University of Saskatchewan 1999
Academic Pension Plan
AGM Presentation – December 31, 2012
November 18, 2013
November
Prepared by 8,
Aon2013
Hewitt
Aon Hewitt | © 2013 Aon Hewitt. All Rights Reserved
Agenda
 Governance Structure







Going-Concern Position
Current Contribution Schedule
Solvency Position
Transfer Deficiency
Lump Sum Transfer Option
Current Pension Landscape
Plan Membership
1
Pension Committee Governance Structure
Board of Governors
Pension Committee
Investment
- Investment
Policy
- Investment
Monitoring
Benefit, Financial,
Accounting and
Controls
Administration
and Compliance
- Plan Design
- Funding Policy
- Communication/
Education
- Expense Controls
- Financial
Statement
Accounting
- Daily Administration
- Plan
Documentation
- Regulatory Filings
and Compliance
2
Going-Concern Position
Interim
Dec 31, 2010
Interim
Dec 31, 2011
Filed
Dec 31, 2012
$ 145,841,000
$ 143,560,000
$ 151,158,000
142,056,000
154,373,000
160,040,000
3,785,000
$(10,813,000)
$(8,882,000)
Funded ratio
103%
93%
94%
Current service cost
17.7%
20.5%
20.9%
Total Assets
Total Actuarial
Liabilities
Surplus / (Unfunded
Liability)
$
• All going-concern positions are based on 5% margin
3
Current Contribution Schedule
 University is currently matching employee contributions per
plan requirements and contributes an additional amount
based on most recent valuation results and legislation:
2012
2013
2014
Member
8.50%
8.50%
8.50%
University – matching
8.50%
8.50%
8.50%
University – additional
0.15%
($2,753 per
month)
0.15%
($2,753 per
month)
8.50%
$113,833 per
month
4
Solvency Position
Interim
Dec 31, 2010
Total Assets
Total Actuarial Liabilities
Surplus / (Solvency
Deficiency)
Interim
Dec 31, 2011
Filed
Dec 31, 2012
$ 145,641,000
$ 143,360,000
$ 150,958,000
172,808,000
194,415,000
205,201,000
$ (27,167,000)
$ (51,055,000)
$ (54,243,000)
84%
74%
74%
Solvency Ratio
• Solvency valuation assumes the plan will wind-up and pay out lump sum
values or purchase annuities
• Effective June 2013, the Plan is classified as a “Specified Plan” under the
Pension Benefits Act and therefore solvency funding is not required
• Transfer deficiencies still apply if members transfer out value of pension
5
Transfer Deficiency
– Applies to individuals who terminate employment and elect to transfer
the lump sum value of their entitlement out of the Plan
– When a Plan has a solvency deficiency, legislation requires that a
portion of every lump sum (LS) payment be held back
– Transfer Deficiency = Portion of LS held back
= (1- solvency ratio) x total lump sum entitlement
– 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
6
Transfer Deficiency - continued
 Example – Transfer Deficiency
–
–
–
–
–
Date of termination = Jan 1, 2013
Total lump sum entitlement = $100,000
Solvency ratio = 0.74
LS payment on Jan 1, 2013 = 0.74 x $100,000 = $74,000
Transfer Deficiency payment on Jan. 1, 2018
= (1–0.74) x $100,000 = $26,000 (plus interest)
7
Lump Sum Transfer Option
 Members retiring from the Plan have the option to:
1. Take a pension from the Plan; or
2. Transfer their lump sum entitlement out of the Plan
 Reserves are included in going-concern balance sheet to
account for this option
8
Lump Sum Transfer Option - Experience
Year
# electing a
pension from the
Plan
# electing a lump
sum transfer from
the Plan
2012
13
2011
7
Total lump sum
payments out of the
Plan during year
$3,192,000
Average lump sum
payment out of the
Plan in year
$456,000
9
7
$5,066,000
$724,000
2010
9
4
$4,804,000
$1,201,000
2009
1
9
$5,685,000
$632,000
2008
2
6
$3,923,000
$654,000
2007
7
17
$11,007,000
$647,000
2006
12
6
$4,961,000
$827,000
2005
9
14
$8,604,000
$615,000
2004
6
11
$6,899,000
$627,000
2003
8
9
$6,405,000
$712,000
Total
76 (46%)
90 (54%)
– The Total lump sum payments out of the Plan during the year do not include the portion
held back due to the solvency deficiency
9
Lump Sum Transfer Option – Going-Concern
December 31, 2012
With LS Option
Without LS Option
$ 151,158,000
$ 151,158,000
Total Actuarial Liabilities
160,040,000
150,770,000
Surplus / (Unfunded Liability)
$(8,882,000)
$388,000
20.9%
19.1%
94%
100%
$113,800 per month
$0
Total Assets
Current service cost
Funded ratio
University special payments
10
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
• Canadian Institute of Actuaries released study in 2013 suggesting
mortality forecast may need to be enhanced long-term to account for
increased life expectancies amongst Canadians
– Investment markets volatile and uncertain
– Pension plans have grown to a size that is often a multiple of the
operating budget of the sponsoring organization
• Hiccup with the pension plan means significant burden for the sponsor
and its employees
11
Plan Membership
Active Members
Dec 31, 2011
Dec 31, 2012
181
166
Average age
58.1 years
58.7 years
Average years of service
19.6 years
20.3 years
Average annual salary
$ 119,583
$ 123,612
Accumulated employee
contributions with interest
$ 33,942,908
$ 34,425,396
Accumulated University
contributions with interest
$ 36,015,200
$ 36,371,425
Expected average
remaining service lifetime
6.3 years
6.0 years
Number
12
Plan Membership - continued
Pensioners and Survivors
Dec 31, 2011
Dec 31, 2012
98
111
70.0 years
70.3 years
Average annual pension
$ 39,280
$ 39,327
Average period since retirement
7.0 years
7.1 years
Number
Average age
Temporary Pensioners
Number
Average monthly pension
Average period since retirement
Average total number of
payments remaining
13
Dec 31, 2011
Dec 31, 2012
19
22
$ 4,202
$ 3,962
2.5 years
2.6 years
30.9 months
31.9 months
Plan Membership - continued
Other Members
Total Contributions with Interest
Dec 31, 2011
Dec 31, 2012
48
43
Deferred
$ 1,207,962
$ 814,777
Pending Terminations
$ 3,426,199
$ 3,471,209
$ 282,348
$0
Pending Retirements
$ 2,702,326
$ 1,494,544
Total
$ 7,618,835
$ 5,780,530
Number
Pending Deaths
14
Questions
15