Extending age limit on UAPP contributions
At the November 30, AUFA general meeting, the AUFA executive agreed to look into extending the age limit at which members can no longer make contributions to the Universities Academic Pension Plan (UAPP).
Link to UAPP: www.uapp.ca
Pension contribution and benefits
Permanent AUFA members contribute to UAPP for up to 35 years, or to the end of the year in which they turn 69 (whichever comes first). Our pension benefits are, in part, based upon the average salary earned during your best-five consecutive years.
Upon retirement (minimum age 55), members can collect their pension. Members must take their pension by the end of the year in which they turn 69 even they continue to work. In such as case, they would receive their salary AND pension.
UAPP Structure
UAPP is a jointly trusteed, defined-benefit pension plan. Both employers and workers make contributions to find retirement benefits. There are two UAPP decision-making bodies: Trustees and Sponsors. Each union and employer have a Trustee and a Sponsor’s Representative.
Trustees are responsible for making sure the UAPP can provide pension benefits to members. AUFA’s Trustee is Lawton Shaw. Sponsors have authority to make changes to the structure of the plan. AUFA’s Sponsor’s Representative is Travis Burwash. Sponsors from the Universities of Alberta or Calgary (either employer or union) each have enough votes to veto changes to the Plan.
History of Issue
The Income Tax Act previously required that pensions commence no later than the end of the year a member turns 69. This is the basis of the current UAPP structure. In 2007, the federal government amended the Income Tax Act to allow contributions as late as age 71. This did not automatically change UAPP’s structure and the age 69 limit remained in effect.
In 2013, the UAPP Sponsor’s Representatives proposed a set of pan design changes, including amending the maximum age from 69 to 71. These changes failed at ratification and the plan stayed as it was. The changes were vetoed by the U of C Board Sponsor. Note: AUFA members also collectively voted against the changes.
Subsequently, AUFA received a further request to change the maximum age. Travis Burwash forwarded it to the Sponsor’s Representatives. Lawton Shaw also brought it up informally with the UAPP Executive Director and other Trustees, some of whom also serve as Sponsor’s Representatives.
The Sponsor’s Representatives took no action on this request. The inaction may reflect (1) the limited number of UAPP members working past 69, (2) the unsuccessful effort to make this and other changes to the plan in 2013, and (3) employers have no interest in paying an additional two years of contributions for members over 69.
Scope and Impact
Presently, the AUFA executive believes there are 14 AUFA members between 69 and 71 (about 3% of the membership). Raising the contribution-age limit from 69 to 71 would affect their total income, and tax paid in a couple of ways.
Prior to taking a pension, pension contributions are deducted from taxable income, reducing tax. If members continue to work after that maximum pension age, they would no longer make contributions, would receive both salary and pension, and would, thus, be taxed at a higher marginal tax rate.
Additionally, by working an extra two years prior to receiving a pension, the member would accrue two additional years of service and extend the “best five years” window by 2 years, thus increasing their future pension benefits.
Analysis
At the November AUFA general meeting, a member requested that the AUFA executive look into extending the contribution-age limit. The executive’s conclusions are:
There appears to be no interest among the “big” sponsors to raise the age limit. This means there is no realistic prospect of change from within the plan.
The Human Rights Act precludes discrimination on the basis of age, but s.7(2) specifically exempts pension plans from this requirement, so there is no legal recourse.
The structure of the plan cannot be collectively bargained because the structure is not within the control of the employer.
Since there is no viable path by which AUFA can achieve the proposed change, the executive voted on December 13 not to take any further action on this matter.
Bob Barnetson
President