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JANUARY 2003 Volume 29.4 Tony Petric, EDITOR |
President's Report FSCO Approval New Members Long Term Disability W. J. B. Owen Other Passages Money Matters Annual General Meeting 2003/04 Executive Volunteers Needed |
President'
Report
(Delivered
at the MUFA General Meeting on December 9, 2002)
When I sat down to write this report, I thought that I would have little to say. However, looking back over the past four months, I realized that there was much to report. Both the MUFA Executive and the Joint Committee have been quite busy.
Benefits
PENSION SURPLUS SHARING UPDATE
In my Year Ahead article in the September 2002 Newsletter, I stated that “With the pension surplus distribution nearing completion, another pension matter needs attention, a Supplemental Employee Retirement Plan (SERP).” ....One reason that there has been little movement on the introduction of a SERP for faculty is that everyone has been preoccupied with the pension surplus distribution. [Ed. Dr. Allan’s remarks regarding the pension surplus distribution have been superceded by events. See below for a surplus sharing update.]TECHNOLOGY FUND
In MUFA’s December 11, 2001 Remuneration Brief, we proposed the “Establishment of a Technology Fund of $1,500 per faculty member every three years with one-third of faculty members receiving grants per year. We removed this benefit from the table when the Administration agreed to the establishment of a Technology Fund for faculty in Social Sciences and Humanities. At the November 11 Joint Committee meeting we agreed to the following proposal from the Administration. Each faculty member (tenured or tenure-track) in Humanities and Social Sciences will receive $1000 every four years for computers and/or peripherals. The implementation will be staggered over the next four years, with ¼ of the faculty receiving $1000 each year. The first installment is January 2003. The details of the proposal will be finalized at the December Joint Committee meeting and will be available in early January.PREGNANCY/PARENTAL/PATERNITY LEAVE POLICY FOR FACULTY (SPS 19)
This policy was last approved by the Joint Committee on June 25, 1997. Since then, there have been legislative changes which needed to be incorporated into the policy. These changes have resulted in enhanced benefits. A revised policy was approved by the Joint Committee in October. The revised policy is on the agenda of the next Board meeting on December 12. [Ed. The policy was approved by the Board.]
Policies — Revised and New
GUIDELINES FOR THE IMPLEMENTATION OF LOAD TEACHING IN PART-TIME DEGREE STUDIES
Many years ago, part-time and full-time degree studies were integrated, resulting in this policy being approved by Senate in 1972. It is this policy that specifies the trade-off between day, evening, and summer teaching. The policy, including its name, was badly outdated. The Joint Committee made a number of changes to the policy, some editorial, others more substantial. The revised policy is now before the Senate Committee on Appointments. [Ed. The policy was approved at the December 11 Senate Meeting.]MEMORANDUM OF AGREEMENT REGARDING THE TEACHING OF DAY CLASSES AND TEACHING IN THE TWILIGHT [5:30-6:20 PM] HOUR
This Memorandum had expired. It was renewed, with some revision, in the Joint Committee in September.AD HOC COMMITTEE TO ADVISE ON POLICY MATTERS CONCERNING PERSONAL PRIVACY AND THE CONFIDENTIALITY OF ELECTRONIC COMMUNICATION AND VIDEO SURVEILLANCE FOR CP/M FACULTY
Tom Davison, in his Report to the General Meeting on January 16, 2002, had a section on Work Completed. He included this Ad Hoc Committee in that section. He noted that this Committee was mentioned as a "to do" in Les King's report to the membership in January 1999. Tom was a little premature in including this Committee under work completed. While the Committee had been struck at that time, its report was just received by the Joint Committee.
Little J Committees
The Senate Committee on Appointments recently approved the terms of reference for two joint committees with MUFA.
