Brock University Pension Plan€¦ · Brock University Pension Plan | Annual Report 2014/15 3...

Brock University Pension Plan

Annual Report 2014/15

Brock University Pension Plan | Annual Report 2014/15 2

Bro

ck U

niv

ers

ity P

ensi

on P

lan

Annual R

eport

2013/1

4

History & Overview of the Plan 3

Plan history 3 How the Plan works 3 Who contributes to the Plan 4 How pension amounts are calculated 4 Retirement from the Plan 4 In the event of death 4 The Short Term Account 5

Plan Governance 6

Plan Sponsor 6 Plan Administrator 6 Financial Planning and Investment Committee and Human Resources Committee 6 Audit Committee 7 Brock University Pension Committee 7 Third party service providers 8

Pension Committee Activity – 2014/15 Plan Year 9 Financial Overview of the Plan 10

The Trust Fund 10 Financial statements 10 Actuarial valuation 11 Plan contributions 13 Going concern liability breakdown 13

Investment Management Overview 15 Current investment structure 15 Statement of Investment Policies & Procedures 15 Fund assets 16 Fund performance 16 Investment manager performance 17 Impact of investment performance on Money Purchase Pensions 17

Plan Member Overview 19

Current membership breakdown 19 Election of pension option at retirement 19

Legislative Changes 20

Regulatory Compliance 20

This report is designed to describe, in simple terms, the Brock University Pension Plan and related matters for

eligible employees as at December 2015. It has been prepared for informational purposes only. Subject to

legislation and collective bargaining, as applicable, future amendments may be made to the Plan. If there is a

discrepancy between this report and the official plan text, or questions of interpretation arise, the official

plan text will prevail. The official plan text, as amended from time to time, is available on request in the

Human Resources Office.

TABLE OF CONTENTS


History & Overview of the Plan

Plan history Brock University pension plans date back to July 1, 1964 when the “Pension Plan for University Staff of Brock University” (the “original plan”) was established. The original plan underwent changes from time-to-time and was suspended as of July 1, 1969 when the “Retirement Plan for Faculty and Certain Other University Staff” (the “former plan”) was established. The former plan was also suspended as of June 30, 1971 and ultimately replaced by what is now known as the “Brock University Pension Plan” (the “Plan”) as of January 1, 1972. The Plan has been amended and restated on a number of occasions since 1972. How the Plan works Most pension plans are either a defined contribution (DC) plan, which provides a pension based on an individual’s pension account balance adjusted for investment performance over time; or a defined benefit (DB) plan, which provides a clearly defined benefit based on a number of factors upon retirement. The Plan is a hybrid plan, which offers a Money Purchase Pension (DC pension), supported by a Minimum Guaranteed Pension (DB pension) in the event that the Money Purchase Pension falls below the Minimum Guaranteed Pension. The Money Purchase Pension and Minimum Guaranteed Pension are adjusted annually on July 1st and pensioners receive the greater of the two for the next 12-month period. Pensioners can flip from between the Money Purchase Pension and the Minimum Guaranteed Pension over time. Chart #1 illustrates how a pensioner can move between a Money Purchase Pension and a Minimum

Guaranteed Pension. In this example, the pensioner starts with a monthly Money Purchase Pension of

$1,000 and a Minimum Guaranteed Pension of $900 in 2007. Actual Money Purchase Pension and

Minimum Guaranteed Pension adjustments have been applied to the starting pension amounts for

illustration purposes. The chart illustrates that the sample pensioner moved from a Money Purchase

Pension to a Minimum Guaranteed Pension in 2009 (as a result of the market downturn) and remained

on the Minimum Guaranteed Pension for the next five years. Adjustments to the Money Purchase

Pension and Minimum Guaranteed Pension after pension commencement are described on page #16.

A plan booklet that details the structure and operation of the Plan is available on the Human Resources web site: http://www.brocku.ca/hr/pension-new/member-pension. Chart #1

Minimum Guarantee Supplement (funded 100% by University)

Minimum Guarantee Supplement (funded 100% by University)


Who contributes to the Plan? Contributions to the DC portion of the Plan are made as follows, subject to Income Tax Act maximums:

• Employees contribute 4.4% of pensionable earnings up to the Yearly Maximum Pensionable Earnings (YMPE), plus 6% of pensionable earnings above the YMPE; and

• The University contributes 7.4% of pensionable earnings up to the YMPE, plus 9% of pensionable earnings above the YMPE.

