Whatever happened to pension indexation?

Dear colleagues,

We are fast approaching the end of 2020 and yet a fair resolution to the pension improvement negotiated by YUFA with the Employer in 2018 is nowhere in sight.

As many of you will recall, in 2018, YUFA was able to negotiate inflation protection for the “minimum guarantee portion” of our members’ pensions.

As we reported here, soon after bargaining concluded, the Employer claimed that the word “portion” meant something different from what that term had meant in previous usage by the Employer and, more generally, when the minimum guarantee pension benefit is described as a ‘component’ or ‘portion’ of a hybrid pension plan like York’s.

Under this highly unusual interpretation, a mere 0% to 15% of the typical member’s pension would be indexed to the Consumer Price Index (CPI). Further, for many of our members, at the time of their retirement, their money purchase pension amount may be higher than their minimum guaranteed pension amount.

Furthermore, according to this interpretation of the term “minimum guarantee portion,” these latter members will never have their pensions adjusted for inflation. This would nullify nearly all the pension indexation benefits YUFA members thought they had secured when they ratified the 2018-21 Collective Agreement.

YUFA has taken the matter to arbitration, where it still stands after a series of failed attempts at mediation. Members contemplating retirement have contacted YUFA asking whether the matter is likely to be resolved. They are aware that there is a large difference between a pension with inflation protection and a pension that only can grow when the Plan earnings exceed actuarial expectations.

When making their decisions to retire, YUFA members have to give consideration to the fact that there is a strong likelihood that their pensions will lose buying power over the course of their retirement, since their pensions lack the inflation protection provided by CPP pensions and the pensions available to faculty at other universities with hybrid and defined benefit plans (see a further explanation here). Moreover, other benefits (dental, vison, etc.) for retired YUFA members fall well below the coverage levels for active members, which further adds to the financial reservations felt by many of our members when making retirement decisions. YUFA has been unsuccessful in recent rounds of bargaining in convincing the Employer of the value of boosting the level of retiree benefits.

When YUFA negotiated pension indexing, we were not asking for a financial windfall, but rather some recognition for the financial price paid for an agreement we made in 2013 to address the alleged financial troubles of the York Pension Plan. As a result of that agreement, since 2015-16, our members’ pension contributions have increased by approximately 50%, a change that was introduced primarily to resolve a pension deficit that the University claimed was structural, but which proved to be temporary (the Pension Plan has been running surpluses in recent years). At the same time, we also agreed to reduce the amount of pension adjustments that could be linked to plan returns in the early years of retirement.

In the 2018 round of bargaining, YUFA presented an analysis to the Employer that clearly demonstrated that pension indexation would not constitute a new cost, but that it had already been paid for by these changes. Indeed, this has been borne out by the fact that the University’s share of pension contributions has declined significantly in recent years, and especially since the 2013 agreement. For example, between 2005 and 2013, the Employer’s share of overall pension contributions (Employer and Employee combined) ranged between 64% and 76% on an annual basis, even in years when the Plan was in surplus. By 2019, the Employer share of contributions had gradually fallen to a mere 54%. Translated into actual dollars, this difference is enough to pay for the CPI-based indexation of the minimum guarantee portion of our pensions that YUFA is claiming was negotiated between the parties.

Finally, it is ironic that, in recent years, the University administration has voiced such strong concern about the number of faculty who delay retirement, while at the same time it has reduced its investments in the kind of pension and retiree benefit provisions that might incentivize some of those same retirements. Unfortunately, the arbitration hearings for our pension grievance will not take place until March, April, and June of 2021. YUFA will keep members informed of the results of that process.

For members who would like a full description of how our pension plan works, including a section on the impact of not having inflation protection, please check out our Pension Plan Primer.

For more information, please email yufa@yorku.ca.