University of Saskatchewan 1999 Academic
Pension Plan
AGM Presentation – November 2014
Prepared by Aon Hewitt
Presentation to University of Saskatchewan 1999 Academic Pension Plan
Agenda
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Governance Structure
The 1999 Academic Plan Basics
Calculation Examples
Financial Position at Dec. 31, 2013
Current Pension Landscape
FAQs – Pensions Office and Retirement
Plan Membership
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Pension Committee Governance Structure
Board of Governors
Pension Committee
Investment
- Investment Policy
- Investment
Monitoring
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Benefit, Financial,
Accounting and Controls
- Plan Design
- Funding Policy
- Communication/
Education
- Expense Controls
- Financial Statement
Accounting
Administration and
Compliance
- Daily Administration
- Plan Documentation
- Regulatory Filings and
Compliance
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The 1999 Academic Plan Basics
 What type of Plan do I have?
– The Academic Pension Plan is a defined benefit pension plan
– Provides a monthly pension at retirement
– Based on service and best average earnings at retirement
 What benefit am I entitled to at retirement?
For retirement dates up to and including June 30, 2015:
– Monthly Pension; or
– Lump sum transfer equal to greater of:
1. Commuted value of pension
2. Member and University contributions with interest
For retirement dates after June 30, 2015:
– Monthly Pension only
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The 1999 Academic Plan Basics - continued
 How is my pension calculated at retirement?
(2% x Service x BAE4) – (0.4% x Post-2005 Service x FAYMPE3)
where:
 Service = pensionable service earned while a member of the Plan
 BAE4 = Best Average Earnings, based on average of highest 48
continuous months of earnings
 Post-2005 Service = pensionable service earned after 2005
 FAYMPE3 = Average of the final 3 years of the Year’s Maximum
Pensionable Earnings
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The 1999 Academic Plan Basics - continued
 What do I contribute to the Plan?
– Current member contribution rates are 8.50% of earnings
 What does the University contribute to the Plan?
– The University matches your contributions plus pays for any additional amounts
required to meet minimum funding standards (deficit funding)
– Current University contribution rates per year are:
• 8.50% of pensionable earnings (no deficit funding required as of November 1, 2014)
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The 1999 Academic Plan Basics - continued
 When can I retire?
Normal
Retirement
• June 30th immediately following age 67
Postponed
Retirement
• Last day of any month following a member’s
normal retirement
• No later than November 30th of the year that
member turns age 71
Early Retirement
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• June 30th immediately following age 55,or last day
of any month following (pension subject to early
retirement reductions)
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The 1999 Academic Plan Basics – continued
 Is my pension reduced at retirement?
– Depending on when you retire, your pension might be reduced at retirement
– Pre-92 service
• not subject to early retirement reduction
– Post-91 service
• Amount of reduction for early retirement is equal to 0.25% for each
month between your early retirement date (ERD) and the earlier of:
 Age 60; or
 Rule of 80
– Members with less than 10 years are subject to an actuarial equivalent
reduction
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The 1999 Academic Plan Basics – continued
 How will my pension be payable?
– Pension is payable at the end of each month for your lifetime
– Normal Form = Single Life, 10 year guarantee
– Pension on annual statement always calculated in normal form
– Optional forms available:
• With Spouse:
 Joint & Survivor, reducing to 60%, 66 2/3%, 75% or paying full 100%
 A guarantee period of 5, 10 or 15 years can be attached
 Integrated options upon request (i.e. level income option)
• Without Spouse (Single Life)
 15 year guarantee
 Integrated options upon request (i.e. level income option)
–
Normal form pension actuarially reduced based on which optional form
chosen
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The 1999 Academic Plan Basics – continued
 Is my pension limited?
