Memorandum of Understanding
Re: Payment of Administrative Expenses Associated with the Pension Plan from the Pension Plan for Salaried Employees of McMaster University including McMaster Divinity College

After the Ontario Court of Appeal issued its judgement in 1995, the President of the University established a Working Group to make recommendations regarding the Pension Plan text and associated matters to implement the court's judgement.

Inter alia, the Working Group recommended Pension Plan text changes that were approved by the Board of Governors in October 1996 and a revised Pension Trust Committee that was approved in December 1997. As a result of its discussions the Working Group reached agreement on the payment of expenses from the Pension Plan (as provided for in Section 14.03) which is recorded here and agreed to by the parties. We encourage practices that make the administration of the Plan cost-effective and this should be a factor in the decision to provide service internally or externally.

"The Pension Trust Committee shall...

Monitor at least annually the administrative expenses paid from the pension plan, and determine whether they are appropriate. Changes in the nature and structure of administrative expenses paid may be approved by the Board of Governors only if recommended by the Pension Trust Committee as a result of a ballot of all members."

[BOG Bylaw 1, Sec. 14 (3,g), item 7]
["all members" means "all members of the Committee"]

For further clarity it is agreed that:

1. administrative expenses, specifically custodian fees, investment management fees and transaction costs, investment advisor fees, actuarial fees, filing charges, accounting fees, and part of the expenses of the Investments Department and Human Resources Department will be monitored by the Pension Trust Committee or, in the event of discontinuance or significant change in composition of that Committee, by a successor group at least 50% of whom are elected by member associations. That is, the composition of such a successor group must reflect the representation of Plan member groups in a manner similar to that of the current Pension Trust Committee.

2. in the case of proposed changes to the administrative expenses, it is agreed that all votes under item 7 of the Pension Trust Committee's terms of reference (quoted above: BOG Bylaw 1, Sec. 14 [3,g]) will be valid only if 50% of those balloted are elected representatives of member associations,

3. the Audited Financial Statements of the Pension Plan will be used for the monitoring activity,

4. any administrative expenses falling outside the types listed under clause 1 above shall be interpreted as changes in nature or structure of administrative expenses,

5. administrative expenses shall be restricted to the administrative costs associated with pensions paid from the Plan for salaried staff,

6. increases of expenses of the Investments and Human Resources Departments (using a base of $210,750 for the calendar year 1997) beyond normal inflation (CPI Canada all items, December to December) shall be interpreted to be a change in nature or structure of expenses. The time of staff from Investments and Human Resources Departments involved in administering the plan will be reviewed every three years,

7. any proposal that the Pension Plan pay for administrative expenses not listed above in clause 1 and any changes proposed under clause 6 must be made in writing and circulated to the Pension Trust Committee at least two weeks in advance of its meeting.

   McMaster University
   March 26, 1998