Hi all,
Some more comments, in particular relating to Natalia Kouzniak's questions yesterday about what the transition costs and buy back plans really are. The answer as Barbara Sanders noted, emphasized also by Ronda Arab is "we won’t have this info until after we join". I am concerned about this, especially to the extent that I see people (e.g. Lynne Quarmby and Nancy Hedberg) casing out scenarios where they buy back years in the DB plan.
To me it seems very clear that we shouldn't expect these numbers to hold even approximately. We saw in 2014-15 that BCCPP was quite willing to say what we wanted to hear (opt out) before a vote, and then take it off the table after the vote. My intuition at the time was that exactly this would happen because in some respects it seemed like a to-good-to-be-true deal (letting people opt out seems like it would lead to a bad result for the pension fund where they take on mostly money-losers) and anyway this is kind of how I expect pension fund managers to work (why I prefer the company of University people).
In part, though, they do have to keep the number a little loose, because with all the talk of 2008, we probably should consider what happens if the next 2008 starts the day after the vote. (Plausible, in my opinion, things do feel bubbly...) So then many of our DC nest eggs drop by 30%, say. But also BCCPP will surely need to adjust the tables up by let's say 20% on top of the 20% they were going to add anyway. So now the 10 years that we thought we were going to buy is more like 5. So if we are going to go through with this, it seems to me that the safety-lovers who want to buy back years is a good idea are going to be sweating for the bubble's continued expansion until the table is locked in and their DC benefits are liquidated.
On that subject, I am very happy to see that Julian Christians mentions the possibility of walking away if BCCPP goes overboard with the changes. This is something I *very much want to see* from SFUFA's team if we do end up at the table with them. I am worried about it because to me, the SFUFA team seems too enthusiastic about BCCPP. In 2015 they did what they had to when the deal changed and walked away, but then the change was so significant that no other action was acceptable.
It looks to me that the issue of negotiation is a strong reason to vote NO if you have doubts. Say we have repeat of the last vote (31% yes, 9% no). The BCCPP negotiators will see that (reported in SFUFA meeting minutes) and then when we ask them if transition costs are $40 million or $10 million, they will be $40 million. And what's an extra 20% on the tables with 77% support? On the other hand, a vote of 31% yes, 30% no looks quite different. It puts Julian in a much better position to say, "look, my membership is concerned about these costs, and they are barely favourable with the preliminary table you showed them. Make it happen or we walk". (And by the way, we should negotiate mainly against BCCPP, only mildly against SFU.)
In fact, I suspect that BCCPP needs us more than we need them, as we would diversify their portfolio within the education sector and arguably add a bit of prestige to their business. Let's say the vote ends up 31% yes, 32% no. I would not be surprised if BCCPP comes back a year later with a better offer (although I'm sure right now they're insisting that they're already doing us huge favours). Maybe at that time we could repeat this exercise with a better offer and a more thorough discussion of the implications prior to the vote.
Besides this issue, I'd like to again mention how useful I am finding all of these comments. I found Barbara's discussion of the fate of the old DC plan in a DB universe extremely informative and mildly alarming, since in some sense it seemed that a big benefit for mid-career people is the ability to be in half in one and half in the other. But I guess it is not so simple.
The fact that it is much easier to get in to the BCCPP than to get out also looks like a very strong reason to vote NO, especially given that it seems like many people are only really starting to think about this but voting has already started. It underlines the significance of the decision, as well as the lack of sufficient information. Like Krishna Pendakur, I believe that this vote is at least as important as unionization and hope that we have 85%+ turnout. On the other hand, the number of things I've learned in this thread shows me in many ways how little I understand this complex question, and it seems to me that I've actually sunk more time into learning about it than several other people have. In many ways I don't see how we can have a well-informed vote at this point.
Random point: Dai remarks that Lynne "*cannot* contribute 10% of your salary to an RRSP". I think this is wrong for the situation described since unused RRSP room accumulates. If she has been passing on contributing for the past 10+ years, then she could presumably contribute 15%+ for the next 10 years if she wants to.
