Memorandum
  March 21, 2006

       TO:    Members of the McMaster University Faculty Association on the Career 
                 Progress/Merit Plan

  FROM:    Mike Veall, Chair, Remuneration Committee

         RE:    Joint Committee Remuneration Agreement,  July 1, 2006 to June 30, 2008
Attached you will find a copy of the Agreement negotiated in the Joint Committee and agreed to on March 3, 2006.  The Negotiating Committee for MUFA were its representatives on the Joint Committee: Betty Ann Levy, (Department of Psychology and MUFA President), Ian Hambleton (Department of Mathematics & Statistics and MUFA Vice-President) and Mike Veall (Department of Economics and Chair of the MUFA Remuneration Committee).  All three support the agreement.  The agreement has also been endorsed unanimously by the Remuneration Committee which includes the above as well as Nancy Bouchier (Department of Kinesiology and Women’s Studies Program), Michael Boyle (Department of Psychiatry and Behavioural Neurosciences), Nora Gaskin (Mills Library) and Wayne Lewchuk (Department of Labour Studies and Department of Economics).  At the March 14, 2006 meeting of the MUFA Executive, a motion supporting the agreement passed unanimously.

The MUFA negotiating process started with a series of consultations within the Remuneration Committee and the MUFA Executive.  An e-mail was sent to all members of the Association asking for input and the responses were tabulated and reviewed.  Further ideas were solicited from a meeting of MUFA Council, a group of representatives of all academic units.  This information, along with information from previous membership surveys and previous briefs, was used to develop the initial MUFA brief which was made public on December 15, 2005 and discussed at the MUFA general meeting on January 5, 2006.

There was then a series of bargaining meetings in the Joint Committee.  The MUFA representatives also met independently and with the Remuneration Committee.  During this period, we also had a meeting with two focus groups, each consisting of about ten randomly selected MUFA members (whom I thank for their participation).  These focus groups provided us some information that helped the negotiators judge which tradeoffs could reasonably be made at the bargaining table.

Had an agreement not been reached by March 15, 2006 MUFA and the Administration would each have submitted a final offer to a neutral third party (a “selector”), who would have had to choose either one final offer or the other

The MUFA representatives believe it is a good agreement.  While it is possible that going to the selector would have led to a better agreement, it is also possible that the selector would have found for the Administration and the agreement would not be as good.  The negotiators and the members of the Remuneration Committee unanimously felt that the agreement was sufficiently attractive that going to selector was not worth the gamble.

I thank the MUFA Remuneration Committee and particularly the MUFA representatives on the Joint Committee for the time and effort they put into this negotiating process.  I ask you to support them and the agreement by voting yes on the enclosed ballot and remembering to put your ballot in the Campus Mail so that it is received by MUFA in Hamilton Hall 103A by April 4, 2006.  (If you need more information, please attend the special information meeting on Tuesday, March 28th at 2:30 pm in Hamilton Hall 109A.)  The agreement must be endorsed by a majority of voting members to take effect.
 

Overview of the Agreement
The agreement is very complex.  Summarizing its main features, it combines an Across-the-Board (ATB) increase and a market sector adjustment to achieve a salary increase of 3.5% per year for two years, after netting out the effect of a pension plan contribution increase, but not including Career Progress/Merit (CP/M) awards.  Most of the salary increase will be on July 1 each year, but some will be delayed until January 1.  All floors, breakpoints and CP/M increments will increase by 3.5% each July 1.  There will be a delayed and then gradual change from the Rule of 80 to the Rule of 85.  The top breakpoint of the CP/M scheme is removed, an important improvement, and the employer will no longer be able to take a significant pension contribution holiday without offering the same holiday to faculty members.  There are small increases in the Professional Development Allowance each year, the $20 per visit limit for paramedical services is eliminated and beginning the second year, there will be coverage for vision tests.

The following points provide a bit more detail.  A very detailed discussion follows.  A spreadsheet is also provided that gives salary increases by current salary level both for a faculty member who receives a zero award under the CP/M system and for a faculty member who receives a par award under the CP/M system.

1. Excluding Career Progress/Merit awards, most faculty salaries will increase by 2.75% on July 1, 2006.  On January 1, 2007, there will be an additional increase of 1.5%.  As there will be a pension contribution increase of 0.75% on July 1, 2006, this will be a total net-of-pension-contribution increase of 2.75% + 1.5% - 0.75% = 3.5%.  Essentially the same thing will happen in 2007-08.