Contributions to the DB portion of the Plan are made in accordance with the latest filed actuarial valuation and include the following:

• Current service cost contributions are funded 100% by the University; and • Special contribution payments to fund any Going Concern and/or Solvency deficits are funded

100% by the University, as needed. Employees may elect to make Additional Voluntary Contributions to the Plan, subject to Income Tax Act maximums and may have the option of making Special Transfer Contributions (transfers from other registered pension plans). There are no employer payments required for either of these contribution types and the funds are accounted for in separate accounts in the member’s name. There is no guaranteed level of pension associated with pensions provided by either of these accounts. A five-year summary of required contributions can be found in the Financial Overview section of this report. How pension amounts are calculated The Money Purchase Pension (DC component) provides a benefit based on accumulated contributions to the Money Purchase Account and investment returns. The total balance in the member’s Money Purchase Account is converted to a variable pension at pension commencement and transferred to the pensioner Variable Annuity Fund. A member’s initial pension is based on actuarial factors in effect at the time and determined by dividing the Money Purchase Account balance by the annuity factor.

The Minimum Guaranteed Pension (DB component) provides a benefit based on a predetermined formula, which considers a member’s pensionable earnings and years of pensionable service. At pension commencement, the Minimum Guaranteed Pension is determined as follows, subject to Income Tax Act maximums:

1.7% x best average earnings x pensionable service

minus 1/35 x (25% x lesser of best average earnings or final average YMPE) x pensionable service capped at 35 years

The normal form of pension is a Life Pension, guaranteed for 5 years. Other optional forms of pension are available and actuarially adjusted from the normal form pension. The default pension for a member with a spouse is a Joint & Survivor 60%. Retirement from the plan Normal retirement age for the Plan is 65, however members can begin receiving a pension as early as age 55 (actuarially reduced) or as late as December 1 of the calendar year that they reach age 71. Rather than elect a monthly pension at retirement, employee’s may elect to transfer the Money Purchase Account balance (including the commuted value of the supplementary retirement benefit, if applicable) to either a Locked-In Retirement Account or Life Income Fund. The transfer payment is subject to Income Tax Act limits with any amounts in excess of these limits paid as cash, less tax. In the event of death If a member dies before pension commencement, their surviving spouse or, if none, their beneficiary will receive a survivor benefit based on the member’s Money Purchase Account balance plus any commuted value owing. Instead of receiving a lump-sum payment, a surviving spouse may transfer the lump-sum benefit amount to a Registered Retirement Savings Plan or may choose to receive an annual


pension. If a member dies after pension commencement, any survivor benefits provided will depend on the form of pension that the member has elected. The Short Term Account Active members aged 62 or older have the option of transferring annually (effective November 1) a portion of the Money Purchase Account to the Short Term Account. Once transferred, the funds remain in the Short Term Account until the member makes an election with respect to their pension. The Short Term Account is currently invested in the Mawer Bond Pooled Fund and the Mawer Money Market Fund (approximately 50% in each fund).


Plan Governance

The Brock University Pension Plan is registered (#0327767) with the Financial Services Commission of Ontario under the Pension Benefits Act (Ontario) and the Canada Revenue Agency under the Income Tax Act. The Pension Benefits Act sets minimum rights and promotes benefit security (the floor) while the Income Tax Act limits contributions and accruals (the ceiling) - the Plan must comply with both regimes. In addition, other various legal regimes that apply to the Plan include, but are not limited to, the following: Employment Standards; Family Law; Contract Law; Human Rights; and Estate Law.

Plan Sponsor Every plan must have a Plan Sponsor, who is responsible for establishing the plan, amending the plan and benefits, contributing as required to the plan and determining pension expenses. Brock University is the Plan Sponsor. Plan Administrator Every plan must have a Plan Administrator, who is responsible for enrolling members, administering benefits, investing plan assets, communicating with plan members, appointing and monitoring service providers and ensuring regulatory compliance. Brock University is the Plan Administrator, however in recognition that certain duties require specialized expertise the University contracts the services of advisors with such expertise and has delegated certain duties to various internal and external parties. Financial Planning and Investment (FPI) and Human Resources (HR) Committee The Board of Trustees introduced a change to the Financial Planning, Investment and Human Resources (FPIHR) Committee structure in 2015. Two committees, the Financial Planning and Investment (FPI) Committee and Human Resources (HR) Committee were formed to replace the FPIHR Committee. The Pension Committee reports to the FPI Committee. The FPI Committee Charter, in relation to the Pension Plan, states: The Committee shall:

1. Review and monitor the investment performance of the Plan. 2. Review the annual audited financial statements. 3. Review and approve the annual pension report. 4. Review, evaluate and approve the recommendations made by the Pension Committee with

respect to the appointment and removal of investment consultants and managers, custodian and actuary.

