YUFA
Retirement
York Pension Plan Primer
by Al Stauffer, with input from Walter Whiteley and Arthur Hilliker
18 Jan 12 - What follows is a brief description of the York Pension Plan for active members of the Plan.
The York Pension Plan (YPP) is common to all employee groups of York University. Although all monies in the Pension Fund are pooled for investment purposes (along with funds for pensions of retirees), there are three separate types of funds associated with individual pre-retirees, for actuarial purposes:
- Individual Money Purchase Accounts (MPA)
- Minimum Guarantee Fund (MGF)
- Non-Reduction Reserve (NRR)
The amount deducted from your salary for the YPP is credited to your MPA. The Employer contributes an amount equal to 103% of your contribution to this account. Upon retirement, if you take a pension from York, 3.5% (soon to be 6%) of the money in this account is transferred to the Non-Reduction Reserve. The remainder is used to provide you with a calculated Money Purchase retirement pension. The amount of your calculated Money Purchase pension is based on your age at retirement and spousal arrangement and is calculated assuming a return of 6% on the remaining funds in your MPA.
If this Money Purchase pension is less than the Minimum Guaranteed Pension (which is based on the number of years of your service at York and on the average of your five highest salary years), you receive additional payments from the MGF to make up the difference. This comes from the Minimum Guarantee Fund. Currently, a large percentage of York employees, who are near retirement, are projected to receive these additional payments.
The Employer is responsible for ensuring there are sufficient funds in the Minimum Guarantee Fund and for making up any shortfall in the Non-Reduction Reserve.
If the annual returns on the pension funds exceed 6% (on a four-year average basis), your pension is increased. However, if the returns fall below 6%, your pension is not decreased. The difference is made up from the Non-Reduction Reserve. Even though your pension is not reduced, the shortfall is tracked (the “Shadow Pension”) and you only receive increases once the shortfall is made up.
Currently, the MGF and NRR do not have sufficient funds to meet assumed liabilities for future retirees. By law, the Employer must make up these deficits over a fifteen year period. The Employer must start making larger payments to reduce these deficits in 2012. Click here for details of these deficits.
There are currently discussions underway with the various employee groups about modifications to the YPP to help reduce these deficits – but with the ongoing goal of preserving all key benefits.