits amount to 85% of university expenditures. There should be lots of money available to both improve the pension and to give members a salary increase which more than matches inflation. As a matter of fact, the grants for the past three years have been increased 5% annually while BUFA salaries have increased only 2.75% per annum. The Employer should have built up a nice surplus to pay for this.

BUFA Member: Certainly sounds like it's do-able. Oh, I also heard something about "solvency deficiency" and the pension plan, and opting out. Could you explain?

Answer: Sure. The Pension Plan undergoes a valuation every 3 years. At its last valuation, the plan was found to have a slight surplus on a solvency basis. This means that if the Plan had to be wound up tomorrow that there would be enough money to purchase annuities to fund the pension obligations for all members. About a year ago, the provincial government passed the University Pension Plans Exemption Regulation which makes it legal to elect to be exempt from making special payments into the plan in the event of a solvency deficiency. Obviously the more and the sooner funds are put into the Plan, the better off it is and the more able it is to fund improvements. BUFA believes that it already has a means to block an exemption election using Article F.7.4(a) of the Collective Agreement which states "No changes or amendments shall be made to the Brandon University Pension Plan or the Trust Agreement for that Plan without the prior approval of BUFA." However, in order to avoid a potential costly arbitration, BUFA wishes to plainly state the fact in the new Collective Agreement. The Employer refuses to even comment.

BUFA Member: That's not very helpful, is it?

Answer: How right you are! Welcome to my world!