5. Review, evaluate and approve the recommendations made by the Pension Committee with respect to investment and funding policies and objectives, asset allocation and any other investment and funding related matters.

6. Review, evaluate and approve the actuarial valuation. 7. Review, evaluate and approve changes to the Brock University Pension Plan Governance

Manual. 8. Review, evaluate and approve the recommendations made by the Pension Committee with

respect to changes of the Plan. 9. Review, evaluate and approve the recommendations made by the Pension Committee, for any

matters not specified in 1 through 8 above, in accordance with the Brock University Pension Plan Governance Manual.

10. Along with the Human Resources Committee, participate in a Joint Committee to review, evaluate and approve the recommendations made by the University related to changes to the benefit formula and contribution rates.

11. Along with the Human Resources Committee, participate in a Joint Committee to review, evaluate and recommend to the Board of Trustees, recommendation made by the University related to termination of the Plan or adoption of a new pension plan.

12. Consider any other matters that may be required by the Brock University Pension Plan Governance Manual.


The HR Committee Charter, in relation to the Pension Plan, states:

The Committee shall: 1. Review the annual pension report. 2. Review the annual audited financial statements and actuarial valuation reports. 3. Review changes to the Brock University Pension Plan Governance Manual. 4. Review all Plan changes recommended by the Pension Committee.

5. Along with the Financial Planning and Investment Committee, participate in a Joint Committee

to review, evaluate and approve the recommendations made by the University related to

changes to the benefit formula and contribution rates.

6. Along with the Financial Planning and Investment Committee, participate in a Joint Committee

to review, evaluate and recommend to the Board of Trustees, recommendations made by the

University related to termination of the Plan or adoption of a new pension plan.

Audit Committee The Audit Committee is a Board of Trustees Committee, with delegated responsibilities outlined in the

Board Bylaws and Audit Charter, as amended from time-to-time. The main responsibility of the Audit

Committee in relation to the Plan is the review and recommendation of the audited pension financial

statements to the Board of Trustees for approval. In addition, the Audit Committee is responsible for

the appointment of the external auditor, which conducts an annual audit of the pension plan and

prepares the audited pension financial statements.

Brock University Pension Committee The Pension Committee is an advisory sub-committee of the FPI Committee with delegated

responsibilities outlined in the Board Bylaws, as amended from time-to-time. The Board Bylaws

specifically state that the Pension Committee is:

1. To keep the Brock University Pension Plan under review, and to study matters of interest to members of the Plan and to take account of their impact on the Plan and to make recommendations to the FPI Committee for changes to the Plan; and

2. To maintain a review of the investment performance of the Trust Fund.


Current Pension Committee membership is detailed in Table #1.

Table #1 - Pension Committee Membership Name Term Term Ending Affiliation*

Voti

ng

Mem

bers

Darrell Cerminara Second Term June 30, 2016 OSSTF Tamara El-Hoss First Term June 30, 2019 BUFA Ana Isla First Term June 30, 2018 BUFA Skander Lazrak First Term June 30, 2017 BUFA Jim Lennard First Term June 30, 2018 BURA David Love(Vice-Chair) First Term June 30, 2017 BUFA Bill Rickers First Term June 30, 2016 Board Sheila Smith First Term June 30, 2017 AP&E Samir Trabelsi First Term June 30, 2017 BUFA David Vivian (Chair) First Term June 30, 2016 BUFA Anthony Ward First Term June 30, 2019 BUFA Brad Worden First Term June 30, 2016 CUPE 1295 Grant Armstrong Ex-Officio AVP, Human Resources Bryan Boles Ex-Officio AVP, Finance

Wanda Fast

Secretary to Pension Committee

Associate Director, Total Rewards

Resource Personnel Josh Tonnos Director, Accounting & Treasury Janice Facey Pension Officer

* AP&E – Administrative/Professional/Exempt Staff (non-union) BUFA – Brock University Faculty Association BURA – Brock University Retirees Association CUPE 1295 – Trades/Custodial OSSTF – Support Staff

Third party service providers The Plan Sponsor and Administrator may rely on the expertise of third party service providers as described above. A summary of current service providers to the Plan is provided in Table #2.

