Principals/Vice-Principals (P/VP)
Learning Centre
Plan updates Q&A
P/VP Benefit Reductions September 1, 2024
Prepared by ONE-T Trustees
ONE-T is an independent trust established in 2018 by the Crown, Trustee associations and P/VP associations through negotiations. Funding for ONE-T is provided (indirectly) by the Crown and is a result of negotiations between the P/VP associations, the Crown and the Trustee associations; ONE-T is not involved in these negotiations. Trustees govern ONE-T in accordance with the Trust Agreement and Funding Policy developed by the various parties.
Q1. What are the key roles and responsibilities of ONE-T Trustees?
A1. ONE-T Trustees are responsible for the operational and financial sustainability of the Trust (i.e., ensuring sufficient funds to provide plan benefits to members now and in the future). This is a legal requirement set out in the Trust Agreement that established ONE-T. Trustees are accountable to the P/VP associations, the Crown and the Trustee Associations to manage the P/VP plan in an efficient and financially sustainable manner including adherence to ONE-T’s Funding Policy approved by P/VPs, the Crown and Trustee Associations.
ONE-T Trustees must carry out their responsibilities regardless of external pressures or the status of funding negotiations. Each year in the late spring, following preparation of audited financial statements, receipt of an annual actuarial valuation, and discussions with P/VP associations, ONE-T makes plan design decisions with changes almost always being implemented by the beginning of the September 1 to August 31 benefits plan year
Q2. Why has the P/VP plan reached a point where benefit reductions are necessary?
A2. Total benefit costs have been increasing annually at a rate higher than FTE funding growth from the Crown. Over the past three years, total benefit costs grew at a compound annual growth rate (CAGR) of 9.3% p.a. whereas FTE funding over the same period grew at a CAGR of only 3.2%. In 2023, total benefit costs grew by over 10% and were $2.8 million higher than FTE funding which grew by only 3.0%. This shortfall resulted in a drawdown of reserves. ONE-T’s actuaries expect that benefit costs will continue to increase by 5% to 7% annually, resulting in forecasted further shortfalls over each of the next three years. The P/VP associations, the Crown and Trustee Associations are not responsible for any shortfalls; that responsibility lies with ONE-T. Therefore, under the Trust Agreement and Funding Policy, ONE-T is required to maintain a minimum level of reserves at the end of each year of its three-year forward-looking forecast.
Q3. Why did ONE-T proceed with some benefit changes effective September 1, 2024? Why can’t benefit changes wait until provincial funding negotiations are concluded?
A3. ONE-T determined that some benefit plan changes were necessary on September 1, 2024, based on its actuarial forecast, to ensure financial sustainability.
ONE-T Trustees reviewed the provision in the Trust Agreement that allows for the consideration of a contingency plan rather than making plan design changes. ONE-T worked with its actuary to develop a range of scenarios with various funding assumptions. From this analysis, Trustees concluded that making no plan design changes in September 2024 would result in much more severe benefit reductions over the next couple of years. The magnitude of these forecasted future benefit reductions was considered unacceptable for members and not aligned with the Funding Policy.
While Trustees implemented some benefit reductions in September 2024, other reductions (e.g., employee premium cost sharing) were intentionally deferred pending the outcome of funding negotiations.
Q4. Do ONE-T Trustees have the power “to mitigate the benefit cuts and preserve the integrity of the benefits plan?”
A4. ONE-T Trustees have legal obligations to ensure the operational and financial sustainability of ONE-T and must take corrective action as necessary following its required regular periodic reviews of plan design and assessments of sustainability. Trustees cannot spend money that ONE-T does not have. If reserves are fully utilized, ONE-T would not be able to pay claims.
Q5. How does ONE-T determine financial sustainability?
A5. ONE-T’s actuary prepares an annual valuation of the P/VP benefits plan. The actuarial methods and assumptions (including demographic and FTE funding assumptions) used in such valuations must be in accordance with generally accepted actuarial principles and ONE-T’s Funding Policy approved by the P/VP associations, the Crown and Trustee Associations. The output of such valuation is a three-year projection of ONE-T’s financial position. The financial position of the plan at the end of each year over the three-year forecast period must meet minimum requirements set forth in the Trust Agreement and the Funding Policy. If such minimum forecast requirements are not met, Trustees must take necessary actions to ensure that the minimum requirements set forth in the forecast are met.
Q6. How do P/VP benefits compare to benefits of teachers plans? What unique challenges does the P/VP plan face?
A6. ONE-T benchmarks the P/VP benefits plan against the plans of other employee life health trusts (ELHTs) including teachers. Some P/VP benefits are better, and some are worse than teacher plans. For example, today one of the teachers plans has a 6% employee contribution requirement, while the P/VP plan does not. None of the teacher benefit plans has a Health Care Spending Account (HCSA) whereas the P/VP plan does. Conversely, the P/VP plan requires members to pay 10% of paramedical services costs whereas the teacher plans do not.