– The Plan limits the amount of pension you can earn in any given year
– Limit is set by CRA and increases each year
– Historical earnings limits
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Year
Maximum
Pensionable
Earnings Limit
2014
$149,000
2013
$145,054
2012
$142,354
2011
$137,271
2010
$134,162
2009
$131,482
2008
$125,647
2007
$119,851
2006
$113,976
2005
$100,000
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Example #1 – Pension Calculation
 Member Information:
– Member is age 60
– 21 years of total service (12 years of pre-2006 service and 9 years of post2005 service)
– Earnings and YMPE for the last 10 years are as follows:
Year
Actual Earnings
Annual Pensionable
Earnings After Appling
Maximum Limit
2014
$100,000
$100,000
$52,500
2013
$95,000
$95,000
$51,100
2012
$92,000
$92,000
$50,100
2011
$90,000
$90,000
$48,300
2010
$85,000
$85,000
$47,200
2009
$84,000
$84,000
$46,300
2008
$82,000
$82,000
$44,900
2007
$80,000
$80,000
$43,700
2006
$76,000
$76,000
$42,100
2005
$75,000
$75,000
$41,100
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Year’s Maximum
Pensionable
Earnings
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Example #1 – Pension Calculation
 Calculation of BAE4 and FAYMPE3:
– BAE4 is based on average of highest 48 continuous months of earnings
– FAYMPE3 is based on average of final 3 years of YMPE
Year
Annual Pensionable
Earnings After Appling
Maximum Limit
Year’s Maximum
Pensionable
Earnings
2014
$100,000
$52,500
= (100,000 + 95,000 + 92,000 + 90,000) / 4
2013
$95,000
$51,100
= $94,250
2012
$92,000
$50,100
2011
$90,000
$48,300
2010
$85,000
$47,200
2009
$84,000
$46,300
2008
$82,000
$44,900
2007
$80,000
$43,700
2006
$76,000
$42,100
2005
$75,000
$41,100
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BAE4
FAYMPE3
= (52,500 + 51,100 + 50,100 ) / 3
= $51,233.33
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Example #1 – Pension Calculation
 Calculation of pension:
(2% x Service x BAE4) – (0.4% x Post-2005 Service x FAYMPE3)
Lifetime Pension
= 2% x 21 x $94,250 – 0.4% x 9 x $51,233.33
= $37,740.60 per year payable in the normal form
= $3,145.05 per month payable in the normal form
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Example #2 – Pension Calculation
 Member Information:
Age: 65
Service: 31 years (22 years of pre-2006 service and 9 years of post-2005 service)
Earnings and YMPE for the last 10 years are as follows:
Year
Actual Earnings
Annual Pensionable
Earnings After Appling
Maximum Limit
2014
$175,000
$149,000
$52,500
2013
$170,000
$145,054
$51,100
2012
$165,000
$142,354
$50,100
2011
$160,000
$137,271
$48,300
2010
$155,000
$134,162
$47,200
2009
$150,000
$131,482
$46,300
2008
$145,000
$125,647
$44,900
2007
$135,000
$119,851
$43,700
2006
$120,000
$113,976
$42,100
2005
$100,000
$100,000
$41,100
Aon Hewitt
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Year’s Maximum
Pensionable
Earnings
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Example #2 – Pension Calculation
 Calculation of BAE4 and FAYMPE3:
– BAE4 is based on average of highest 48 continuous months of earnings
– FAYMPE3 is based on average of final 3 years of YMPE
Year
Annual Pensionable
Earnings After Appling
Maximum Limit
Year’s Maximum
Pensionable
Earnings
2014
$149,000
$52,500
2013
$145,054
$51,100
2012
$142,354
$50,100
2011
$137,271
$48,300
2010
$134,162
$47,200
2009
$131,482
$46,300
2008
$125,647
$44,900
2007
$119,851
$43,700
2006
$113,976
$42,100
2005
$100,000
$41,100
Aon Hewitt
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BAE4
= (149,000 + 145,054 + 142,354 + 137,271) / 4
= $143,419.75
FAYMPE3
= (52,500 + 51,100 + 50,100 ) / 3
= $51,233.33
15
Example #2 – Pension Calculation
 Calculation of pension:
(2% x Service x BAE4) – (0.4% x Post-2005 Service x FAYMPE3)
Lifetime Pension
= 2% x 31 x $143,419.75 – 0.4% x 9 x $51,233.33
= $87,075.85 per year payable in the normal form
= $7,256.32 per month payable in the normal form
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Example #3 – Full Details of Options
 Member Information:
–
–
–
–
Retirement Date: June 30, 2014
Member’s age: 66.4 years
Spouse’s age: 65.7 years
39.0 years of total service (30.5 years of pre-2006 service and 8.5
years of post-2005 service)
– BAE4: $140,718.26
– FAYMPE3: $51,233.33
– Member plus University contribution balance with interest:
$1,742,228.95
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Example #3 – Full Details of Options
 Calculation of pension:
(2% x Service x BAE4) – (0.4% x Post-2005 Service x FAYMPE3)
Lifetime Pension
= 2% x 39 x $140,718.26 – 0.4% x 8.5 x $51,233.33
= $108,018.31 per year payable in the normal form
= $9,001.52 per month payable in the normal form
Maximum pension payable in accordance with the ITA
= $2,770 per year of service (for 2014 retirements)
= $2,770 x 39
= $108,030 per year.