JOINT FACULTY ASSOCIATION/SENATE COMMITTEE TO INVESTIGATE TEACHING APPOINTMENTS
The yellow document specifies that the maximum term of a Contractually Limited Appointment (CLA) is normally six years. This six-year maximum is frequently extended. Also, there appears to be an increase in the number of renewals of CLAs which are shorter than one year. These matters, as well as others, are included in the terms of reference of this joint committee.JOINT FACULTY ASSOCIATION/SENATE COMMITTEE TO INVESTIGATE A UNIVERSITY HEARINGS COMMITTEE
The task before this Committee is to investigate the feasibility of forming a University Hearings Committee or Board that would hear and adjudicate appeals and grievances related to issues that affect faculty and librarians. If established, this Board would replace the appeals tribunals and boards in the following policies:
Tenure and Promotion Policy
Code of Conduct for Faculty
Statement on Consulting Policy and Procedures
Faculty General Grievance Policy
Librarian Grievance Policy
Luncheons In September, Phyllis suggested to the Executive that MUFA might like to institute a practice of inviting new appointees to lunch. This suggestion was received with enthusiasm. Two or three times a month, I and another member of the Executive take a group of 4 - 6 new faculty to lunch. These lunches have been the highlight of my term thus far. The calibre of our new appointees is truly outstanding. They are bright, enthusiastic, and interesting. The only negative aspect of this endeavour, is the upward movement in my weight.
I am fortunate to have a dedicated and enthusiastic Executive. I thank them for their support and commitment. Finally, I want to acknowledge Phyllis and Kelly. My job would be impossible without them.
Lorraine Allan
Leslie Gordon
Ita O'Kelly
Dmitri Malakhov
Abigail Payne
Igor ZhitomirskyMills Library
Biology
Materials Science
Economics
Materials Science
McMaster Family Practice Unit
to Offer Primary Care Services to
New AppointeesDuring the summer, MUFA was contacted by a new faculty member who had just moved to the Hamilton area and was frustrated in his efforts to find a family doctor. In response, MUFA President, Lorraine Allan, met with Peter George to convey the Executive’s belief that it was important that the University help new faculty find health care for themselves and their families. President George consulted with the Dean & Vice-President (Health Sciences) and the Unit Director of the McMaster Family Practice who agreed to provide primary care services for new faculty members. Information regarding the Family Practice Unit will be communicated to new faculty members when they sign in with the Human Resources Department.
Other Passages
Gunter W. Bruns
Professor Emeritus
Mathematics & Statistics
died December 23, 2002Ernst O. Gadamer
Retired Professor
Applied Mathematics
died January 3, 2003James N. Siddall
Professor Emeritus
Mechanical Engineering
died December 26, 2002
In response to requests from our members for financial information, we are pleased to provide the following column on what we hope will be a regular basis. The information below has been supplied by Joe Gadoury of Berkshire Securities. Please contact Mr. Gadoury directly at 905-529-5505 if you have any questions or require clarification. 
Money Matter$Taking Control of YOUR Financial Future
In our previous three newsletters, we went over Rule #1: Set the Goal and the Time Frame to Achieve It; Rule # 2: Use Other Peoples’s Knowledge and Rule #3: Pay Yourself First. As mentioned in the November issue, there’s a variation on Rule # 3 which has actually created more net worth in society than most people can appreciate. And when done properly, can generate potentially much more tax efficient future cash flow too.
Wealth Law #4:
Use Other People's MoneyUsing other people’s money or ‘leveraging’ as it is commonly known, is one of the most favored ways to increase one’s net worth exponentially over time. Most people have used this concept at least once with the purchase of, usually their largest asset - their home. But it is rarely their best ‘investment’. The unfortunate part of this practice is that the interest paid to subsidize this purchase in not generally tax deductible as it is in the US. Invariably this means that over a fully amortized period of say 15 years the total after tax cost of borrowing for a $200,000 house with $150,000 mortgage at an average interest rate of 6% will be almost $227,000, or over 13.5% more than the actual price you paid for the house. The cost of borrowing would be about $77,000 in total after tax dollars. Hmmm…some investment — but we all have to live somewhere.
However, the part that makes this all feasible is the monthly mortgage payment - which is an abstract form of the #3 — Pay Yourself First Rule. If you were to structure a similar type of arrangement where the borrowed money was used to purchase a qualified investment for tax purposes, the costs could actually be less than the above example since all the interest costs are tax deductible. And if you were to set up what I consider the ‘perfect scenario’ where you do not pay down the loan, but just the interest cost, the results could be even better.
