U of W owes province $8.8M for vanished pension surplus

Superintendent of pensions overrules university pension agreement

The University of Winnipeg is looking to increase revenues and reduce operating budget costs over the next 40 years to pay back an $8.8 million provincial government loan.

The university applied for the loan after the Manitoba Pension Commission ordered it to distribute surplus funds to members of the 2001 pension plan agreement.

Mary Anne Walls, the U of W’s benefits administrator, oversees all benefits and pensions for university employees and says the issue has a long history. She explained that in the 1990s, the defined benefit pension plan – a pension shared by the university and its employees – had an immense surplus. When a pension’s surplus reaches a certain point, the Canada Revenue Agency requires that something be done with that surplus.

In 2001, the pension committee – which included the board of regents, members of administration and university employees, including the faculty association union, the support staff employees’ union, the engineers’ union, but not administrative staff – agreed to share the surplus. Both the university and the other members of the pension committee each received an initial payment of $3 million.

But after 9/11, when the investment markets crashed, the remaining surplus diminished. By the end of 2002, the surplus was completely wiped out.  As a result, in 2003 the university and the other members of the pension committee unanimously agreed that both parties would not receive the remainder of their surplus entitlement, as the funds were no longer available.

“In essence there was $6.4 million that wasn’t distributed to the defined benefit members or to the university,” said Laurel Repski, vice-president of human resources, audit and sustainability at the U of W.

After this agreement was made, the pension committee put the issue to rest.

“All the parties considered it to be finished business,” said Walls.

But business was far from being finished.

In late 2006, after a lengthy review process, the superintendent of Pensions Manitoba overruled the pension committee’s agreement and demanded that the university pay out the remaining surplus.

“They made the determination irrespective of the university’s ability to pay,” said Repski.

The university appealed the order in 2008, but the appeal was denied. The university took the case to the Manitoba Court of Appeal in January 2009, but once again the appeal was denied.

Currently, the university is devising strategies to come up with an additional $600,000 a year to put towards paying off the loan.

Although the office of the superintendent of pension commission would not speak specifically of the order, the office did say in an e-mail that orders are made if pensions or the way they are administered breach the Pensions Act.

Mike Emslie, U of W’s controller and executive director of financial services, said that although next year’s budget is still being prepared, the university is working hard to make cuts that will not have detrimental effects for students.

“It is our goal to make sure we are minimizing the negative impact on the student experience,” he said.

Published in Volume 64, Number 19 of The Uniter (February 11, 2010)

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