George Kirczenow's question about what happens to phased retirement in the DB plan is another great question that I hadn't thought about at all and doesn't seem to been in SFUFA's FAQ. I would be interested to hear an answer to it. On retirement issues, I liked Barbara's suggestions on how to improve faculty saving rates.
Best regards,
Tamon
________________________________________
From: Julian Christians <julian_christians@sfu.ca>
Sent: November 13, 2018 1:26 PM
To: Natalia Kouzniak; Ronda Arab; academic-discussion@sfu.ca
Subject: Re: Pensions vs. Mortgages
Hi
There is a pension estimator here
https://www.pensionsbc.ca/portal/page/portal/general_pension_estimator/cpp_general_estimator/
that you can use to estimate the impact of various guarantee periods and joint-life vs. single-life options.
The transition costs were estimated by the firm that performs the evaluations of the BC College Pension plan every three years, using our actual age and salary data. The initial, higher estimate was the produced using less data from SFU and simpler calculations.
However, if the transition costs end up being much higher than expected, SFU would not be obliged to join and, in the next round of bargaining between SFU and SFUFA, our bargaining team would not be obliged to accept that these higher costs would be borne by SFUFA members rather than the university.
Cheers
Julian
________________________________________
From: Natalia Kouzniak <kouzniak@sfu.ca>
Sent: Tuesday, November 13, 2018 1:00 PM
To: Ronda Arab; academic-discussion@sfu.ca
Subject: Re: Pensions vs. Mortgages
Hello Ronda,
Thanks for clarification. Interesting enough, your attachment has 2018 numbers indeed. But the posted document with FAQ2(2) on SFU site with resources, still has 2014 data which I was referring to.
If we compare both documents, at the age of 65 buy back costs have increased:
Salary 2014 2018
70,000 17,684 19,549
100,000 25,263 27,927
130,000 32,842 36,305
If the trend continues, a person with 10-15 pre-retirement years will have much less buy-back power.
Also, I still cannot find anywhere costs of joint pension and no confirmation about transition costs.
If you can comment on this, will be highly appreciated.
Thanks a lot.
Regards,
Natalia
________________________________
From: Ronda Arab
Sent: Tuesday, November 13, 2018 12:28 PM
To: Natalia Kouzniak; academic-discussion@sfu.ca
Subject: Re: Pensions vs. Mortgages
The costs on the current, updated FAQs are from 2018, not from 2014. Please see item 11 of the attached FAQs or consult the full web page of information here
http://www.sfufa.ca/current-issues/pensions/resources/
Dr. Ronda Arab
Associate Professor of English
Simon Fraser University
________________________________
From: Natalia Kouzniak <kouzniak@sfu.ca>
Sent: 13 November 2018 11:22:18
To: academic-discussion@sfu.ca
Subject: Re: Pensions vs. Mortgages
Dear All,
My major concern:
a) Transition costs
In 2014, they were announced to be $40,000,000. Now, a consulting company has estimated them to be only $10,000,000, to be absorbed by us within 3 years by taking an additional 1% from our salary (this is not the actual response from the Fund though!) and - please correct me if I am wrong - by excluding the opt-out for anybody. There is no guarantee that it is exactly this lower number, just estimates. And if we say "yes", and then the actual number number turns out to be much higher, after the vote?
b) Buy-back costs
Again, there is only the estimate based on the old data from 2014. What are the exact costs now or what they will be in future (formula?).
c) Joint fees
I could not find anywhere how much it would cost, to include the spouse. Just mentioning that there are additional costs.
During the last presentation in Vancouver, SFUFA representatives promised to try to get the updated numbers *before* the vote. This did not happen. Instead, there was a calculator provided to explain the transition only.
My apologies, if I missed this info though.
Regarding medical benefits: I hope it is possible to re-negotiate with administration those measly $15,000 instead of making it an argument that new plan is better because of better medical benefits, which we do need indeed. Also, our plan with Pacific Blue Cross is not that great. My husband was enrolled in Sun Life and Standard Life earlier where they had much higher allowances for naturopath doctors, acupuncturists, chiropractors etc. with about the same fees. May be it is time to address this issue?
Regards,
Natalia Kouzniak