Plan's merger proposal for university pension plans

Over the last few years, the CAAT Plan has been involved in talks with various interested pension plans to discuss their possible merger into the CAAT Plan. As a result of these discussions, the Royal Ontario Museum (ROM) has become the CAAT Plan’s newest participating employer.

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ROM pension merger with CAAT Plan gets greenlight from regulator

(Toronto: December 12, 2016) The merger between the Royal Ontario Museum (ROM) pension plan and the Colleges of Applied Arts and Technology (CAAT) Pension Plan received final approval from the Financial Services Commission of Ontario earlier today.
The approval completes the merger that started on January 1, 2016, when employees of the ROM began contributing to the CAAT Pension Plan and earning valuable and secure pension benefits. The merger is the first of its kind to use Ontario’s regulations permitting single-employer pension plan in the broader public sector to join an existing, jointly governed multi-employer pension plan.

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ROM employees overwhelmingly supported the merger proposal as it offered a cost effective and sustainable way to provide pension benefits. Of the active ROM pension plan members, 97% voted to join the CAAT Pension Plan while no retirees or deferred members voted against the merger.

The transfer of over $100 million in pension assets to the CAAT Plan will fund the pension benefits accrued to December 31, 2015 by the 640 active, retired and deferred pension members from the ROM plan based on the ROM plan provisions.

The merger allows the ROM to exit the increasingly complex pension-management business and focus its resources on operating one of North America’s largest and most prominent museums.

The CAAT Pension Plan is in various stages of merger discussions with five single-employer plans from the broader public sector interested in providing secure defined benefits from a modern, well-managed jointly governed pension plan. The CAAT Plan can accommodate mergers of defined contribution, defined benefit and hybrid plan models. 

As a multi-employer pension plan the CAAT Plan has a lower risk profile than single employer pension plans, such as the ROM plan. The long-established and fully funded CAAT Plan is managed by pension experts and a jointly governed board to provide secure pension benefits at stable contribution rates.

Answers to your questions about the university proposal

The CAAT Pension Plan has been in discussions with interested universities with a goal of merging their pension plans into the CAAT Plan. This would enable university employees to contribute and build retirement income with the CAAT Plan and benefit from a stable, secure pension plan with a strong governance model and a comprehensive Funding Policy. CAAT Plan members would benefit from even greater Plan stability and reduced contribution volatility.

During these discussions, our goal has been to ensure our stakeholders are kept informed about the progress. We recognize that you have questions, and we want to make sure we respond to them. Visit this page often to read the latest information and be sure to sign up for My Pension NewsLink, to get Plan news delivered right to your inbox.

Why is the university merger proposal a good idea?

In the 2012 budget, the Ontario government proposed changes to certain public service industries, including healthcare, education and pensions, in order to improve efficiencies and lower costs. One of the recommendations was that pension plans, especially single employer plans such as those at universities, find ways to improve efficiencies and better manage pension risks. Welcoming university pension plans into the CAAT Plan is a practical solution with benefits for all stakeholders.

Efficiencies and cost savings

The CAAT Plan Board of Trustees and the Sponsors’ Committee reviewed the implications of merging pension plans in the postsecondary education sector and determined that such mergers would be beneficial for a number of reasons.

Efficiencies and cost savings would be realized through the pooling of administration, investment and infrastructure costs. Operating under a jointly-sponsored governance model with a larger membership base with a similar demographic profile would increase stability, help lower contributions and reduce risk.

When like-minded stakeholders combine, a merger is more beneficial. Universities are a natural fit for the CAAT Plan; university and college employees have a similar demographic profile.  Adding universities to the CAAT Plan also affords all members easier portability within the broader postsecondary sector.

The Board of Trustee's objectives

The Board of Trustees has objectives that are at the foundation of every decision made:

  • Limit volatility in contribution rates
  • Limit the need for future contribution increases
  • Remain in a surplus funded position
  • Improve the likelihood of paying conditional inflation protection now and in the future.

Each strategic decision undertaken by the Board is built on these key financial objectives. Growth for the CAAT Plan through university participation will help the Plan continue to achieve all these goals for current and future Plan members.


How will it work?

Over the past few years, the Plan has welcomed new employers that are part of the college system, and this is similar. These new employers will be coming from the Ontario university sector rather than from within the college system. Your membership will remain the same – you’ll continue contributing and earning service in the Plan the same way you do today. Members from university plans who join the CAAT Plan will join as new members and will begin to earn service going forward.

The steps to finalizing an agreement

There are several steps to finalizing an agreement with any university to join the CAAT Plan.

Raise awareness - Universities have been made aware of the offer and understand how it will impact them.

Detailed discussions - Work closely stakeholders including university administration, member groups and Boards of Governors, following the key guiding principles. Discussions are on a campus-by-campus basis, and joining is voluntary for interested universities.

Agreement - Reach an agreement with a given university and its members.

Revise appropriate legislation - The provincial government will need to adjust the Pension Benefits Act to allow the transfer of assets from the university plan to the CAAT Plan.

