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The Retirees' Newsletter

The Faculty and Librarian Retirees' Association, University of Windsor, Windsor, Canada

Issue # 21 -- February, 1997

MANY OF OUR MEMBERS STILL REELING AFTER ABRUPT GRAB-BACK

RETIREES ON THE GUARANTEED MINIMUM

STAGGERED BY 2 ½ PER CENT FIASCO

AS EARLY AS OCTOBER The Newsletter reported that, under the new agreement, there would be a 2.5 per cent increase in the Minimum Guarantee. For those retirees receiving their Minimum Guaranteed pension ­ some 50 per cent of the total ­ this was expected to result in an immediate 2.5% increase in their pensions, retroactive to July 1st.

ACCORDINGLY, on December 13^th, the administrator of our pension plan, Canada Trust, sent one-time cheques to many of those on the Guaranteed Minimum to cover the retroactive portion of their increase, and also included in their December pension cheques the full amount of the monthly increases... It seemed just like a jolly Merry Christmas wish. Right? Wrong. Read on.

A month later, on January 13^th Canada Trust came calling again. This time, in a letter to the same people, Canada Trust advised that the increase had been "due to an administrative error...(it)was inadvertently processed and should not have occurred, nor should the associated one time retroactive payment have been issued". So much for good wishes!

But not to worry, said the good folks at Canada Trust. "Fortunately (sic) we were able to correct your gross pension amount for January 1, 1997... and we will be withholding (these overpayments) from your February 1, 1997 payment in order to recover these funds". (Not even a P.S., "Hope you didn't spend all the extra over the holidays!").

HOW DID SUCH A FIASCO HAPPEN?

IT'S HARD TO SAY how it happened, or to make good the upset it caused for so many. But here is what we have been given to believe is the background:

IN THE NEGOTIATIONS, it was found necessary to reduce the accumulated surplus in the pension fund. Quite logically, the preferred method of doing this was to distribute the surplus among those who had contributed to it, which clearly included the retirees. An across-the-board increase in all retirees' Minimum Guarantees was seen as a way to convey to retirees their "share" of the surplus. This appears to have been accepted by both sides in negotiations.

THE FLY IN THE OINTMENT was a ruling by none other than Revenue Canada. The University's actuaries, Mercer Limited, state that they pointed out this ruling to the University on August 14^th, 1996. (See letter reprinted in the next column). In November the actuaries again pointed out that there would be a problem in the case of "some of the faculty pensioners".

BY EARLY NOVEMBER it had become clear that the problem was indeed going to be a real one, heightened by an apparent insistence in negotiations, that the FULL 2.5% increase be given to ALL retirees receiving their Guaranteed Minimum, irrespective of the actual c-o-l increases received since retirement, versus actual increases in the Consumer Price Index.

The university says it instructed Canada Trust by telephone in early November to put everything on hold. Clearly that didn't get done, and ­ well, see above.

MERCER AND REVENUE CANADA

Below is an extract from a letter from Mercer to the University dated Nov. 5, 1996:

"As indicated in our letter of August 14, 1996, some of the Faculty pensioners cannot receive an immediate increase due to Revenue Canada restrictions. Revenue Canada does not allow a member's pension to increase more than the cumulative increase in the Consumer Price Index (CPI) from the member's date of retirement... A member restricted by Revenue Canada would not receive the full 2.5% ad hoc increase.

"The following is an example:

"A member who retired July 1, 1995 will receive a regular scheduled increase effective July 1, 1996 equal to 100% of CPI. Therefore, a further increase of 2.5% would result in a total increase greater than 100% of CPI which is not allowed by Revenue Canada."

(Emphasis added)

THE CURRENT POSITION

The Faculty and the University have now filed a joint appeal to Revenue Canada against the ruling, on the basis of equity. There is no indication of when a disposition of the appeal can be expected. Both parties have expressed confidence that retirees will ultimately receive an equitable share of the pension surplus that is being distributed.

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