2. The increases in item 1 include a July 1 1.25% market sector adjustment where the latter component is capped at $1475.  Because of the cap, this means that the net-of-pension-increase will be slightly smaller than 3.5% to the extent salary exceeds $118,000 (see the spreadsheet).  But for most such members this should be much more than offset because the agreement removes the top breakpoint of the CP/M scheme.  This means that members now or in the future whose par increment would have only been one-quarter the standard par increment (about $716 in 2006-07) now will have a par increment of one-half the standard par increment (about $1433 in 2006-07).

3. There are a number of changes involving the pension plan.  These are discussed in detail below but to summarize:


4 The Professional Development Allowance increases by $50 per year.   The per visit ceiling of $20 is removed for all paramedical benefits (e.g. physiotherapy, chiropractic) although the annual ceiling of $300 per person (that is for either an employee or a dependent) per practitioner class remains.  This should make this benefit more accessible to members.  In the second year, the benefit plan will begin to cover eye examinations up to $100, although only for the employee.

5 The agreement establishes a separate committee to examine the CP/M scheme.  Under a separate agreement, the Joint Committee has also agreed to examine benefits and consider adopting a prescription drug Formulary with the cost savings used to improve health benefits.  However any resulting package of Formulary/improved health benefits would not be instituted without much more information distributed to members and a separate ratification vote by MUFA members.
 

Detailed Discussion

Salary Issues
A problem in comparing this agreement to those at other universities is that the settlements at other universities are often also complex.  And just as this agreement attempts to do at McMaster, agreements at other universities address local concerns and issues.  However if we focus on ATB-like increases and consider the six settlements made at Ontario universities since McMaster’s previous agreement in March 2005, the ATB-like increase at McMaster of 3.5% for two years is comparable to the 3.0, 3.0 and 3.05% three-year May agreement at Queen’s and the 2.5% and 3.5% two-year May agreement at Guelph.  (Both of those agreements had significant other components, as does the  proposed agreement for McMaster.) The agreements at Ryerson, Lakehead, Laurier and particularly Laurentian have significantly larger ATB-like components.  However, had we chosen to go to final offer selection, the judgment of the Negotiating Committee was that a selector would have put more weight on the Queen’s and Guelph settlements as those universities are traditionally in our comparator group, in part because they have current salaries and average teaching loads closer to those at McMaster.

With respect to the phase-in of the ATB increases, obviously this was something the Administration wanted and the Negotiating Committee opposed but accepted because we felt the overall agreement was a good one.  Note, as is clear from the spreadsheet, that the bulk of the salary increase is not phased in because there is no delay in the market sector adjustment or the CP/M increases.  In addition, there is a tiny offsetting advantage that the January 1 ATB is applied to December 31 salary, and thus compounds the previous July 1 ATB, CP/M and market sector adjustments.

An important feature of this agreement is the market sector adjustment each year.  For example in the first year, it is approximately 1.25% of salary up to $118,000 (which corresponds to the cap of $1475).  One justification for the cap is that part of the market sector adjustment offsets the pension plan contribution increase and earnings above $118,000 are not pensionable in 2006.  The other justification is that faculty in this salary range will likely get the most immediate benefit from the removal of the top breakpoint in the CP/M scheme.

Incidentally, even though this agreement is not the remuneration agreement for academic librarians, there is a Joint Committee agreement intended to give those MUFA members the same financial settlement as faculty.  In the past, there was a dispute as to whether a “market adjustment” in the faculty settlement would carry through to librarians.  This agreement has specific language to ensure that the market sector adjustment will be applied to librarians.

All the par increments and breakpoints in the system are functions of the assistant professor floor salary so as it will increase by 3.5% each year under this agreement, so will the values of the par increment and all the breakpoints.

Finally, to explain the breakpoint removal, the CP/M system currently reduces awards so that only those with salaries below 1.8 times an assistant professor floor are eligible for full “Range 1" increments (currently $2768 for par).  As salary increases to over 1.8 times the assistant professor floor (the first breakpoint), the standard par increment becomes only three-quarters of a Range 1 increment.  As salary increases over 2.2 times the assistant professor floor (the second breakpoint), the standard par increment becomes only one-half of a Range 1 increment.  And as salary increases over 2.35 times the assistant professor floor (the third breakpoint), the standard par increment becomes only one-quarter of a Range 1 increment.  This agreement removes the third breakpoint, so that the standard par increment is never reduced to less than one-half of a Range 1 increment.  For a faculty member earning $130,000 per year and who continues to perform at par, this will translate into an additional annual salary increment of about 0.5% for as long as he or she is at McMaster.  But most faculty at McMaster should be able to benefit from this provision for at least a few years during their career.