Table #2 – Service Providers Service Providers Fund Managers

Actuary Mercer Fixed Income AllianceBernstein Investment Consultant Aon Hewitt Canadian Equities Mawer Custodian RBC Investor & Treasury

Services Global Equities Aberdeen

Walter Scott Auditor KPMG Pension Administration System Seclon


Pension Committee Activity – 2014/15 Plan Year The Pension Committee normally meets a minimum of five times per year. During the 2014/15 plan year the committee met on the following dates:

September 15, 2014 January 16, 2015 April 9, 2015 November 10, 2014 February 13, 2015 May 14, 2015 November 27, 2014 March 5, 2015 June 4, 2015

March 20, 2015 Sub-committees of the Pension Committee met on the following dates:

Asset Mix Governance Review March 24,2015 February 3, 2015 May 6, 2015

Performance reviews The Plan’s investment consultant presented two detailed performance reviews for periods ending June 30/13 and December 31/14. Quarterly performance summaries were received for periods ending September 30/14 and March 31/15. Fund manager presentations Representatives from Aberdeen (Global Equities) and Walter Scott (Global Equities) attended Pension Committee meetings to present information regarding the firms’ respective portfolios. Pension governance review The Governance Review sub-committee finalized the Pension Governance Manual, which was subsequently approved by the FPIHR Committee. Related policies and procedures will be finalized and flow through established University approval processes.

Actuarial Valuation The triennial funding valuation was prepared and filed for the Brock University Pension Plan effective July 1, 2014. The valuation guides the University in establishing employer contributions until the

effective date of the next valuation. Details regarding the funding valuation can be found starting on page 10 of this report and are posted on the pension web site. Asset mix review A sub-committee composed of members from the Pension Committee and FPIHR Committees was formed to review the asset mix structure of the Plan, in consultation with the Plan’s investment consultants. Following recommendations by the Asset Mix sub-committee and Pension Committee, the FPIHR Committee approved the investment of up to 20% into Real Estate and Infrastructure over time, sourced equally from fixed income and equities. The sub-committee will continue its’ work on this item. Mortality Table A change to the current mortality table (used for converting money purchase account balances into monthly pensions) was recommended by the Pension Committee and approved by the FPIHR Committee.

Annual member meeting The annual pension meeting was held on June 19, 2015. The Plan’s actuary and investment consultant presented information regarding markets and fund performance, the pension adjustment process, the change to a new mortality table and a review of the results of the Actuarial Valuation at July 1, 2014.


Financial Overview of the Plan

The Trust Fund While the Brock University Pension Plan is comprised of a number of separate accounts, all funds are held together under one Trust Fund and administered by professional fund managers in accordance with the Plan’s approved Statement of Investment Policies and Procedures (SIP&P). The Plan actuary confirms exact amounts that make up the trust fund at each actuarial valuation date - the total trust fund value as at the last filed valuation (July 1, 2014) was $398M, details of which are shown in Chart #2. Chart #2

Financial statements Financial Statements for the Plan were prepared by the University and audited by KPMG. The

statements are available on the Financial Services web site -

http://www.brocku.ca/finance/university-financial-information/audited-statements. The Statement of

Changes in Net Assets Available for Benefits, as well as Benefit Payment details and a breakdown of

plan administrative expenses from these statements are provided in Tables #3, #4 and #5, below.

< 1%

67%

1%

7%

2%

23%

Trust Fund Allocation - July 1 2014 Valuation

Additional Voluntary Contribution

Account $678,967

Money Purchase Account

$265,590,314

Special Transfer Contribution Account

$5,178,247

Minimum Guarantee fund

$26,083,987

Short Term Account $7,627,870

Variable Annuity Fund $92,714,615


Table #3 - Statement of Changes in Net Assets Available for Benefits 2015 2014 Increase in Net Assets Available for Benefits Investment Income $16,414,376 $11,332,284 Change in Unrealized Gains $22,500,017 $44,194,687 Contributions: Employer $12,445,350 $17,110,084 Employee $7,036,310 $6,983,054 Transfers from Other Pension Plans $157,052 $271,634

