RESOLUTION OF MAY 23 2012 CLAIMING THE 3RD TRANCHE DUE SINCE 2006 AND PAYMENT OF COMPENSATION TO RETIREES ISSUING FROM CONTRIBUTION HOLIDAYS TAKEN BY THE EMPLOYER AND THE EMPLOYEES IN 2007
1-Our Pension Plan was registered with the Financial Services Commission of Ontario, as a defined contributions plan, on September 1st 1963. The employer and the employees contributed equally The funds of the plan belong to the employees and the retirees, the employer having no claim on this fund.
In 1988, the fiduciaries (the members of the Board of Governors) distributed a surplus to the employees and retirees by creating voluntary contributions. The employer paid its annual contribution of 8.5% as stipulated by the Pension Plan. We were reassured, the surplus belonged to the retirees and employees.
2- Numerous modifications were adopted such that our pension plan became a defined benefits plan. To our knowledge, the rights of the retirees and the employees were not modified. However, the reform adopted by the Board of Governors on July 24 2000 allowed the employer to take very significant sums from the fund. The plan was severely taxed as demonstrated by a surprising part of the conclusion of a resolution adopted by the Board of Governors :
EXTRACT OF THE MINUTES OF THE MEETING OF THE BOARD OF GOVERNORS OF JULY 24 2000
«-In the event thatthere is a threat of grievance, a grievance is lodged,
-there is a threat of litigation, documents are filed to initiate litigation before a tribunal of competent jurisdiction
-an appeal is made to a government agency or other whose approval is required, whether the action or proceeding is individual or collective,
and the Board of Governors is of the opinion that such event merits the suspension of the implementation of the Pension Plan Reform, then the Board reserves the right to suspend the Reform or to terminate its implementation.»
The majority of persons who voted on the project of reform approved the reform, but one must remember that many amongst them feared to lose everything if the reform was not approved or was annulled.
The retirees had to be content with the sums which they received issuing from the reform, they had to be content with the conclusions cited above. Any dispute risked that they lose the little that they had received. We waited for year 2006 with patience. In 2007 the decision allowing a contribution holiday for the employer and the employees granted nothing to the retirees. We were flabbergasted.
You can learn of or review the events and its decisions on the documents that are published on our Web site:
2-The surprising situations concerning the reports of 2006 and 2007
Extract from the report of actuary Michel Bédard , FICA, dated December 6, 2010published on our Web site under the following title : Actuarial evaluation: Pension Plan of the retirees and employees of the University of Ottawa: Financial evolution from 1994 to 2010
« Coming back to 2006 and 2007, one observes what follows:
i)If there existed a running deficit on January 1stf 2006, it was known a year later that this deficit was entirely due to the use of methods and forecasting that were out of date : new bases for evaluation as adopted by the new actuaries in 2007 would have shown instead, if they had been applied as of January 1st2006, a surplus of about 82 million dollars(see Table 5, annexed), that is 8,1% of the liabilities. This would then have exceeded the stipulated 6% threshold which would have allowed the 3rd payment promised in 2001 to the «1998 group» (retirees, members with deferred pensions, and active members). Thus, taking into account the excess of the 8,1% over the threshold of 6%, there would then have been an «available » surplus of about 21 million dollars, a sum sufficient to cover the major part of the third payment.
ii) One can also add the insufficiency of the contributions of the employer emanating from the obsolete methodology described in the preceding section 3 (36 million), to conclude that there should have been a surplus greater than sufficient (118 million) on the 1st of January 2006 to permit payment of the third tranche promised to the group of 1998 (retirees, active employees and those with deferred pensions).
iii)One year later, in 2007, the employer and the employees favoured themselves with an optional contribution holiday valued at 22 million dollars (part of the contribution holiday of the employees was carried over to the beginning of 2008), the plan having a running surplus of 133million on January 1st 2007 (this surplus however being accompanied by a solvency deficit of 45 million). Note that these holidays could not have been granted, even on an optional basis, if one had instead effected the third payment of 2006 to the group of 1998 (retirees, actives and deferreds), »
One must add that a letter from the actuaries Mercer presented to the meeting of the Pension Plan Committee on March 12 2010 confirmed the error committed in 2007 and the fact that the actuaries had advised the administrators of the Pension Plan that the employer was not obliged to take a contribution holiday, but that it was simply optional. And now to this contribution holiday and that of the employees, the employer has added the injustice of 2006 (the non payment of the 3rd tranche which it could have done), a new injustice for all those who retired before August 31 2007, in not giving them any amount to take into account the contribution holiday of the employees.