In the interest only scenario payments to the interest cost could be considered similar to contributions to a ‘Pay Yourself First’ RRSP program. The amount of the tax deduction you would receive is exactly the same for the interest portion of any payments as it would be for the RRSP contribution. But unlike the RRSP program where you can modify or stop your payments quite easily, the leverage program commits you to make the monthly payments, a much more disciplined approach. And in that essence the risk factor for this type of program goes up exponentially, so this idea is not for the faint of heart or people who don’t know how to budget. And it is not for those people with a short term time horizon of less than 5 years minimum.
But the future tax ramifications are also something to consider. As most people know, any RRSP proceeds are taxable when withdrawn regardless of whether they are principal or growth. In the leverage scenario, only the growth portion is taxed and since it is usually capital growth in nature, it is only taxed at half the rate of the RRSP. The much more favorable tax difference can best be explained in the following example.
Suppose you put $200/month into an RRSP every month for the next 15 years. At a growth rate of 8% it will have a future value of about $69,000. If your marginal tax rate (the rate on your last dollar earned in the year) is 30%, then that’s the tax to be levied on the full $69,000 regardless of when you withdraw it.
On the other hand, in a pure interest only scenario, at an average borrowing rate of 6%, you could borrow around $40,000 which would be invested in a qualified investment. This would cost the same $200/month. At the same growth rate of 8% over the next 15 years, the future value would grow to about $127,000. If you then paid off the original loan, you would be left with $87,000. Since this is all considered capital growth, you would only pay tax on half of it at the similar tax rate above when you started to withdraw it. So in our example the end results of a more disciplined approach would be a much better after tax position than the standard everyday RRSP approach.
Doing something similar but amortizing the loan would not give as good a result as just the interest only scenario, but the end result is a paid off loan with still a much better after tax position than the regular RRSP.
You must always be aware that leveraging is a double edge sword. Both gains AND losses are enhanced because the money is borrowed. Remember that it eventually must be paid back, which makes this a much longer term strategy than most people can appreciate. And in periods of extended down markets, such as we have seen in the past 2 ½ years, it’s easy to lose your focus on what your long term objective is. That’s where the next law can be the most important. See you when we explain it in the new year. And have a good one!
Author’s Note - if you wish copies of our normal quarterly newsletter, please send either your e-mail address or postal address to: jgadoury@berkshire.ca. Back issues are available upon request.
This publication contains opinions of the writer and may not reflect opinions of Berkshire Securities Inc. The information contained herein was obtained from sources believed to be reliable, but no representation, or warranty, express or implied, is made by the writer or Berkshire Securities Inc or any other person as to its accuracy, completeness or correctness.
This publication is not meant to provide legal or account advice. As each situation is different you should consult your own professional advisers for advice based on your specific circumstances.
MUFA Annual General Meeting
Tuesday, May 6, 2:00 p.m.
Council Chambers (GH 111)
Mark your Calendars Now!MEETING
If you are interested in serving on the Faculty Association Executive or know of someone who would make an excellent candidate, please contact us: Hamilton Hall 103A; Ext. 24682; mufa@ mcmaster.ca). DEADLINE — FEBRUARY 15, 2003.
A voluntary organization such as the McMaster University Faculty Association can succeed in serving the interests of its membership only to the extent that the members participate in formulating and executing policy. At any given time, approximately two dozen individuals carry the burden for all of the members and after a few years most of them are exhausted by the tasks which they have voluntarily borne. Their valuable experience and wisdom is then lost to us. The best way to lessen this attrition of talent is for more of the membership to give some time and effort to the Association. If you are not interested in putting your name forward for the Executive Committee, please use the form below to let us know if you would like to participate in MUFA’s efforts by serving on one of the following committees. --------------------------------------------------------------------------------------------------------------------------------------------------
Yes, I am interested in working more closely with the Faculty Association. My interests are:
MUFA Council ___ Pension ___ Academic Affairs ___ Public Relations ___ Human Rights ___ Remunerations ___ Library ___ Grievances ___ Membership ___ Tenure ___ Ad Hoc Committees ___ Special Assignment ___ Are there other areas where the Faculty Association might be useful to its members?
_____________________________________________________________________
Return form to McMaster University Faculty Association, HH 103A
NAME____________________________________________EXTENSION______________________ DEPARTMENT____________________________________ E-MAIL___________________________
February 4, 2003
pdk
New
Members
Long
Term Disability (LTD)
olunteers
Needed!