$58,553,105 $79,891,743 Decrease in Net Assets Available for Benefits Net Realized Gain (Loss) on Sale of Investments $1,595,164 ($7,328) Benefit Payments $21,365,236 $16,329,048 Administrative Expenses & Professional Fees $3,006,274 $2,734,013

$25,966,674 $19,070,389 Increase in Net Assets Available for Benefits $35,776,759 $60,821,354 Net Assets Available for Benefits, Beginning of Year $401,731,225 $340,909,871

Net Assets Available for Benefits, End of Year $437,507,984 $401,731,225

Table #4 - Benefit Payments

2015 2014 Pension Benefits $9,371,860 $7,887,828 Cash Refunds $3,654,189 $888,839 Transfers to Other Pension Funds $8,120,704 $6,142,920 Death Benefits $218,483 $1,409,461

Total Benefit Payments $21,365,236 $16,329,048

Table #5 - Administrative Expenses & Professional Fees 2015 2014 Fund Manager Fees $2,202,396 $1,996,514 Investment Consulting Fees $90,565 $213,374 Actuarial/Pension Consulting Fees $350,414 $162,172 Custodial Fees $93,246 $85,804 Audit Fees $9,489 $10,560 Plan Administration Expenses $260,164 $265,589

Total Expenses $3,006,274 $2,734,013

Actuarial valuation Funding valuations are required by the Income Tax Act (ITA) at least every third year, however the Pension Benefits Act (PBA) requires that annual valuations be prepared if the solvency position of a plan falls below a prescribed threshold (currently if the wind-up ratio is less than 85%). The valuation establishes the minimum required employer contributions (in accordance with the PBA) and maximum permissible employer contributions (in accordance with the ITA). There are three different calculations performed during the valuation: Going Concern: Assumes the Plan will continue indefinitely. Assumptions are set by the actuary with the employer’s input (the employer sets the margin for adverse deviation which is used in calculating the discount rate) and subject to actuarial standards of practice. Going Concern deficits are amortized over a 15-year period. Wind-Up: Assumes that the plan will hypothetically terminate on valuation date and uses prescribed assumptions. Solvency: Identical to the Wind-Up valuation, with the exception that regulation allows certain adjustments to solvency valuations (e.g. future indexing can be excluded). Solvency deficits are amortized over a 5-year period. The most recent valuation was filed effective July 1, 2014.


July 1, 2014 valuation The latest funding valuation was prepared effective July 1, 2014 and revealed a Going Concern deficit of $3.5M. Details of the July 1, 2014 valuation are shown in Tables #6, #7 and #8, below.

Table #6 - Financial Position of the Plan Going Concern Basis July 1 2014 July 1 2011 Assets Money Purchase, Short Term Account, AVC’s & Special Transferred Contribution Funds

$279,075,000 $212,448,000

Variable Annuity Fund $92,715,000 $62,264,000 Minimum Guarantee Fund $26,084,000 $7,624,000 Mortality Reserve Account $0 $0

Total Assets $397,874,000 $282,336,000 Liabilities Money Purchase, Short Term Account, AVC’s & Special Transferred Contribution Funds

$279,075,000 $212,448,000

Variable Annuity Fund $92,715,000 $62,264,000 Accrued Active Members’ Supplemental Benefits $19,325,000 $33,617,000 Retired Member’s Supplemental Benefits $10,316,000 $9,449,000

Total Going Concern Liability $401,431,000 $317,778,000

Funding Excess (Shortfall) ($3,557,000) ($35,442,000)

Funding Ratio 99% 89%

Table #7 - Financial Position of the Plan Wind-Up Basis July 1 2014 July 1 2011 Assets Market Value of Assets $397,874,000 $282,336,000 Provision for Termination Expenses ($500,000) ($400,000)

Wind-Up Assets $397,374,000 $281,936,000 Liabilities Money Purchase, Short Term Account, AVC’s & Special Transferred Contribution Funds

$279,075,000 $212,448,000

Variable Annuity Fund $92,715,000 $62,264,000 Accrued Active Members’ Supplemental Benefits $65,041,000 $37,893,000 Retired Member’s Supplemental Benefits $29,750,000 $15,233,000

Total Wind-Up Liability $466,581,000 $327,838,000

Wind-Up Excess (Shortfall) ($69,207,000) ($45,902,000)

