YUFA
Retirement
Executive Receives Report from Sub-committee on Retiree Benefits Funding
Apr 02 - It is well known that the level and security of YUFA's retiree benefits are inadequate. The issue is all the more pressing as the number of retirees will greatly increase over the next decade.
Since 1996, the YUFA Executive has discussed many ways of improving retiree benefits. In late 2000, the Executive decided YUFA needed to explore new options that might offer a permanent solution to the problem, independent of the Employer's resistance to providing adequate funding. For example, the benefits might be funded through a combination of contributions by active members, retirees, and the Employer (similar to the pension plan but for benefits).
To explore the feasibility of the idea, the Executive struck a sub-committee, which made its final report on 22 April 2002. The sub-committee identified two main options investigate: (1) creating a trust fund that would hold money and would provide benefits to future retirees, and (2) joining the Ontario Teachers Insurance Plan as a group.
With respect to the idea of a trust fund, the sub-committee addressed what seemed to them to be the three primary questions: where would the money come from? what would be the tax implications of various structures and management schemes? and what would be the best use of benefits dollars to be paid from such a fund?
The sub-committee identified and sought actuarial
advice about five potential sources of funding: the YUFA Trust Fund (with
income of about $50000/yr), the YUFA Retired Faculty and Librarian
Benefits Trust Fund (with a principal of over $1 million), contributions
by current YUFA members, employer contributions, premium payments by
retirees themselves.
The most complicated set of questions for the sub-committee arose from the
tax implications of a benefits trust fund for retirees. They quickly
learned from legal counsel that current Canadian tax law does not allow
such a fund to be set up for "non-employees" without attracting
tax unless it is held by a tax-exempt institution such as the University.
So at present an internal fund held by the Employer would be the simplest
and most tax effective solution, but would require the employer's
co-operation. YUFA has recently asked the Employer if they would be
willing to explore this possibility, without either party committing to
acting on it.
Finally, what would be the best use of benefits dollars to be paid from such a fund. The two main kinds of extended health & dental plans are "fixed" - all plan members enjoy the same benefits and "flex"-plan members choose their benefits from a menu within a certain dollar amount. The clear winner in this case would be flex benefits, which tend to be considerably cheaper, although less comprehensive.
As for the option of joining the Ontario Teachers Insurance Plan (OTIP), the sub-committee learned that individual YUFA retirees can join at any time. At this time, it is their understanding that to negotiate group membership, YUFA must be able to guarantee a group large enough to cover the group's projected liabilities.
The sub-committee left the Executive with four recommendations: (1) to explore in more detail the idea of an internal fund for providing adequate and stable funding for retiree benefits; (2) to urge CAUT to lobby for tax law changes that would allow unions to establish benefits trusts for retirees; (3) to continue to explore group members in the OTIP; and (4) to share the results of the investigation with the general membership.
To read the full sub-committee report, click here.