Highlights of Key Terms between the Plan SponsorsPosted: October 24, 2012
The plan sponsors (OPSEU and the Government of Ontario) have agreed to freeze pension plan contribution rates and benefit improvements for five years, except in exceptional circumstances. The freeze period runs from December 31, 2012 to December 30, 2017.
- Any contribution increases currently scheduled to occur will continue as planned. OPTrust does not have any further contribution increases scheduled.
- Benefit improvements can only be made if the Plan remains 105% funded after the improvement
- If benefits are reduced as a result of the agreement, they can only be restored if the Plan remains 100% funded after the restoration.
- The OPSEU Pension Plan has full indexation. However, if there were ever to be ad hoc indexation, it would continue so long as it did not bring the Plan's funded status to below 100%.
If, during the freeze period, a draft valuation identifies a funding shortfall, it will be addressed as follows:
There will be no contribution increase during the freeze period, except in exceptional circumstances.
- Future benefits may be reduced to a maximum of 20% of the total value of future benefits determined at the date of the benefit reductions based on the Plan provisions in effect on December 31, 2012.
- The effective date of any future benefit reductions will be no later than the earlier of:
- two years following valuation date of the filed actuarial valuation, or
- December 30, 2017.
- No accrued benefits will be reduced.
- Once the benefit reduction limit has been reached, the Sponsors will return to their usual methods (e.g. contribution rate increase and/or benefit reductions).
What Happens at End of the Freeze Period?
At the end of the freeze period, the Letter of Agreement expires and any actions associated with it. In the event of a surplus, the Union sponsor will receive priority for use. The surplus may only be used to restore benefits that were reduced during the term of the agreement, provided that the restoration will not reduce the Plan's funded status below 100%.
- The Ontario Government will amend the Regulation 909 of the PBA to allow for a four-year valuation cycle, subject to:
- at least one valuation filed during the freeze period
- there are no more than four years between the valuation dates and filed valuations
- any benefit reductions filed during the freeze period are implemented according to the General Principles.
- OPTrust will cooperate with Letter of Agreement by preparing the draft valuation, filing the valuation, and applying for any necessary extension for filing.