Wind-Up Ratio 85% 86%

Table#8 - Financial Position of the Plan Solvency Basis July 1 2014 July 1 2011 Assets Market Value of Assets $397,874,000 $282,336,000 Provision for Termination Expenses ($500,000) ($400,000)

Solvency Assets $397,374,000 $281,936,000 Liabilities Money Purchase, Short Term Account, AVC’s & Special Transferred Contribution Funds

$279,075,000 $212,448,000

Variable Annuity Fund $92,715,000 $62,264,000 Accrued Active Member’s Supplemental Benefits $65,041,000 $37,893,000 Retired Member’s Supplemental Benefits $29,750,000 $15,233,000

Total Solvency Liability Before Exclusion of Benefits $466,581,000 $327,838,000 Value of Excluded Benefits ($87,937,000) ($47,773,000)

Adjusted Solvency Liability $378,644,000 $280,065,000

Solvency excess (shortfall) $18,730,000 $1,871,000

Solvency Ratio 1.05% 101%


Plan contributions The July 1, 2014 valuation showed a Going Concern deficit of $3.5M and a Solvency surplus. The

University’s DB Current Service Cost percentage identified in the valuation was 17.3%, which means

that Current Service Cost contributions are calculated as 17.3% of employee required contributions.

Going Concern payments associated with the $3.5M deficit are $413,000 annually. Table #9 illustrates

total required contributions to the Plan for the last five years.

Table #9 – Required Contributions to Plan (July 1 to June 30)

2015 2014

(Valuation Year)

2013 2012 2011

(Valuation Year)

DC - University Required $11,113,619 $ 11,021,901 $ 10,501,222 $ 10,078,781 $ 9,568,534 DB - Current Service 1,199,073 2,636,035 2,512,439 2,430,372 679,453 DB - Going Concern 132,658 3,452,148 3,452,148 3,743,991 420,996

Total University $12,445,350 $17,110,084 $16,465,809 $16,253,143 $10,668,984 DC - Employee Required $6,980,217 $6,918,726 $6,594,329 $6,331,646 $6,012,862

University/Employee Required Contribution Ratio

1.8 2.5 2.5 2.5 1.8

Going concern liability breakdown The $3.5M Going Concern liability identified in the 2014 valuation is allocated to the Plan membership as outlined in Chart #3. The breakdown of the active member liability between the various employee groups at the University is illustrated in Chart #4. Chart #3

65%

< 1%

35%

Going Concern Liability by Plan Membership

Active Members $2,305,480

Deferred Members $13,975

Pensioners $1,238,212


Chart #4

86%

< 1%

<1%

7%

<1%

7%

Active Member Going ConcernLiability by Employee Group

BUFA$1,977,158

CUPE 4207 Unit 1, 2 and 3 & IATSE$3,560

OSSTF$12,932

Non-Union (AP&E and Part Time)$154,733

CUPE 1295 & CUPE 2220$4,801

SAC$152,295


Investment Management Overview Current investment structure After a review of fund performance in the fall of 2006, a detailed review of the Plan’s investment structure was undertaken. Prior to the 2006 review, the Plan’s investment structure consisted of two balanced managers (each with 50% of the fund) and an asset mix policy that allocated 40% of the fund to fixed income, 35% to Canadian equities, and 25% to global equities. Following the review, the Pension Committee recommended a new investment structure and the use of active fund managers in order to maximize long term returns while reducing the frequency and size of negative returns in any year. Recommendations were approved by the Board of Trustees and became effective in July 2008. Table #10 outlines the investment structure at July 1, 2008. Table #10 - Asset Structure July 1 2008 Asset Class Percentage Fund Manager Located Fixed Income 40 AllianceBernstein New York Canadian Equity 15 McLean Budden Toronto Global Equity* 45 Aberdeen (15%) Edinburgh

Acadian (15%) Boston

Walter Scott (15%) Edinburgh

Short Term Fund was managed by McLean Budden *An active currency hedging program was also implemented using Pareto Partners.

A number of changes to the 2008 investment structure were subsequently approved, including a move

from three to two global equity managers in 2012; adjusting the Canadian/global equity proportions of

the asset mix from 15%/45% to 12%/48% in 2011; moving the Canadian equity mandate to Mawer in

2012; changing to a passive currency hedging program in 2012; removing the currency hedging program

in 2013; and transferring the Short Term Fund mandate to Mawer in 2013.

Table #11 outlines the current investment structure.