3 key points and 3 guiding principles for mergers

  1. Equitable treatment for all members
    Equity amongst Plan members is an important principle embraced by the Board of Trustees. This will not change. University pension plan members who join the CAAT Plan will earn pension benefits on the same formula as existing CAAT Plan members.
  2. University employees join the Plan on a future-service basis
    University members can have their past service benefits accrued in their previous pension plan transferred to the CAAT Plan. Where past service is transferred to the CAAT Plan, the Plan will not be negatively impacted as sufficient assets to fund these benefits will also be transferred.
  3. Benefits remain independent from labour negotiations
    The Plan benefits and contribution rates will continue to remain independent from labour negotiations. For some university plans, this move to joint governance represents a change, but it is the foundation of all decisions in the CAAT Plan and has been a critical part of the Plan’s success.

Three guiding principles for mergers

During the course of these negotiations, the Board of Trustees, which is made up of equal member and employer representatives, is guided by three key principles:

  1. Mergers must be in the best interest of the Plan and its members
  2. The CAAT Plan will not assume any university's pension deficit
  3. Sponsors are willing to share governance representation up to a maximum of 50%


What changes for me?  What are the benefits?

Existing CAAT Plan members will continue to make contributions on their earnings, and earn a pension. No changes to the benefit you earned will result from a merger. Your retirement options will not be impacted by this change. For new members from universities, once their pension plan merges with ours, they will enter the Plan as regular members and earn benefits and contribute at the same rate as every other member.

Impact and benefits for existing members and current employers

Colleges and existing members would benefit from lower contribution rate volatility, increased stability, and cost efficiencies that a larger membership base with a similar demographic profile can deliver. The similar demographic and risk profiles of postsecondary plans would also facilitate strong alignment for governance needs and liability and asset management.

  • It improves the timing and likelihood of contribution reductions and limits contribution increases
  • It improves our ability to withstand more adverse economic conditions
  • It improves the likelihood of paying conditional indexation
  • It reduces contribution volatility

Impact and benefits to universities and the government

Universities and their members would benefit from stable contributions and secure benefits. They would see lower contribution rate volatility and increased Plan stability resulting from the larger membership base, dedicated professional management, and exemption from having to fund based on volatile solvency valuations.

  • Being part of a well-governed, well-managed Jointly Sponsored Pension Plan (JSPP) allows, on a cost-effective basis, universities to exit the business of running a single employer pension plan, enabling them to focus on their core business. They would be joining a model JSPP, with permanent exemption from solvency funding.
  • With a pension plan built on a strong jointly sponsored model and established governance structure, these new members would be represented in true joint decision-making.
  • Universities and members will also benefit from the Plan’s expertise in investing, pension administration, communication and risk management.

Government Adding universities to the CAAT Plan would benefit the government by providing a sustainable, long-term solution to future funding issues faced by single-employer university plans.

  • This solution will reduce the risks and costs to all stakeholders including taxpayers and students by improving the sustainability, and reducing costs of pension plans across the postsecondary sector.
  • This change also brings the universities into a JSPP, which the government considers the model for managing risk to help members build appropriate retirement savings, at a reasonable cost.


Who will govern the Plan?

The Plan is jointly sponsored by employers and employees who together share the responsibility for the Plan. This joint sponsorship will continue if universities join the Plan, with some changes to reflect a broader membership. University employers and employees will have a voice in Plan governance, in a way that is respectful of the existing, strong governance model. Colleges and members must appoint at least 50% of the governance roles regardless of how many universities join.

How universities will fit into the governance model

Joint sponsorship continues

The CAAT Plan would offer up to 50% representation from the university sector on the Board of Trustees. That representation would depend on the amount of assets and liabilities being transferred. The more universities that join, the more seats the university sector will have on the governing bodies, with a limit of 50%.

Once a university joins, no matter what the representation on the Board, all members will continue to be protected by the Board’s fiduciary obligation: as fiduciaries, each individual trustee must consider the best interest of all members in their decision-making process.

Funding Policy remains

One of the cornerstones of our effective governance structure and Plan sustainability is the Funding Policy which outlines the decisions the Board makes at various funding levels. The details of the Funding Policy ensure there are no surprises, and helps ensure ongoing contribution and funding stability. Adding new members and employers to the Plan would not change this fundamental decision making document.

In working with universities and their members, the Board of Trustees is committed to act in the best interest of members. The current or projected financial health of the Plan cannot deteriorate as a result of a university joining the Plan. In other words, any university pension deficit will not be assumed by the CAAT Pension Plan and total contribution rates for future service will be the same.

Your Plan won't change but the name will...

  • Once a university joins the CAAT Pension Plan, the Plan will be renamed.
  • The Board of Trustees has already selected the new name - the Ontario Colleges & Universities Pension Plan (O.C.U. Pension Plan.)
  • The new name reflects that the Plan is built on a foundation created by the College system, while becoming available for the universities in Ontario. It also reflects the reality of the postsecondary education marketplace: many Colleges of Applied Arts and Technology have updated their names in past years, to reflect the changing nature of their programs and students.


Where can I find out more?

From newsletter articles to Annual Reports, we've made it our goal to keep you informed. Visit the Background Resources and Q&A page to read what we've previously posted on our website about the university merger initiative. You'll find a video recording and transcript from the May 5, 2014 member webinar, detailed answers to specific questions and links to a variety of resources on our website. If you can't find answers to your questions, please send them to us.

Read more about the merger initiative