Pension plans at Canadian universities have a combined solvency deficit of $2.59 billion and could face service cuts in order to make up the shortfall, according to a Globe and Mail survey.
The survey of more than 20 Canadian universities shows many of the primarily defined benefit (DB) plans shed a substantial percentage of their value during the 2008 market crash. Pension laws in some provinces will require the university plans to make up the shortfall, a daunting task as an increasing number of plan members move toward retirement.
Among the universities reporting a loss in the survey, University of Toronto’s pension plan lost 29.8% of its value in 2008, and faces an estimated solvency deficit of $1.1 billion.
University of Guelph reported a 2008 loss of 14.9%, and a solvency deficit of $340 million.
On the other hand, while the University of Western Ontario saw a 20.8% drop in value in 2008, the school says its DB plan is fully funded. However, all new employees are being offered a defined contribution plan. The Globe article says that since many of the universities last crunched their numbers before the 2008 crash, deficit figures for many schools could rise even further.
Dalhousie University in Nova Scotia may be one institution where service cuts are inevitable. The university says its plan lost 16% of its value in 2008, leading to a $129 million solvency deficit. Earlier this year, Dalhousie officials asked the government for an exemption to provincial solvency rules that would require a $12 million influx of funds into the plan in 2011 on top of regular contributions, but the request was declined. The province did allow the university to skip its 2011 payment and spread payments over 10 years instead of the usual five. But Dalhousie assistant vice-president Katherine Sheehan says service cuts may still be needed. “The only place that [money] could come from is our operating budget,” she told The Globe.
While Ontario recently temporarily eased pension regulations to allow universities time to recover from the financial hit, University of Toronto officials say they are also facing possible service cuts. The school’s shortfall means it will owe an additional $50 million on top of its regular pension contributions.
After an arbitrator ruled against a proposal to raise premiums for faculty and librarians, Cathy Riggall, the university’s vice-president of business affairs, said service cuts may be its only option, too. Tuition levels and grant funding are under government control so, cutting from its operating budget might be the school’s only option.