Because the implementation of the CP/M plan is sometimes contentious, particularly in a few departments, the Joint Committee also agreed to establish a subcommittee to consider the CP/M system further.
 

Retirement Issues
When I met with the Faculty Council of MUFA, the first question I was asked was whether the pension fund was secure.  I believe the Administration is taking pension issues very seriously.  Currently employee contributions are being matched by the employer at a rate of more than two-to-one.

I do not believe there is any real risk of McMaster going bankrupt or being in such straitened circumstances as to curtail pension payments.  But nonetheless, the Negotiating Committee decided that there was some value in crafting an agreement that included increased pension payments to encourage the recovery of the pension plan’s finances.  (Note that the Administration would not have agreed to the same ATB increases if there had not been the increased pension plan contributions.)

The Negotiating and Remuneration Committees highly value the guarantee that the employer can never again take a significant, unilateral pension contribution holiday.  For about fifteen years beginning 1987, the employer at McMaster did not contribute to the pension plan.  Employees contributed for most of these years, although sometimes only partially.  MUFA brought a court case against the employer challenging its right to take a unilateral pension contribution holiday, but lost in 1991 (although in a sense it won a partial victory which may have prevented the employer from unilaterally claiming the surplus rather than splitting it with employees).  Under this agreement, if the employer chooses to take a contribution holiday, the employees automatically will receive one as well.

The agreement would require that an employee who begins at McMaster July 1, 2006 would have to work ten years at McMaster before being eligible for benefits in retirement and vesting would not occur until after two years.  (The latter means that the employee who worked at McMaster for two years or less and left would receive her/his pension contributions with interest, but not the employer’s contributions.) The Negotiating and Remuneration Committee felt that most faculty members would find these provisions reasonable.

By far the most difficult for the Negotiating and Remuneration Committees was the provision to change the Rule of 80 to the Rule of 85 (with a 5.5 year delay and then a further 5 year transition).  The Rule of 80 is a pension plan provision that allows retirement with pension from McMaster when the sum of the employee’s age and years of employment at McMaster add up to 80 (which some members achieve in their early fifties).  Because the received pension is based on the years of service obtained up to that point, the pension tends to be what most of our members would regard as small.  But the real problem from the perspective of the University is that an employee can leave McMaster under the Rule of 80, collect the pension or the cash equivalent, and begin employment at another university or institution.  It is not surprising that the Rule of 80 is rare in the Canadian university sector; it creates a situation in which some of our best colleagues are paid by McMaster to work somewhere else.  To me it is an anachronism given the trends to greater longevity and longer working life.

This was the general view within the Negotiating and Remuneration Committees.  The problem was to allow for a sufficient transition period to be fair.  As you can read in the agreement, there will be no change from the Rule of 80 for 5 and a half years, after which the rule gradually changes to the Rule of 81, the Rule of 82 etc. until the Rule of 85 will begin on January 1, 2016.  The eventual result is that a member will have to work 2.5 years longer to achieve the Rule of 85 as opposed to the Rule of 80, but will also have a better pension because of the additional years of service.

While no doubt there will be some who criticize the decision to accept this provision, the Negotiating and Remuneration Committees feel that this is in the long run interest of McMaster as an institution and those who are committing their careers to it.  While of course one reason the Administration wanted this change was the actuarial savings it brings to pension plan operation, I believe the settlement gives value in return because the mid-career faculty who might have most valued the Rule of 80 option will likely be the main beneficiaries of the improved CP/M system.  And in any case, I do not believe this will be the last word regarding early retirement at McMaster.
 

Other Issues
While the elimination of the per visit restriction on the paramedical benefit is not a huge improvement, it will make those benefits more accessible, The eye examination benefit is also welcome but admittedly a small improvement.  The Joint Committee has separately agreed to have a subcommittee to discuss the possibility of introducing a prescription drug Formulary and using the savings to improve health benefits more broadly.  A drug Formulary would force a user to pay the excess if he/she insists upon a name brand drug when a generic drug is available and would also curtail access to certain new expensive drugs unless a third party authority judges them to have additional therapeutic value as compared to current drugs.  Such Formularies are now common, have been adopted at other universities and apply to management group employees at McMaster.  However the Negotiating Committee understands that many members would like to have much more information before even contemplating such a change.   Hence those discussions are completely separate to this agreement.  More information will be provided as they progress and nothing will be done without a separate ratification vote.

