When you leave the university you will receive two types of pension, the current plan and the new Target Benefit Plan. Your pension for service accrued up to the date of any change in the plan is protected by legislation and cannot be reduced.
How it Works
A target benefit pension plan is a unique type of pension with similarities to a defined benefit plan, but with a different treatment of surplus and deficits.
- provides a lifetime payment based on a formula, depending on the financial position of the plan
- funded through fixed contribution rates
- risk is primarily borne by the members but this risk is pooled amongst all members, active and retired
The plan is designed to be self-sustaining, but in case of significant surplus or shortfall, adjustments to pension benefits would be based on a set of prioritized, predetermined steps.
Employees and university
Contributions are invested collectively with the risk shared by all of the members
Is based on a formula
How Pension is Calculated
There is a simple formula used to calculate pension.
Best Average Earnings*
months and years in plan
*Subject to potential adjustments, based on surpluses or shortfall in plan
Benefits for Retirees
Plan Surplus or Deficit
What happens if plan has a surplus or shortfall
Because contributions from the employer are fixed, there must be the option to adjust benefits in order to make sure the plan is funded sufficiently. The plan is designed to operate in a greater than fully funded state (110% - 135% funded ratio) on a long-term basis to reduce the likelihood of benefit adjustments either upward or downward.
The following adjustments are built into the governance structure of the plan, so there is a prioritized, pre-determined list of benefit changes the joint governance committee would follow.
BENEFIT ENHANCEMENT ZONE greater than 135%
When the plan’s funded ratio at any particular date exceeds the upper threshold of 135%, the following list outlines the order of benefit improvements that would be contemplated:
- Increase post-retirement COLA to 75% of inflation
- Increase earnings base (i.e. shorten earnings averaging period) for service after such date
- Increase early retirement benefits for service after such date
- Increase post-retirement COLA to 100% of inflation
- Increase past service benefits for actives and/or retirees, as determined by the University and CUPE, and as recommended by the joint committee.
BENEFIT SUSTAINABILITY ZONE between 110% and 135%
When the plan’s funded ratio remains between 110-135% no changes are made to the plan. The plan is designed to remain in this zone or return to it as soon as possible once the benefit changes (enhancement or reduction) are triggered.
BENEFIT REDUCTION ZONE below 110%
When the plan’s funded ratio at any particular date falls short of the lower threshold of 110%, the following list outlines the order of benefit reductions that would be contemplated:
- Reduce post-retirement COLA to 25% of inflation
- Reduce earnings base (i.e. lengthen earnings averaging period) for service after such date
- Reduce early retirement benefits (i.e. increase early retirement reduction) for service after such date
- Reduce post-retirement COLA to 0%
- Reduce earnings base for service before such date (i.e. past service)
- Reduce early retirement benefits for service before such date (i.e. past service)
- Reduce accrual rate for service after such date
- Reduce accrual rate for service before such date (i.e. past service)
- Reduce accrued benefits, including pensions in pay, as determined by the University and CUPE, and as recommended by the joint committee
3 – USask Appointed Trustees
3 – CUPE 1975 Appointed Trustees
- for the first five years of the plan’s existence, all three would be active members of the plan
- after five years, two would be active members and one would be a retiree of the plan
1 – Jointly Appointed Trustee
- trustee would serve as chair of the joint committee
- would not have a vote, except to break a tie among the remaining six trustees