1999 Academic Pension Plan
Annual Report to Membership
September, 2012
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, 2011
∗ to review investments and investment performance of the Plan in 2011
∗ to report on the activities of the Academic Defined Benefit Pension Committee (ADBPC)
ACTUARIAL VALUATION at December 31, 2011
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
2011
181
48
58.1 years
19.6 years
$119,583
6.3 years
2010
196
51
57.5 years
19.0 years
$114,487
6.6 years
98
$39,280
19
$4,202
30.9 months
88
$39,518
20
$3,748
33.6 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, 2011 shows that the
Plan, on a going-concern basis, is in a deficit position of $10.8 million as per the summary
table below. Comparative numbers as at December 31, 2010 are also provided.
The major reasons for the decrease in financial position were investment returns being less
than expected and the addition of a lump sum payout assumption to better reflect
retirement liabilities. This change in methodology served to increase pension obligations
by $5,946,000. This assumption assumes that 40% of members will choose the lump sum
option at retirement. As highlighted in previous annual meetings the lump-sum option has
an impact on the plan. In response to member concerns, during the previous year, the
committee working with the plan actuary, reviewed more closely the financial implications
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of the lump-sum option. In addition to the impact of this lump-sum option on the plan
financial position, there are also implications for the plan investment asset mix.
Accordingly, the committee is undertaking a review of options to ensure long term
sustainability.
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)
2011
2010
$ 143,560,000
$145,841,000
$
94,443,000
42,284,000
2,280,000
8,155,000
$ 90,166,000
37,615,000
2,277,000
8,520,000
3,642,000
1,793,000
418,000
1,358,000
$ 154,373,000
810,000
1,890,000
438,000
340,000
$142,056,000
$ (10,813,000) $
3,785,000
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 payment being
paid by the University. The next required valuation to be filed with the regulators will be at
December 31, 2012.
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
2012
20.51%
8.50%
8.50%
3.51%
2011
17.72%
8.50%
8.50%
0.72%
2010
17.15%
6.82%/8.50%*
6.82%/8.50%*
3.51%/0.15%
effective September 1, 2010 contribution rate increased to 8.50%.
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Funding Requirements
The actuary has concluded that current contribution rates are insufficient to pay for the
benefits currently accruing to members of the plan. The valuation report at December 31,
2009 revealed a current service cost deficiency of 3.51%. Due to the increased
contribution levels negotiated prior to the filing of the 2009 actuarial valuation, the current
service cost deficiency was reduced to 0.15% from September 1, 2010 onward.
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.
Required Monthly Special Payments (With Solvency Relief)
Monthly deficit required
contributions
Jan 1, 2012 to
Dec 31, 2012
Current Service Cost
Deficiency
Total Annual Payments
Jan 1, 2011 to
Dec 31, 2011
$2,753
$2,660
$33,036
$31,920
Jan 1, 2010 to
Dec 31, 2010
Jan – Aug
Sep - Dec
$60,144
2,570
$491,432
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, 2011 shows that the
Plan, on a hypothetical wind-up basis, is in a deficit position of $51.1 million. The solvency
ratio at December 31, 2011 is 74%.
Solvency Financial Position
Solvency assets
Solvency liabilities
Surplus (Deficit)
Solvency ratio(assets/liabilities)
2011
$ 143,560,000
194,615,000
$ (51,055,000)
0.74
2010
$ 145,841,000
173,008,000
$ (27,167,000)
0.85
2009
$142,413,000
166,751,000
$ (24,338,000)
0.85
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 provides for a three year
moratorium from funding a solvency deficiency and is 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.
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The intent of the paper was to seek feedback on establishing new funding rules for all
public sector plans. It is anticipated that new regulations will be finalized by the provincial
government in the fall of 2012.
Transfer Deficiency Requirements
Because the temporary 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 percent 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 fiveyear 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.
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 = June 30, 2012
– Total LS entitlement = $100,000
– Solvency ratio = 0.85
– LS payment on June 30, 2012 = 0.85 x $100,000 = $85,000
– Transfer Deficiency payment on June 30, 2017 = (1–0.85) x $100,000 = $15,000
(plus interest)
INVESTMENTS of the PENSION PLAN at December 31, 2011
Market Value of Pension Plan Assets
By Asset Classes
2011
($000)
% of Market
Value
Canadian Equities
Non-Canadian Equities
Total Equities
$
23,407
56,421
$ 79,828
16.3
39.2
55.5
Bonds
Short term investments
Total Fixed Income
$
61,360
2,681
$ 64,041
42.6
1.9
44.5
Total Market Value
$ 143,869
100.0
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2011
($000)
$ 49,525
15,904
78,410
By Investment Manager
Jarislowsky Fraser Limited
Tweedy Browne
BlackRock Asset Management
% of Market
Value
34.4
11.1
54.5
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
2011
3.4%
0.9%
2.3%
Last 4 years
2.8%
1.2%
1.8%
Last 10 years
4.6%
3.9%
2.1%
ACADEMIC DEFINED BENEFIT PENSION COMMITTEE (ADBPC)
Committee Members
Faculty Association Appointees:
E. Cristina Echevarria, Economics
Rob Roy, Bioresource Policy Business &
Economics
Gordon Sarty, Psychology
Observer: Al Rung, ASPA
Board of Governor Appointees:
Marion Van Impe, Financial Services
Laura Kennedy, Financial Services
Martin Gonzalez, Consumer Services
Meetings of the Committee
The Academic Defined Benefit Pension Committee met 8 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.
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Meeting Date
Time
allocated
September 28, 2011
2.0 hours
October 31, 2011
1.5 hours
November 16, 2011
2.0 hours
January 31, 2012
2.0 hours
March 7, 2012
2.0 hours
April 18, 2012
1.0 hours
May 25, 2012
2.0 hours
June 1, 2012
1.0 hours
Purpose
*Quarterly Investment Performance Review to June 30th
* Investment Manager presentation: Jarislowsky Fraser
*Plan Amendment P14
* Annual General Meeting discussion
*Plan Amendment P14 final approval
*Quarterly Investment Performance Review to Sept 30th
* Investment Policy Annual Review
* 2011 Annual Credited Interest Rate approval
*Long-Term Planning and Sustainability discussion
*Quarterly Investment Performance Review to Dec 31st
*Investment Manager presentation: Tweedy Browne
*2011 Actuarial Valuation review and approval
*Quarterly Investment Performance Review to Mar 31st
*Investment Manager presentation: BlackRock
*Financial Statements at December 31, 2011 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
966-6633
www.usask.ca/fsd/faculty_staff/pension_plans
Please contact the Pensions Office at 966-6633 or any member of the Academic Defined
Benefit Pension Committee if you have any questions about the items covered in this
newsletter.
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