1999 Academic Pension Plan
Annual Report to Membership
July, 2013
The primary purpose of this report is:
∗ to review the actuarial valuation information and contribution requirements of the
1999 Academic Pension Plan as at December 31, 2012
∗ to review investments and investment performance of the Plan in 2012
∗ to report on the activities of the Academic Defined Benefit Pension Committee (ADBPC)
ACTUARIAL VALUATION at December 31, 2012
Membership Data
Active members
Other members (inactive, deferred, pending transfers)
Average age of membership
Average pensionable service
Average pensionable salary
Expected average remaining service
Pensioners & Beneficiaries
Average annual pension
Number of temporary pensioners
Average temporary monthly pension
Average temporary pension total number of payments remaining
2012
166
43
58.7 years
20.3 years
$123,612
6.0 years
2011
181
48
58.1 years
19.6 years
$119,583
6.3 years
111
$39,327
22
$3,962
31.9 months
98
$39,280
19
$4,202
30.9 months
Going-Concern Financial Position of the Plan
The financial position of the Plan on a going-concern basis is measured by comparing the
market value of assets to the actuarial liabilities assuming the Plan is continuing for the
long-term. The actuarial valuation performed as at December 31, 2012 shows that the
Plan, on a going-concern basis, is in a deficit position of $8.8 million as per the summary
table below. Comparative numbers as at December 31, 2011 are also provided.
This communication, future communications and other pension plan information are available online at:
www.usask.ca/fsd/faculty_staff/pension_plans
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Going-Concern Financial Position
Assets
Fund value (net assets available for benefits)
Liabilities
Present value of accrued benefits for active members
Pensioners
Temporary pensioners
Other members (inactive, deferred, pending transfers)
Present value of future benefits to be paid in excess of
future contributions
Voluntary and transferred contributions
Defined contribution account balances
Transfer deficiency holdbacks
Total actuarial liabilities
Surplus/(Deficit)
2012
2011
$ 151,158,000 $ 143,560,000
$ 94,327,000
48,775,000
2,646,000
6,133,000
$
94,443,000
42,284,000
2,280,000
8,155,000
3,656,000
3,642,000
1,842,000
1,793,000
417,000
418,000
2,244,000
1,358,000
$ 160,040,000 $ 154,373,000
$ (8,882,000) $ (10,813,000)
Contribution Requirements
The Plan last filed a valuation report with the regulators at December 31, 2009. The going
concern deficiency established at December 31, 2009 is being amortized over a period of
fifteen years, or until the next funding valuation is certified, with monthly payments being
paid by the University. The December 31, 2012 valuation is required to be filed with the
regulators by September 30, 2013.
Contribution Requirements based on actuarial valuation at
the prior year end December 31st
Total going-concern current service cost
Member fixed rate contributions
Employer fixed rate contributions
Additional employer current service contributions
% of Earnings
2013
2012
2011
20.90% 20.51% 17.72%
8.50% 8.50% 8.50%
8.50% 8.50% 8.50%
3.90% 3.51% 0.72%
Funding Requirements
The actuary has concluded that current contribution rates continue to be insufficient to pay
for the benefits currently accruing to members of the plan. The valuation report at
December 31, 2012 revealed a current service cost deficiency of 3.90%.
Total payments to the plan for the current service cost deficiencies based on the last filed
valuation report at December 31, 2009 are outlined in the following table. Payments for
Jan 1, 2014 and onward will be updated once the valuation report has been finalized and
filed with the regulators.
This communication, future communications and other pension plan information are available online at:
www.usask.ca/fsd/faculty_staff/pension_plans
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Required Monthly Special Payments (With Solvency Relief)
Monthly deficit required contributions
Current Service Cost Deficiency
Total Annual Payments
Jan 1, 2013 to
Dec 31, 2013
$2,753
$33,036
Jan 1, 2012 to
Dec 31, 2012
$2,753
$33,036
Solvency Position of the Plan (Hypothetical Wind-Up)
The Pension Benefits Act (Saskatchewan) requires the University to review whether the
assets of the Plan would be sufficient to cover the liabilities of the Plan in the event of a
plan wind-up. The actuarial valuation performed as at December 31, 2012 shows that the
Plan, on a hypothetical wind-up basis, is in a deficit position of $54.2 million. The solvency
ratio at December 31, 2012 is 74%.
Solvency Financial Position
Solvency assets
Solvency liabilities
Surplus (Deficit)
Solvency ratio(assets/liabilities)
2012
$ 151,158,000
205,401,000
$(54,243,000)
0.74
2011
$143,560,000
194,615,000
$(51,055,000)
0.74
Temporary Solvency Deficiency Payment Relief
In 2010, The Pension Benefits Regulations, 1993 was amended to provide temporary relief
from solvency deficiency funding for sponsors of defined benefit plans. The university
undertook to elect for temporary solvency relief in compliance with regulations for the
valuation report filed at December 31, 2009. This relief provided for a three year
moratorium from funding a solvency deficiency and was in effect until December 31, 2012
when an actuarial valuation must be filed with the regulators.
In the spring of 2012 the Saskatchewan Financial Services Commission, Pensions Division
released a Consultation Paper – New Funding Regime for Public Sector Plans for comment.
The intent of the paper was to seek feedback on establishing new funding rules for all
public sector plans. New regulations have been drafted for Public Sector Pension Plans,
proposing the elimination of the solvency funding test, but with enhanced going-concern
payments whereby payments are required over a 10 year period as opposed to the current
15 year amortization period. To date, the new regulations have not been approved by the
provincial government; however through discussions with the Pension Division, we are
confident that the regulations will be approved as drafted. Once that occurs, the valuation
report will be finalized and filed with the regulatory authorities.