Therefore no reduction
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Example #3 – Full Details of Options
 Options available to member:
1)
Monthly pension payable from the plan
2)
Transfer out value of pension
 Option 2 (transfer out value of pension) is only available for
retirements up to and including June 30, 2015. For all retirements
after June 30, 2015, Option 1 is the only available option.
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Example #3 – Option 1 – monthly pension
 Option 1: monthly pension payable from the plan
Guaranteed Period (Years)
0
5
10
15
June 30, 2019
June 30, 2024
June 30, 2029
Single Life Options
9,001.52
8,599.93
Joint Life Options
100.00%
- payable for longer of Members Life or Guarantee Period
8,000.92
7,997.58
7,974.30
7,908.55
- payable to spouse after Member's death and Guarantee Period
8,000.92
7,997.58
7,974.30
7,908.55
- payable for longer of Members Life or Guarantee Period
8,313.70
8,287.31
8,208.52
8,070.78
- payable to spouse after Member's death and Guarantee Period
6,235.28
6,215.48
6,156.39
6,053.09
- payable for longer of Members Life or Guarantee Period
8,423.46
8,388.58
8,289.58
8,126.30
- payable to spouse after Member's death and Guarantee Period
5,615.92
5,592.67
5,526.66
5,417.80
- payable for longer of Members Life or Guarantee Period
8,513.44
8,471.46
8,355.74
8,171.29
- payable to spouse after Member's death and Guarantee Period
5,108.06
5,082.88
5,013.44
4,902.77
75.00%
66.67%
60.00%
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Example #3 – Option 2 – lump sum transfer
 Option 2: transfer out value of pension (retirements on or before June 30, 2015)
– Lump sum transfer equal to greater of:
1.
2.
Commuted value of pension
= pension x actuarial annuity factor
= $108,018.31 x 15.8604 = $1,713,212.49
Member and University contributions with interest
= $1,742,228.95
– Lump sum transfer equal to $1,742,228.95
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Example #3 – considerations for lump sum transfer
1) Transfer Deficiency:
• When a Plan has a solvency deficiency, legislation requires that a portion of every
lump sum (LS) payment be held back
• Transfer Deficiency paid out, with interest, at end of five year period following the
date of payout
• No impact on members retiring and commencing a pension from the Plan
2) Income tax act – tax sheltered maximum amount
• The Income Tax Act only allows a portion of a lump sum transfer from a pension
plan to be tax-sheltered
• The portion is based on the member’s accrued pension and a factor (set by the
ITA) based on member’s age at retirement
• Any amounts over the ITA tax sheltered maximum must be taken in cash and
subject to tax
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Example #3 – Option 2 – lump sum transfer
Breakdown of lump sum transfer options:
Full lump sum transfer
Transfer deficiency holdback*
Adjusted lump sum transfer
• Tax-sheltered amount**
• Cash amount***
= $1,742,228.95
= ($452,979.53)
= $1,289,249.42
= $959,201.28
= $330,048.14 OR temporary pension
*Transfer deficiency holdback= [Full Lump sum] x (1- Solvency Ratio)
(Solvency ratio in this example = 74%)
**Tax-sheltered amount = [Pension x ITA factor] x (Solvency Ratio)
***Cash amount = Adjusted Lump sum - tax-sheltered amount
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Example #3 – Option 2 – lump sum transfer
Summary of lump sum transfer options:
 Transfer to a LIRA or PRIF = $959,201.28
 Cash or RRSP transfer = $330,048.14 (subject to 30% withholding tax) OR a
temporary monthly pension of $9,001.52 per month for 38 months
 Transfer deficiency amount of $452,979.53 paid back in 5 years (also
subject to ITA maximum transfer limits and applicable cash withholding tax)
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Financial Position
Going-Concern
Filed
Dec 31, 2012
Solvency
Filed
Dec 31, 2013
Filed
Dec 31, 2012
Filed
Dec 31, 2013
$ 151,158,000
$ 169,671,000
$ 150,958,000
$ 169,471,000
Total Liabilities
160,040,000
167,900,000
205,201,000
190,979,000
Surplus /
(Deficit)
$(8,882,000)
$1,771,000
$ (54,243,000)
$ (21,508,000)
94%
100%
74%
89%
20.9%
20.3%
Total Assets
Funded/
Solvency ratio
Current service
cost
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Current Pension Landscape
 Challenges facing DB pension plans:
– Sustainability and affordability
– Margins in plans may not be adequate
• Saskatchewan Superintendent of Pensions putting pressure on plan sponsors to
enhance margin to 10% by next valuation
– Pensions being paid for longer
– Investment markets volatile and uncertain
– Other considerations: TBD
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FAQs – Pensions Office
Where is the Pensions Office?
