Employer's Unilateral Changes to Portability Provisions of York Pension Plan

Richard Wellen, YUFA President

Members of the York University Pension Plan (YUPP) have always had a number of options for how their pension would be paid upon retirement. One such option includes the right to transfer the “commuted value”—or monetary equivalent—of one's pension entitlement out of the plan entirely. However, on December 11, 2014, the employer announced that it had unilaterally changed the administration procedures for the York University Pension Plan (YUPP) so as to remove this option for members who had already reached age 65. A number of our members who were counting on exercising this option have been affected. Nevertheless, the employer cited technical changes to the Pension Benefits Act (PBA) that allegedly required them to do this.

YUFA filed a grievance regarding this change in February 2015, demanding a restoration of the right to transfer after age 65. Among other things, we argued that our collective agreement requires that a change to the terms of the YUPP can only be made with the consent of YUFA and that changing the portability provisions requires a change to the plan text (see article 26.02 of the YUFA collective agreement) and is not simply a matter of plan administration. We also claimed that members of the All University Pension Committee (AUPC), which also includes members of York's other employee groups, were neither adequately consulted nor given an opportunity to present alternatives, as required by the 2013 changes to the governance rules of the YUPP.

The employer did not respond to our grievance until June 16, 2015. They have argued that they are within their rights to take this unilateral step to prohibit transfers from the Plan for those over age 65 on the assumption that the 2012 changes to the Pension Benefits Act excludes—apparently inadvertently—those over age 65 from transferring the commuted value of their entitlement to another registered vehicle. They say they were only recently made aware of the requirement after consulting with their pension advisors.

It is important to note that both the administration and York's unions have written to the Government of Ontario requesting a change in the legislation. In the meantime, there seems to be some uncertainty within the government about the meaning of the 2012 changes to the PBA. The Ministry of Finance is responsible for proposing changes to the PBA. The Pension Policy Branch usually takes the lead in drafting changes to the PBA. The pension regulator is the Financial Services Commission of Ontario (FSCO). While the Ministry of Finance is responsible for introducing changes to pension legislation, it is FSCO’s job to interpret and apply the legislation. It is our understanding that FSCO has unofficially communicated that the transfers at age 65 and over are prohibited, but we have no direct knowledge of such communications.

Normally, if an amendment to the PBA has unintended consequences, the Ministry of Finance would take action to correct the error. However, in this instance, the Ministry of Finance has not taken action since there is no clear consensus within the Ministry that the unofficial FSCO interpretation is correct. The Ministry appears to have concluded that there is no problem with members of defined contribution plans transferring out entitlements after age 65 under the PBA because these members are not included in the definition of “retired member” under the PBA. But the Ministry has not actively considered the impact on a hybrid plan such as YUPP which may not be assisted by PBA provisions applicable only to defined contribution pension plans. (The YUPP is a hybrid pension plan, sharing features of both defined benefit and defined contribution plans). Further, the Ontario Government has introduced the payment of variable benefits from defined contribution plans as part of its 2015 Budget. The proposed changes would allow payment of benefits from defined contribution plans and transfers of account balances from that type of plan at any time post-retirement to a registered vehicle (e.g. another pension plan, a registered savings vehicle or an annuity). Consequently, there is no incentive for the Ministry to take action at this time since they do not perceive the existing and proposed legislation as problematic.

The situation described above involves some unusual regulatory issues and also some important questions about the governance of our Pension Plan. The grievance process we have initiated continues to proceed slowly. In spite of this, YUFA's position remains that the YUPP should not be amended or administered to prohibit post-65 transfers, especially in view of the lack of regulatory intention and clarity regarding this matter. As such, we continue to seek the following remedy: any member that has had a transfer prohibited since the unilateral implementation of the freeze on post-65 transfers would be made whole, that is, the member should be able to transfer funds and recover any loss that has been caused by the delay in the transfer.

We will provide further updates as we continue to seek this remedy. If you believe this contested change to the YUPP affects you, please contact the YUFA office.