Factors such as the rate of family coverage and number of dependents can result in higher claims costs. Benefit costs per member generally are higher for P/VPs than some other plans. These and other factors translate into fewer benefits for the same amount of funding.
Q7. Do trustees of ONE-T represent the interests of CPCO, ADFO and OPC?
A7. From a lobbying or advocacy perspective, ONE-T does not and can not represent the interests of any party, including P/VP associations. ONE-T has a responsibility under the Trust Agreement to the P/VP associations, the Crown and the Trustee Associations to operate the benefits plan on a sustainable, efficient and cost-effective manner for the benefit of its members. This includes reviewing and adjusting benefits at regular, periodic intervals based on available funding provided to ONE-T to ensure the financial sustainability of the benefits plan.
Q8. Did ONE-T meet with the P/VP associations to discuss plan design?
A8. Yes. ONE-T meets with the P/VP associations each year in the spring to discuss plan design. This year we met with P/VP associations on multiple occasions to discuss the actuarial forecast, the need for plan design changes and what changes ONE-T was considering. ONE-T Trustees listen, discuss and explain plan design and sustainability matters with the P/VP associations.
Q9. Did ONE-T do anything in response to requests from the P/VP associations to delay changes to benefit plans?
A9. Where possible, ONE-T considers changes within the boundary of ensuring financial sustainability, among other factors.
ONE-T delayed its decision regarding plan design changes from its May 22 board meeting to its June 18 board meeting to give additional time for P/VP negotiations with the Crown. In addition, ONE-T deferred its decision regarding the magnitude of premium cost sharing and delayed the earliest implementation date from January 1, 2025, to March 1, 2025, to ensure sufficient time for the P/VP associations to conclude funding negotiations.
Q10. Do trustees of ONE-T have any role in funding negotiations with the Province of Ontario (Crown)? Can ONE-T trustees intervene or engage in dialogue with the Crown regarding benefit reductions?
A10. Trustees do not have any involvement in funding negotiations with the Crown. Trustees are accountable to the P/VP associations, the Crown and the Trustee Associations for the sustainable, efficient and cost-effective operation of ONE-T. ONE-T is independent from the P/VP associations and the Crown and Trustees cannot advocate on behalf of either.
Q11. Did ONE-T meet with the Crown?
A11. At the request of the P/VP associations, ONE-T and P/VP representatives met with Crown and Trustee Association representatives and provided details of ONE-T’s actuarial forecast and required plan design changes necessary to ensure financial sustainability. ONE-T provided the Crown with information on the amount of funding that would be required to avoid plan design changes in September 2024. As noted above, ONE-T has no role in funding negotiations, and this was only an information exchange with the Crown.
Q12. Will the funding shortfall be resolved when 2024 negotiations are settled?
A12. ONE-T does not know when the 2024 negotiations will be concluded nor what the results of those negotiations will be. Trustees do not have any input into discussions related to funding negotiations with either the Crown, P/VP associations or Trustee Associations. Depending on when 2024 negotiations are settled, ONE-T will review its decision to invoke a premium cost sharing arrangement with members to determine whether such arrangement is required and, if so, what the magnitude of cost sharing will be. A significant increase in funding will be required to avoid a cost sharing arrangement. As noted previously, historical FTE funding increases have not kept pace with the growth in benefit costs.
Q13. Is ONE-T planning to reduce any mental health benefits?
A13. No. ONE-T added a new separate maximum of $1,300 for mental health services1 in 2022. Prior to this, mental health services were included with the “other” paramedical services that have a combined plan year maximum of $1,300.
1Mental Health Services: Psychologist/Social Worker/Marriage & Family therapist/Psychologist
Q14. Will ONE-T modify the plan changes that are set to be implemented on September 1, 2024?
A14. ONE-T has no current plans to modify the plan changes that have been communicated. If funding from the Crown is materially higher than what ONE-T has assumed, this would build resiliency into the benefits plan and would reduce the need for future adverse plan design changes (such as the currently contemplated premium cost sharing with members).
Q15. Can ONE-T find creative solutions to address the benefit cuts?
A15. There is no magic bullet to address the fundamental challenge associated with benefit costs growing materially more quickly than funding. Funding shortfalls must be covered primarily by some combination of: (i) increased funding from the Crown; (ii) benefit reductions; (iii) a drawdown of reserves.
To enhance the financial position of the P/VP plan, Trustees have taken several initiatives such as reducing administrative expenses each year for the last four years, introducing new prior authorization programs to effectively manage claims costs of high-cost drugs and significantly increasing investment returns commensurate with increased interest rates.
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