Table #11 - Asset Structure – July 1, 2015 Asset Class Percentage Fund Manager Located Fixed Income 40 AllianceBernstein New York Canadian Equity 12 Mawer Calgary Global Equity 48 Aberdeen (24%) Edinburgh Walter Scott (24%) Edinburgh

Short Term Fund is managed by Mawer

Statement of Investment Policies & Procedures (SIP&P) The SIP&P is a legislatively required document for all registered pension plans that describes the objectives and operation of a plan and outlines investment related policies and procedures, including asset allocation and guidelines. The Plan’s asset mix and ranges, as provided for in the current SIP&P are detailed in Table #12.

Table #12 - Percentage of fund at Market Values

Asset Class Allocation

June 30, 2015 Normal Allocation Range

Minimum Maximum Equities: Canadian Equities 13.4% 12% 5% 20% Global Equities 50.8% 48% 40% 55%

Total Equities 64.2% 60% 50% 70% Fixed Income 34.8% 40% 30% 50%

Cash & Cash Equivalents 1.0% 0% 0% 5%


Fund assets Total fund assets have increased by approximately 54% since 2011. Chart #5 illustrates changes in total

fund assets, including the Short Term Account, over the past five years.

Chart #5

Fund performance Fund performance, excluding the Short Term Account, compared to the Plan’s benchmark since 2010 is summarized in Chart #6. (Total fund benchmark: 12% S&P/TSX Capped 10% + 48% MSCI World Net + 40% FTSE TMX Universe Bond) Chart #6

$438M

$402M

$341M

$302M$284M

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

2015 2014 2013 2012 2011

Mil

lio

ns

Total Fund Assets as of June 30th

2015 2014 2013 2012 2011

Expenses 0.8% 0.9% 0.8% 1.0% 1.2%

Fund Return - Net 9.5% 15.8% 10.3% 2.0% 12.6%

Benchmark 11.3% 17.4% 11.5% 2.2% 14.0%

0.0%

5.0%

10.0%

15.0%

20.0%

Total Fund Performance


Investment manager performance The Pension Committee regularly monitors performance of the fund and individual investment managers. The Plan’s investment consultant provides quarterly reports to support the monitoring process. Table #13 provides detail on individual manager annual performance.

Table #13 – Fund Manager Gross Annual Performance – for Plan Year Ending June 30 2015 2014 2013 2012 2011 2010 2009 Mawer * 8.1% 31.0% 19.3% -3.0% 27.7% 11.6% -17.9% S&P TSX Capped Composite -1.2% 28.7% 7.9% -10.3% 20.9% 12.0% -25.7%

Value Added 9.3% 2.3% 11.4% 7.3% 6.8% -0.4% 7.8% Aberdeen * 7.6% 22.1% 17.0% 4.3% 18.4% 6.5% -21.1% MSCI World (Net) (CAD) 18.9% 25.2% 22.7% 0.4% 18.5% 0.8% -19.3%

Value Added -11.3% -3.1% -5.7% 3.9% -0.1% 5.7% -1.8% Walter Scott * 20.8% 20.1% 20.7% 6.4% 14.2% 1.3% -7.1% MSCI World (Net) (CAD) 18.9% 25.2% 22.7% 0.4% 18.5% 0.8% -19.3%

Value Added 1.9% -5.1% -2.0% 6.0% -4.3% 0.5% 12.2% AllianceBernstein 5.8% 6.6% 0.2% 9.4% 6.8% 13.3% 2.2% FTSE TMX Universe Bond 6.3% 5.3% -0.2% 9.5% 4.7% 6.9% 7.0%

Value Added -0.5% 1.3% 0.4% -0.1% 2.1% 6.4% -4.8% (* Mawer funded February 2012; Aberdeen and Walter Scott funded July 2008)

Impact of investment performance on Money Purchase Pensions Money Purchase Pensions (MPP) are adjusted up or down each year to reflect the difference between 1)

actual fund rate of return compared to the 6% assumption used when calculating the starting Money

Purchase Pension; and 2) actual pensioner mortality compared to the assumption used when calculating

the starting Money Purchase Pension.

