ABOUT THE CITY OF SASKATOON SUPERANNUATION PLAN
The City of Saskatoon has unilaterally locked out its transit employees represented by ATU Local 615. The City has also unilaterally imposed new terms on the Pension Plan that affects the rights and entitlements of active members of the Pension Plan. The City has recently sent a “Just the Facts” news release to members that contains incorrect and misleading information.
The ATU is deeply concerned about these changes and this misinformation. This notice sets out some of the key myths and facts about the changes the City has imposed on members.
Myth #1: The City is still providing a defined benefit plan to its employees.
The changes imposed by the City fundamentally change the nature of the Pension Plan from a contributory defined benefit plan, in which the employer is liable for any plan costs not negotiated and paid by plan members to a fixed cost, target benefit type pension plan.
The changes impose the key features of a fixed cost, target benefit plan: they limit or cap contributions to the Pension Plan by the City and employees. If these contributions are not sufficient to meet the needs of the Pension Plan from time to time, the new terms require that future benefits be cut in some way.
The City is incorrect and misleading in calling the amended Pension Plan the same type of defined benefit plan it had in place before. True defined benefit plans have fixed defined benefits and flexible contributions that can increase and decrease as needs require. The new terms the City imposed impose caps on contributions and would require cuts to future benefits in some cases.
It is true that the city cannot reduce past or accrued benefits under these new changes. Retirees pensions and active members past service (also called accrued benefits) cannot be reduced under current legislation. Instead, any future funding problem in the plan will require deeper cuts to future benefits.
In contrast, before these amendments were unilaterally imposed, the City was responsible for paying any extra cost over and above negotiated contributions. The City has shifted this burden onto employees, particularly younger employees who have yet to accrue many pension benefits.
Myth #2: The City has no responsibility for actuarial valuations and no influence over the required contributions to the Pension Plan.
The Pension Plan is sponsored by the City, and the City negotiates contributions to the Pension Plan, as well as negotiating benefits paid under the Plan. It has the ability to agree to pay the costs necessary to maintain the contributory, defined benefit pension plan it has always provided to employees.
The Pension Plan is administered by a Board of Trustees. At least half the trustees are appointed by the City. The City has significant influence over the funding of the Pension Plan by its role as a sponsor and in its power to appoint City representatives to the Board of Trustees. City Manager Murray Totland and Councillor Pat Lorje sit as trustees of the plan. Murray Totland has sat as a trustee over the years since 2000.
Myth #3 The ATU caused an additional $6.7 million deficit in the Pension Plan.
According to the actuarial valuations approved by the Board of Trustees of the Pension Plan (where the City appoints 50% of the Board), the Pension Plan had a $68 million deficit at December 31, 2012. This actuarial valuation included a “margin” or additional money set aside for contingencies. The size of the margin was 10% of all Pension Plan liabilities, or about $70 million. If no margin were employed, there would likely have been no deficit in 2012. The cause of the 2012 deficit was the introduction of a 10% margin.
When the Board of Trustees “updated” the actuarial valuation following negotiations with the other bargain units, the new valuation only used a 5.4% margin. No explanation was given as to why, now, the Board of Trustees determined that only 5.4% was needed, now that other bargaining units had made concessions in bargaining.
Even worse, the June, 2014 update did not reflect positive investment gains during 2013 and 2014, but did reflect the significant concessions made by other bargaining units. If the positive investment gains had been reflected, it is very likely that the Pension Plan would be fully funded today, including a 10% margin.
The City is misleading members when it states that the ATU caused the pension deficit and that radical changes are needed to address the pension deficit. The City is attempting to bargain with the ATU on information that is over two years old and is very misleading. The ATU has had independent advisors including legal counsel review this information and confirm that the Pension Plan is likely to be fully funded today even without any concessions by the ATU.