Pension plan problems

University staff could face funding shortage unless a fix is implemented

ROMER BAUTISTA STAFF

A letter regarding how the University of Manitoba’s pension plan could face a funding shortage in the future was sent out to the university’s employees early this month, according to Leah Janzen, communications manager at the U of M.

The letter, which the 4,500 employees at the U of M received, outlined the two pertinent factors that have contributed to the plan’s troubles, the first of which is longer life expectancies.

“For whatever reason, professors at the university are living about one per cent longer than the average Canadian,” Janzen said.

Because of this, pensioners are at a serious risk of outliving their pensions.

The second problem facing the pension plan is a decrease in interest rates and investment returns. According to Janzen, the pension plan, which contains a mix of different bonds and equities, has seen its returns dip from over 11 per cent in the early ’90s to an expected return of just six per cent this year.

While these problems are unlikely to affect current employees’ pensions, future employees are could receive smaller pensions, unless the university finds a way to get the plan back to past levels.

“We’re currently discussing a couple of options with employees,” Janzen said.

One option being discussed is cutting back on retirement benefits. This would include smaller payouts and fewer fringe benefits. As it stands, for every $100,000 put away a pensioner will collect $557 a month, if retiring at the age of 55. That value is bumped up to $674 a month if the employee chose to retire at 60.

Another option given to employees is to increase contributions, both by employees, and by the university. Currently, the university matches payments made into the plan by employees, dollar-for-dollar.

“A university facing pension plan problems is not an uncommon problem in Canada,” Janzen said. Concordia University and the University of Toronto have faced similar pension plan crises in the recent years.

The University of Winnipeg faced a similar funding shortage in 2004. According to a report by the National Post, the U of W’s pension fund was nearly $15 million in debt. To solve the problem, the U of W decided to increase its funding levels. That, along with a rise in the stock market, has seen the debt level of the pension plan fall to just $6 million. The U of W hopes to be fully funded in the near future.

Talks between U of M officials and the University of Manitoba Faculty Association continue, but no timetable has been set on when a decision will be made.