Chart #7 illustrates Money Purchase Pension adjustments for the last five years. Note that a stronger mortality table was introduced in 2010, resulting in larger than normal mortality adjustments in 2010 and 2011. Chart #7

2015 2014 2013 2012 2011

MPP Adjustment 3.04% 8.8% 4.6% -3.6% 3.3%

Fund Return - Net 9.54% 15.8% 10.3% 2.0% 12.6%

Fund Return - Gross 10.30% 16.7% 11.1% 3.0% 13.8%

Benchmark 11.30% 17.4% 11.5% 2.2% 14.0%

-4.00%

1.00%

6.00%

11.00%

16.00%

Money Purchase Pension Adjustments


Minimum Guaranteed Pensions (MGP) are adjusted annually by the Consumer Price Index to a maximum of 2%, cumulative from retirement date. Chart #8 displays Minimum Guaranteed Pension adjustments for the last five years. Chart #8

Note: the Minimum Guaranteed Pension is adjusted by the change in Consumer Price Index over the preceding 12 months to a maximum of 2% cumulative from start of pension, which can result in different adjustments among pensioners depending on when the pensioner’s pension commenced. The percentage listed above is the increase received by the majority of pensioners in each year.

Chart #9 illustrates the proportion of pensioners receiving a Money Purchase Pension and a Minimum Guaranteed Pension for the last five years, as well as approximate monthly amounts paid from the Minimum Guarantee Fund. Chart #9

2015 2014 2013 2012 2011

MGP Adjustment 2.00% 2.0% 2.0% 2.0% 2.0%

CPI 1.50% 1.4% 0.9% 2.4% 2.5%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

Minimum Guarantee Pension Adjustments

2015 2014 2013 2012 2011

Pensioners Receiving MGP 58 63 75 87 71

Pensioners Receiving MPP 289 266 228 201 204

MGP cost per month $10,754 $12,372 $16,828 $20,271 $12,384

$0

$5,000

$10,000

$15,000

$20,000

$25,000

0

50

100

150

200

250

300

350

400

Pensioners Receiving MPP vs MGP


Plan Member Overview

Current membership breakdown Plan membership is comprised of three groups: active members (employees in active employment who are currently contributing to the Plan); pensioners (plan members in receipt of a pension from the Plan); and deferred members (employees who have terminated employment with the University and have elected to defer their pension in the Plan). Membership trends over the last 5 years are detailed in Chart #10. Chart #10

Election of pension option at retirement When retiring, Plan members have the option of electing a pension or transferring pension benefits from the Plan to either a Locked-In Retirement Account or Life Income Fund. The transfer payment is subject to Income Tax Act limits and any amount above these limits are paid as cash, less tax. Chart #11 details the proportion of retirees electing a pension versus transferring their pension benefit out of the Plan. Chart #11

2015 2014 2013 2012 2011

Pensioners 347 329 303 288 274

Deferred Members 300 270 254 247 239

Active Members 1595 1621 1604 1551 1506

0

500

1000

1500

2000

2500

Plan Membership - 5 Year Summary

55% 57%75% 67% 68%

45% 43%25% 33% 32%

0%

20%

40%

60%

80%

100%

2015 2014 2013 2012 2011

Election of Pension Option

Pension Transfer funds out


Legislative Changes

Legislative and regulatory changes that affect pension plans are introduced from time-to-time, some of which require changes to the administration of a plan and/or the plan text. No regulatory changes were introduced in the 2014/2015 Plan year.

Regulatory Compliance

Plan Administrators are required to administer pension plans in accordance with all applicable legislation and plan documents. In addition, certain reports are required to be filed with relevant government agencies. To the best of the knowledge and belief of Human Resources staff, the Plan is in compliance with the Pension Benefits Act and Income Tax Act as at June 30, 2015. Table #14 details all required filings for the 2014/15 plan year, including due date and date filed.

Table#14 – Regulatory Compliance Government Filing Date Due Date Filed Form #7 - RBC Investor Services Contribution Planner 31-Aug-14 22-Aug-14 Form #8 - Investment Information Summary 31-Dec-14 23-Dec-14 Financial Statements 31-Dec-14 06-Nov-14 Form #2 - Annual Information Return 31-Mar-15 18-Mar-15 From #2.1 - Pension Benefits Guarantee Fund 31-Mar-15 18-Mar-15 Actuarial Valuation (tri-annual) 31-Mar-15 09-Feb-15

Brock University Pension Plan€¦ · Brock University Pension Plan | Annual Report 2014/15 3...

Documents

Transcript of Brock University Pension Plan€¦ · Brock University Pension Plan | Annual Report 2014/15 3...