St. Michael’s Pension Plan

As you already know the St. Michael’s Pension Plan benefits are considerable different than the pension benefits provided at the U of T or Victoria U.

One of the major differences is the way in which your retirement pension benefits are calculated. As you may already know the benefits are calculated on a percentage of your earnings up to the Years Maximum Pensionable Earnings (YMPE) and a percentage of your earnings over the YMPE.

Currently at St. Mike’s the pension benefit is based on 1.5% of your earnings up to the YMPE and 2% of your earnings over the YMPE. However this formula only applies to pensionable service earned after July 1, 2000. For pensionable service earned before July 1, 2000 the formula is based on 1% of your earnings up to the YMPE and 2% of your earnings over the YMPE.

The current step in the pension benefit formula provides a smaller pension than if the 1.5-% applied to all years of pensionable service. The Union proposed to eliminate the step in benefit calculations and base the benefit calculation on 1.5% up to the YMPE for all years of service. Earnings above the YMPE would still be calculated at 2%.

The following example will illustrate the effect the different formulas will have on your pension benefits.

	Current Formula		Proposed Formula
Average YMPE	$38,333		$38,333
Earnings up to the YMPE	Before July 1, 2000 1%	After July 1, 2000 1.5%	1.5%
Earnings above the YMPE	2%		2%
Benefit Calculations
Member 1 with 10 years (as of July 1, 2002) pensionable service and average earnings of $45,000	38,333 X 1% X 8 yr. $3066.64	38,333 X 1.5% X 2 yr. $1149.99	38,333 X 1.5% X 10 yr. $5749.95
	45000 – 38333 = 6667 6,667 X 2% X 10yrs $1333.40		45000 – 38333 = 6667 6,667 X 2% X 10yrs $1333.40
Total Annual Pension	$3066.64 + $1,149.99 + $1,333.40 = $5,550.03		$5749.95 + $1,333.40 = $7,083.35
Member 2 with 25 years (as of July 1, 2002) pensionable service and average earnings of $45,000	38,333 X 1% X 23 yr. $8816.59	38,333 X 1.5% X 2 yr. $1149.99	38,333 X 1% X 25 yr. $14374.87
	45000 – 38333 = 6667 6,667 X 2% X 25yrs $3333.50		45000 – 38333 = 6667 6,667 X 2% X 25yrs $3333.50
Total Annual Pension	$8816.59 + $1,149.99 + $3,333.50 = $13,300.08		$14,374.87 + $3,333.50 = $17,708.37

The proposed new pension formula would provide a 27% in crease in pension for a member with 10 years of pensionable service and a 33% increase in pension for a member with 25 years of pensionable service.

The University would have you believe that they cannot afford such an improvement in the pension plan. This is just simply not true!

The University has acknowledged that the pension plan currently has a surplus in excess of 3 million dollars. They have also acknowledged that the change in benefit formula for all plan members, including approximately 30 non-bargaining unit members, would use just over 2 million of the surplus. In other words the surplus money in the pension plan would pay for the improvement. This improvement will not cost the University anything at all.

How did the pension plan get into a surplus position?

A pension plan will end up in a surplus position when the return on investment has been greater than expected for a number of years. Your contributions to the pension plan have earned a higher rate of return than expected and have helped contribute to the surplus in the pension plan.

Why does the University not want to make this improvement?

The University does not want to make this improvement because they want to keep the surplus in the pension plan so that they can use it to offset their contributions to the pension plan. The University does not want to contribute any money to the plan during the term of this agreement. However they still want plan members to contribute to the pension plan during the term of this agreement.

The pension plan improvements that have been proposed by the Union are sound proposals. They will significantly improve your retirement benefits without creating an undue hardship on the University.