Finally, I acknowledge that the agreement has not achieved everything that MUFA proposed in its initial brief and while that is the nature of bargaining, some of those shortcomings I particularly regret.  For one, it still strikes me as strange that the Administration is so resistant on the Supplementary Pension Plan (to allow in effect higher pensionable earnings, on which contributions would be paid and pensions received).  In any case, legislative changes have increased pensionable earnings from $112,000 last year to $118,000 this year and then up to $124,000, $130,000 and $136,000 in subsequent years after which the $136,000 will be indexed.  So while I think a Supplementary Pension Plan remains sensible, some of the gains to the members from such a plan have instead been achieved by legislation.

While it has its shortcomings, on balance this is a good agreement.  Please support it and your negotiators by voting yes and ensuring the ballot is received in Hamilton Hall 103A by April 4, 2006.

____________________________________________________

Not including any CP/M award
                                                                              Percentage Increases (compared to June 30, 2006
    Salaries                                                                          adjusted for pension contribution increase)

June 30
2006		 July 1
2006 		 January 1
2007 		 July 1
2007		 January 1
2008		 12345 12345 June 30
2006		 July 1
2006		 January 1
2007		 July 1
2007 		 January 1
2008
50000 51359 52130 53523 54326 50000  1.95% 3.48% 5.44% 7.02%
60000 61636 62561 64243 65207 60000 1.96% 3.49% 5.47% 7.05%
70000 71913 72992 74963 76087  70000 1.96% 3.49% 5.48% 7.07%
80000 82190 83423  85683 86968 80000 1.97% 3.50%  5.50%  7.08%
90000  92467 93854  96402  97848  90000  1.97% 3.50% 5.51%  7.09%
100000  102744  104285 107122 108729  100000 1.97%  3.50% 5.52%  7.10%
110000 113021 114716 117842 119610 110000 1.98%  3.51% 5.52%  7.11%
120000 123275 125124 128476 130403 120000 1.99% 3.50% 5.51%  7.04%
130000 133425 135426 138933 141017 130000 1.95% 3.46%  5.44% 6.97%
140000 143575 145729  149390  151630 140000  1.92% 3.43% 5.38%  6.91%
150000 153725 156031 159846 162244 150000 1.89% 3.40% 5.32% 6.86%

 
Assuming a par CP/M award
                                                                                  Percentage Increases (compared to June 30, 2006
    Salaries                                                                              adjusted for pension contribution increase)

June 30
2006		 July 1
2006 		 January 1
2007 		 July 1
2007		 January 1
2008		 12345 12345 June 30
2006		 July 1
2006		 January 1
2007		 July 1
2007 		 January 1
2008
50000 54224 55038 59477 60369 50000  7.64% 9.25% 17.17% 18.93%
60000 64501 65469 70196 71249 60000 6.70% 8.30% 15.24% 16.97%
70000 74778 75900 80916 82130 70000 6.02% 7.62% 13.86% 15.57%
80000 85055  86331 91636 93011 80000 5.52%  7.10% 12.83%  14.52%
90000  95332 96762 102356  103891 90000  5.13% 6.71% 12.02%  13.70%
100000   104892 106465 111587 113261  100000 4.11%  5.67% 9.91%  11.56%
110000 115169 116896 122307 124141 110000 3.91% 5.47% 9.52% 11.16%
120000 124707 126578 131433 133405 120000 3.18% 4.71% 7.98%  9.55%
130000 134857 136880 141890 144018 130000 3.06% 4.58% 7.72% 9.28%
140000 145007 147182 152347 154632  140000  2.94% 4.47%  7.49% 9.06%
150000 155157 157484 162804 165246 150000 2.85% 4.37% 7.30% 8.86%

Note: the "with CP/M" tables tend to overstate the benefits of the agreement by folding in all of the effect of CP/M awards, much of which is not attributable to the agreement. However these tables give some idea of actual salary increases and their timing, and illustrate that for most faculty members the bulk of the salary increases will be on July 1 of each year.  The "without CP/M" tables give a better indication of the salary benefits of the agreement, although they understate them somewhat because they do not include the effects of the CP/M improvement.

pdk - April 5, 2006