UW Gazette, May 7, 1997

     There is so much money in the UW faculty and staff
pension fund that something has to be done to shrink it,
and the first step is a reduction in the premiums paid by
staff and faculty members.
     UW itself, which puts $1.33 into the pension fund for
every $1 paid by individuals, will also benefit from a
reduction over the next three years.
      "Chances are, if no action were taken, the university
would be forced to stop contributing to the fund," provost
Dr. Jim Kalbfleisch told the senate finance committee on
April 17.
     He said the fund, which recently passed half a billion
dollars in assets, had a surplus of $37.7 million as of
January 1, after two years in which its investments brought
returns of 17 per cent and 20 per cent. If that kind of
thing continues, the fund will soon bump into a limit set
by the federal government, which doesn't allow a registered
pension fund to have a surplus greater than 10 per cent of
its liabilities. In UW's case that would be about $46
million.
     Kalbfleisch, who spoke about the pension situation as
part of his 1997-98 budget presentation, said the pension
and benefits committee - which he chairs - is taking two
approaches.
     y First is the pension premium reduction, which he said
had been recommended unanimously by the P&B committee. At
that time it wasn't final, but official approval was given
April 22 by the board of governors executive committee.
     Staff and faculty currently pay between 4.8 and 6.5
per cent of salary into the pension fund; the temporary
reduction will mean another 2 to 3 per cent in people's
take-home pay for the three years. The university will
continue to match individual premiums at a rate of 133 per
cent, but cutting the rate in half will save the budget
some $3.3 million this year.
     y Second, "possible pension plan improvements are under
discussion" by the committee, Kalbfleisch said.
     "It's very tricky to find pension improvements that
will benefit everyone," he noted. But it may be possible to
tinker with the formula by which the "standard form" of a
new retiree's pension is calculated, and the committee is
also looking at "what sorts of early retirement
enhancements might be possible".
     In a memo that followed the board executive meeting
late in April, Kalbfleisch told the campus that some other
savings on benefits will also put money into faculty and
staff pockets.
     The text of his memo:
     "I am pleased to report that recent claims experience
in both our Long Term Disability and Group Life Insurance
plans has been quite good. As a result, the LTD premium
paid by employees is being reduced from 1.17% of salary to
0.75% effective May 1, 1997. Group life insurance premiums
were reduced last September, and for the next few years the
employer premium will not be a taxable benefit to
employees.
     "Pension Fund investment returns of 17% and 20% in the
past two years have produced a funding excess of more than
$37 million at the end of 1996. This is in addition to the
funds required for the Special Early Retirement Program
(SERP) during 1996. The funding excess will likely grow in
1997 because the actuarial valuation uses a three-year
average rate of return. If the funding excess were to
exceed $47 million, legislation would require UW to stop
contributing. The Pension and Benefits Committee has
concluded that part of the funding excess should be used to
reduce contribution levels, and part to improve future
pensions.
     "Yesterday, the Board of Governors Executive Committee
approved a P&B Committee recommendation to reduce pension
contribution levels by half, starting May 1, 1997. The
reduction is for three years, subject to annual review by
the P&B Committee. It will save pension plan members
between 2.4% and 3% of salary annually, with no effect on
the pension benefit accrued. The University will contribute
133% of aggregate employee contributions as previously
agreed, but because aggregate employee contributions are
lower, there will also be savings of $3.3 million in the
operating budget. This will help prevent further budget
cuts and loss of faculty and staff positions.
     "The P&B Committee is discussing possible pension
improvements, and plans to make recommendations to the
Board of Governors in October, with changes being
retroactive to May 1, 1997. I encourage you to discuss your
suggestions with members of the Committee, or send them to
Trenny Canning, Secretariat, NH (e-mail: tcan
ning@secretariat.uwaterloo.ca)."
     Here's a list of the P&B committee members:
     Lorraine Beattie, staff association, ext. 2618
     Trenny Canning, secretary, ext. 5924
     Stephen Cook, staff association, ext. 2027
     David Dietrich, resource person, assistant director of
human resources, ext. 3911
     Dave Forrest, Canadian Union of Public Employees, ext.
3651
     Art Headlam, retirees' association, ext. 6750
     Dennis Huber, associate provost (general services and
finance), ext. 6828
     Jim Kalbfleisch, chair, vice-president (academic) and
provost), ext. 4766
     Ramesh Kumar, faculty association, ext. 2644
     Paul Mitchell, board of governors
     Harold Nudelman, consulting actuary, W. M. Mercer Ltd.
     Frank Reynolds, faculty association, ext. 5540
     Catharine Scott, associate provost (human resources
and student services), ext. 3186
     Kirti Shah, faculty association, ext. 5539
     Paul Spafford, board of governors
     Don Strickler, St. Jerome's College, 884-8110
     Gary Waller, associate provost (academic and student
affairs), ext. 4411