This communication, future communications and other pension plan information are available online at:
www.usask.ca/fsd/faculty_staff/pension_plans
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Transfer Deficiency Requirements
Because the solvency relief provisions do not apply to lump-sum payments, as the plan has
a solvency ratio of 0.85 (determined in the valuation at December 31, 2009), it is necessary
to withhold 15% of any lump-sum payments. The amount withheld, referred to as the
“transfer deficiency”, will be paid out with interest at the end of the five-year period
following the date of original payout (or earlier in the event of plan surplus). This
provision does not impact members retiring and commencing a pension from the plan.
Once the valuation at December 31, 2012 is filed with the regulators, the solvency ratio will
change to 0.74 and 26% of all lump-sum payments will be withheld.
Transfer Deficiency Payout Example



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 LS entitlement
Example
– Date of termination = May 30, 2013
– Total LS entitlement = $200,000
– Solvency ratio = 0.85
– LS payment on May 30, 2013 = 0.85 x $200,000 = $170,000
– Transfer Deficiency payment on May 30, 2018 = (1–0.85) x $200,000 = $30,000
(plus interest)
INVESTMENTS of the PENSION PLAN at December 31, 2012
Market Value of Pension Plan Assets
By Asset Classes
2012
($000)
% of Market
Value
Canadian Equities
Non-Canadian Equities
Total Equities
$
23,915
62,197
$ 86,112
15.8
41.2
57.0
Bonds
Short term investments
Total Fixed Income
$
61,681
3,290
$ 64,971
40.8
2.2
43.0
Total Market Value
$ 151,083
100.0
This communication, future communications and other pension plan information are available online at:
www.usask.ca/fsd/faculty_staff/pension_plans
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2012
($000)
$ 51,115
81,021
18,930
By Investment Manager
Jarislowsky Fraser Limited
BlackRock Asset Management
Tweedy Browne
% of Market
Value
33.8
53.6
12.5
Investment Performance
The long-term investment goal of the Plan is to achieve a minimum annualized rate of
return of 4.25% in excess of the Canadian Consumer Price Index. To achieve this goal, the
Plan has adopted an asset mix that has a bias in favour of equity investments.
The responsibility for investing the assets of the Plan has been delegated to three
professional investment fund managers with different mandates to ensure adequate
investment diversification.
The Plan’s Return Benchmark is a performance standard developed by the Plan’s
Investment Consultant, Aon Hewitt. The Academic Defined Benefit Pension Committee and
the Board of Governors have approved the benchmark. The investment fund managers of
the Plan are expected to meet or surpass the benchmark.
Investment Performance
Plan return (gross)
Plan return benchmark (gross)
Consumer Price Index
2012
9.8%
8.6%
0.8%
Last 4 years
8.0%
7.7%
1.7%
Last 10 years
6.0%
5.6%
1.8%
ACADEMIC DEFINED BENEFIT PENSION COMMITTEE (ADBPC)
Committee Members
Faculty Association Appointees:
E. Cristina Echevarria, Economics
Rob Roy, Bioresource Policy Business &
Economics
Gordon Sarty, Psychology
Board of Governor Appointees:
Laura Kennedy, Financial Services
Martin Gonzalez, Consumer Services
Marion Van Impe, Financial Services (retired)
Observer: Al Rung, ASPA
Meetings of the Committee
The Academic Defined Benefit Pension Committee met 7 times during the year. Acting in
its capacity as managing fiduciary, the Committee is responsible for the oversight of the
1999 Academic Pension Plan operations, including funding, investment, and administration
of the Plan. The Committee activities over the past year in fulfilling these responsibilities
are outlined in the following table.
This communication, future communications and other pension plan information are available online at:
www.usask.ca/fsd/faculty_staff/pension_plans
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Meeting Date
Time
allocated
September 20, 2012
2.0 hours
November 20, 2012
2.0 hours
January 25, 2013
2.0 hours
March 11, 2013
2.0 hours
April 16, 2013
2.0 hours
May 22, 2013
2.0 hours
June 12 , 2013
1.0 hours
Purpose
*Quarterly Investment Performance Review to June 30th
* Investment Manager presentation: Jarislowsky Fraser
* Annual General Meeting Review
*Quarterly Investment Performance Review to Sept 30th
* Statement of Investment Policies & Procedures review
* Liability Driven Investing education session
*Investment Manager review of Jarislowsky Fraser: Aon
Hewitt
* 2012 Annual Credited Interest Rate approval
*Quarterly Investment Performance Review to Dec 31st
*Investment Manager presentation: Tweedy Browne
*2012 Actuarial Valuation Review
*Funding Policy Review
*Quarterly Investment Performance Review to Mar 31st
*Investment Manager presentation: BlackRock
*Financial Statements at December 31, 2012 Review
1999 ACADEMIC PENSION PLAN INFORMATION
Plan Documents
Copies of the following documents are on file in the Faculty Association office and the office
of the Director of Pensions (Financial Services). They are available for inspection by any
member of the Plan during regular working hours by prior arrangements.
∗ Plan Text
* Actuarial Reports
∗ Financial Statements
* Auditor’s Reports
∗ Committee meeting agendas and minutes
Other Agents of the Plan
Actuary:
Investment Consultant:
Custodian:
Aon Hewitt, Saskatoon
Aon Hewitt, Regina
CIBC Mellon Global Securities
Pension Administration & Support:
Pensions Office, Financial Services
Room 220, Research Annex, 105 Maintenance Road
306-966-6633
www.usask.ca/fsd/faculty_staff/pension_plans
Please contact the Pensions Office at 306-966-6633 or any member of the Academic
Defined Benefit Pension Committee if you have any questions about the items covered
in this newsletter.
This communication, future communications and other pension plan information are available online at:
www.usask.ca/fsd/faculty_staff/pension_plans
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