To: All members of the Contributory Pension Plan of the Ontario Northland Transportation Commission (Ontario Registration Number 0355164)
The Ontario Northland pension plan is currently underfunded due to losses sustained by the fund during 2008-09 and historically low interest rates which increase the liabilities of the pension plan. As a result of the funded position of the plan, Ontario Northland and its employees resumed contributing to the fund on January 1, 2010. In 2011 Ontario Northland is expecting to contribute about $29.1 million into the pension fund while employees will contribute about $3 million.
Contributing $29.1 million per year is not sustainable for Ontario Northland as it represents about 47% of total payroll. The province has recognized the challenges faced by various public sector employers and has provided an opportunity for companies like Ontario Northland to reduce their pension contributions by applying for a funding relief program. This opportunity will save Ontario Northland about $19.8 million per year in contributions. To qualify for these savings Ontario Northland must do the following:
- Communicate with collective bargaining agents
- Communicate with all employees
- Apply for the funding relief
We will apply by the end of the year and it is expected that we will know by mid February 2012 whether we have been accepted into the funding relief program. If accepted we will be required to review the pension plan and develop an approach to reduce the annual costs of the pension plan. We will effectively have about two years to develop the plan and make progress towards implementing cost savings. We understand that the cost savings will then have to be fully implemented within another five years.
In reviewing the plan and developing cost savings it is important to note that legislation governing pension plans have clear rules that protect pension benefits accrued to the date of any change. Accrued, vested benefits may not be reduced and no changes can be made for current retirees. Cost savings can be generated by increasing employee contribution rates, changing some of the plan design features, or by changing the governance of the plan to a jointly sponsored pension plan.
We will be using the period of reduced payments to review the plan, identify potential cost savings, and seek input into potential changes to the plan to ensure the continued sustainability of the pension plan. As we move through this process you will be kept informed of our progress.
Frequently Asked Questions about the Pension
Amendment and Plan Documents