o Research Annex Building, Room 220
When should I contact the Pensions Office?
You should contact us if you:
o have general questions about your pension plan or annual statement
o are retiring or leaving the University
o are considering retirement and require information
o need to make changes to your pension beneficiary designation
o have already left the University and require assistance understanding your
options or completing your pension option forms
pensions.inquiries@usask.ca or 306-966-6633
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FAQs – How to Retire
When should I give my retirement notice?
o Notice requirements are outlined in your collective agreement
o Your retirement date will be the last day of the month
o Your last physical day at work will depend on whether you are taking
vacation prior to your retirement
o Provide written notice to your supervisor, and copy the Pensions Office
What should I expect once I’ve given my retirement notice?
o Pensions Office will send option forms to your home address approximately
3 months before your retirement date
o You may set up an appointment with the Pension Manager to explain your
options and answer any questions
Can I bring my spouse with me to the appointment?
o Yes - please feel free to bring someone along to your appointment
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FAQs – How to Retire
What forms will I need to fill out, and what information will I need to
provide?
o There are several required forms to be completed, depending on the option
chosen. All required forms are included in your package, and the Pensions
Office can assist you in completing your forms.
o You may need to provide proof of age and spouse’s proof of age, banking
information, transfer information from a financial institution
What about CPP and OAS?
o Contact Service Canada for information
o 1-800-277-9914 or servicecanada.gc.ca
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FAQs – How to Retire
What about my health benefits?
o Your University benefits will end on your retirement date, but conversion
options are available through Sun Life
I’m not yet ready to retire, is there anything I need to do?
o Review your annual statement, it provides estimates of your monthly
pension on retirement
o Ensure all data and beneficiaries are correct
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Appendix: Plan Membership
Active Members
Dec 31, 2012
Dec 31, 2013
166
149
Average age
58.7 years
59.3 years
Average years of service
20.3 years
20.6 years
Average annual salary
$ 123,612
$ 127,302
Accumulated employee
contributions with interest
$ 34,425,396
$ 35,510,973
Accumulated University
contributions with interest
$ 36,371,425
$ 37,381,343
6.0 years
5.6 years
Number
Expected average remaining
service lifetime
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Appendix: Plan Membership - continued
Pensioners and Survivors
Dec 31, 2012
Dec 31, 2013
111
123
70.3 years
70.4 years
Average annual pension
$ 39,327
$ 39,560
Average period since retirement
7.1 years
7.4 years
Number
Average age
Temporary Pensioners
Number
Average monthly pension
Average period since retirement
Average total number of payments
remaining
Aon Hewitt
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Dec 31, 2012
Dec 31, 2013
22
23
$ 3,962
$ 4,210
2.6 years
2.8 years
31.9 months
32.3 months
32
Appendix: Plan Membership - continued
Other Members
Total Contributions with Interest
Dec 31, 2012
Dec 31, 2013
43
37
$ 814,777
$ 674,664
Pending Terminations
$ 3,471,209
$ 3,333,482
Pending Retirements
$ 1,494,544
$ 1,886,604
Total
$ 5,780,530
$ 5,894,750
Number
Deferred
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Questions
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