Here is the conclusion for the period 1994 to 2010,
For the period going from 1994 to 2010, we estimate that the employer has benefited from contribution holidays to the cumulative amount of 137 million dollars without taking into account interest on this amount. The employees have received 53 million dollars, 28 million in the form of contribution holiday and 25 million in the form of refund of contributions, while the retirees , with great deception, have received only 27 million dollars.
So these are ways of action that justify our claims established by our actuary, Michel Bédard, in the report reproduced below .
Valeurs estimées au 1er janvier 2011 (A) du 3e versement dû en 2006 et
(B) de remboursements correspondant aux congés de contribution
accordés aux membres actifs en 2007
- Valeur estimée au 1er janvier 2011 du 3e versement dû en 2006, pour les employés et retraités inscrits en 1998
La valeur actualisée au 1er janvier 2011 du troisième versement qui n’a pas été effectué en 2006 se chiffre à un montant estimé à 40,8 millions de dollars, réparti comme suit:
23,9 millions $ aux employés actifs y ayant droit selon les listes de 1998,
15,4 millions $ aux membres retraités selon les listes de 1998, et
1,5 million $ aux membres qui avaient une pension différée à cette même date.
B. Valeur estimée au 1er janvier 2011 (pour les retraités et les "différés") de mboursements correspondant aux congés de contribution accordés aux membres actifs en 2007
La valeur actualisée au 1er janvier 2011 d’un remboursement en faveur des retraités et des membres «différés», correspondant au congé attribué aux employés actifs en 2007, se chiffre à un montant estimé à 7,5 millions de dollars, réparti comme suit:
7,0 millions $ aux retraités ayant ce statut en 2007, plus
500 mille $ aux membres différés en 2007.
Michel Bédard,Fellow de l’Institut canadien des actuaires,
le 2 mai 2012.
On page 2 above we have demonstrated that the 3rd payment could have been made in 2006.
Moreover, herewith interesting facts drawn from an extract of the minutes of the meeting of the Board of Governors held on June 26, 2006. An option was possible to reduce the liabilities and create a surplus of 211 million and be able to pay the 3rd tranche, but it was not chosen. Payment of the 3rd tranche did not seem important in the eyes of the interlocutors, since no one says a word about it.
As for the contribution holiday it would not have occurred had the 3rd payment been made in 2006. Regardless, it was not obligatory as we have clearly demonstrated above. It would have been wise not to take this contribution holiday in order to maintain a better solvency of funds of our Pension Plan. This way, an injustice to the retirees would have been avoided.
We claim, in dollars, the sum of 48300000, for the retirees 22 400 000 (15 400 000 for the 3rd payment + 7 000 000 as compensation for the contribution holiday granted to the employees in 2007), for the employees 23900000, that is the sum due to the employees for their part of the 3rd payment, and for the deferreds 2 000 000 (1 500 000 as their part of the 3rd payment and 500 000 as their part in compensation for the contribution holiday granted to the employees in 2007).
We do not accept the argument that the funds of the plan cannot pay this amount when we know that on December 31 2011, the plan was worth $ 1 325 000000 and that the amount required on January 1st 2011 was only $ 48300000, which is a fraction of 0.0364528308 of the fund.
The total amount to be paid to each retiree and their heirs should be adjusted with the figures of the year 2012.
We ask that the total amount of $ 48300000 be declared, as of the date of the 1st of January 2011, a priority debt or obligation which should be paid in total as soon as there is a surplus or in several tranches as soon as there are successive surpluses and as long as is necessary in order to pay to each person alluded to the total amount that is due to him or her. The Association of Professors Retired from the University of Ottawa requests that the fiduciaries act according to the fundamental principles of justice and equity and that they follow up on our request. That they establish the sums that should be given to each retiree, employee, heir and deferred pension member.
IN CONSEQUENCE, it is moved by B. Philogène and seconded by G. White
That the present resolution be adopted and that it be brought to the attention of the fiduciaries (the members of the Board of Governors), the actuaries, the auditors of the Pension Plan and the members of the Pension Plan Committee of the University of Ottawa, at the same time requesting that they attend to it with the briefest delay.
The following resolution was discussed and approved (1 against, 3 abstentions)
Ottawa, May 23 2012
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