Report to/Rapport au :

 

Council / au Conseil

 

November 22, 2006 / le 22 novembre 2006

 

Submitted by/Soumis par:  Greg Geddes, Chief Corporate Services Officer/Chef des Services généraux

 

Contact Person/Personne ressource : Lois Pearce, Director, Employee Services

/Services aux employés

(613) 580-2424 x14946, lois.pearce@ottawa.ca
 

 

 

 

Ref N°:ACS2006-CRS-EMP-0009

 

 

SUBJECT:

OC TRANSPO PENSION PLAN – PRE 1981 SERVICE BENEFIT ENHANCEMENT

 

 

OBJET :

Régime de retraite d’OC Transpo – Majoration des prestations pour services antérieurs à 1981

 

 

REPORT RECOMMENDATION

 

That Council approves the funding mechanism for the OC Transpo Pension Plan pre 1981 service benefit enhancement as outlined in this report.  The funding was previously approved during the ATU 279 contract negotiations.

 

 

RECOMMANDATION DU RAPPORT 

 

Que le Conseil approuve le mécanisme de financement de la majoration des prestations pour services antérieurs à 1981 du régime de retraite d’OC Transpo, tel qu’exposé dans le présent rapport. Ce financement a déjà été approuvé lors des négociations contractuelles de la section locale 279 du SUT.

 

 

BACKGROUND

 

The Ottawa-Carleton Regional Transit Commission Employees’ Pension Plan (OC Transpo Pension Plan) was established on September 1, 1951 to cover all OC Transpo employees, regardless of their union affiliation.  Employees hired prior to 1999 accrued pension benefits under the OC Transpo Pension Plan.  Effective January 1, 1999, OC Transpo adopted the OMERS pension plan for all employees and new hires to accrue future pension benefits. Today, members retiring with both pre 1999 and post 1999 service receive pension incomes under both plans.

 

During the ATU 279 collective agreement negotiations, tentative agreement was reached to provide a pension benefit improvement to the average earnings formula for all OC Transpo plan members. Before the amendment, the OC Transpo Pension Plan benefit for service before 1981 was capped using the earnings from 1996-2000.  This caused retirees earning higher incomes after January 1, 2001 to be disadvantaged by not having their full pre-retirement earnings used to calculate their entire pension benefit.

 

On December 6, 2005, Council ratified the ATU 279 collective agreement, including the pension benefit improvement to the average earnings formula for all OC Transpo Pension Plan members.

Since then CUPE 5500 and ATU 1760 have also settled their collective agreements to include the pre 1981 pension service amendment as their members are also members of the OC Transpo Pension Plan.

 

Therefore, effective January 1, 2006, all retirees with pre 1981 service who retire after January 1, 2001 will have their pension benefit adjusted to reflect their best 60 consecutive monthly earnings for all years of service.

 

All unrepresented members of the OC Transpo Pension Plan, consisting of MPE, non-union/non MPE employees from the Supervisory & Administrative Support (SAS) group, in addition to other OC Transpo plan members who have moved to other City departments are also included under this enhancement.

 

 

DISCUSSION

 

During the final negotiations with ATU 279 in December 2005, this issue went before Council at an in camera session and a full discussion took place. Council agreed to the pension plan enhancement with the ratification of the ATU 279 collective agreement.

 

This will result in a recalculation of pensions paid from January 1, 2006 for individuals who retired after January 1, 2001.

 

This amendment will have an impact on the liabilities of the plan and will require additional contributions by the City to pay the enhanced incomes to retirees and the future pension benefit costs of new retirees with pre 1981 service under the OC Transpo Pension Plan.  These contributions will be funded from the Transit Reserve Fund in the amount of  $2.0545 million per year for the next 5 years.

 

The pension plan text will need to be amended and documents filed with the Office of the Superintendent of Financial Institutions (OSFI) and the Canada Revenue Agency (CRA) by the end of 2006.

 

In addition, a by-law needs to be approved by Council to amend the pension plan.

 


 

CONSULTATION 

 

The Employee Services (ES) Branch worked with the plan actuary (Watson Wyatt) to confirm with OSFI and CRA the requirements to implement this change to the OC Transpo Pension Plan. 

 

 

FINANCIAL IMPLICATIONS

 

The initial funding estimate for the ATU 279 negotiations included the cost for all plan members of the OC Transpo Pension Plan.  A cost certificate will be filed with the amendment to amortize the funding cost of $8.89 million over 5 years, equivalent to $2.0545 million per annum starting in 2006.

 

The funding for this amendment will come from the Transit Reserve Fund.

 

 

DISPOSITION

 

Council approval is required for this report and for a by-law on December 14, 2006.

 

Council confirms the delegation of authority to the Chair of the Pension Administration Committee (PAC) to complete the necessary documentation with the pension authorities and to make the required funding payments from the City to the OC Transpo Pension Plan.