Two of our proposals pertain to pensions. First, we propose that the university provide pension plan contribution for all sessional lecturers. Currently the university only pays full compensation (salary plus pension plan contributions) to sessional lecturers with at least 50% workloads. Second, we propose to work out a way for members’ full compensation not to be reduced at age 71, which would happen if the university stopped paying the pension plan contributions at that age.
To understand why we feel so strongly about these proposals it is first necessary to understand how our pension plan works.
At UBC faculty do not have a standard pension. What we call a pension, and what is certainly a pension substitute, is actually a defined contribution savings plan, which is really more akin to a locked-in group RRSP plan. Each year the employer puts a certain percentage of our compensation into the savings plan, and we save a certain percentage of our salary in the same plan. The contributions to the plan are tax deferred, as is any income earned in the plan, just like any other registered savings plan. Unlike a traditional pension, which is both a deferred compensation and an insurance instrument, our plan is a forced savings and investment instrument.
In terms of the University’s financial obligations it makes no difference whether they put some portion of our compensation into our group savings plan, or pay the equivalent amount to us directly, allowing us to put it into our personal RRSPs. And it makes no difference to the university at all how much we contribute to our group savings plan (currently about 5%). Whether we save 5%, 10%, or nothing at all in the plan in addition to the amount the university puts in directly is completely irrelevant to the university, at least in terms of cost.
This is not to take a position on the question of whether members would be better or worse off if all their compensation was paid directly them, rather than having some of their compensation placed directly into a locked-in savings plan. Nor is it to take a position on the question of whether a traditional pension, like the one at U of T, is better than our plan. There is certainly room for debate on those issues but since we have not proposed any changes in our plan, that debate is moot.
The point we want to make is simply this: the university’s contribution to the plan is simply part of our total compensation, and our so-called pension is simply savings. Once that is understood, it is easy to see why this issue is so important to us. Consider Sessional Lecturer A in the Faculty of Arts, who teaches one 3-credit course in each Winter session term and has been placed at step 1 of the minimum scale. Dr. A earns a salary of $6,264 for each of the two courses, or a total of $12,528. Sessional Lecturer B, similarly placed at step 1 of the minimum scale, who teaches two 3-credit courses in one term and no courses in the other term will also receive $12,528 in salary, but unlike Sessional Lecturer A, will receive $1,090 placed into his or her defined contribution savings plan. This is not just inequitable, but arbitrary. (Sessional Instructor C, who teaches the same two courses in the Faculty of Education would be paid only $3,756 per course but that gross inequity is the subject of a different proposal.)
Now consider the case of a full-time member who earns $100,000 a year in base salary. His or her total compensation is $100,000 plus the university’s contribution to the group savings plan, $9,118. Once this member turns 71 the university is no longer allowed, by law, to contribute to either a defined benefit pension plan, or a registered savings plan. If we don’t find a way to ensure that the member continues to receive that $9,118 in compensation he or she will have suffered a cut in total compensation, which is not only inequitable, but a blatant example of discrimination on the basis of age. The law does not require that individuals receive less compensation at the age of 71, only that the compensation can no longer be provided through a pension plan or a registered savings plan contribution. The Association has proposed that full compensation be maintained through the simple mechanism of salary in lieu of contribution to the plan. The fact that this hypothetical member will simultaneously be earning salary in lieu of group plan contributions at the same time he or she is drawing on his or her plan savings is completely irrelevant in the same way that drawing on one’s private RRSP savings should not be taken as a reason for the University to cut one’s compensation.