November 2010
To:
Members of the 1999 Academic Pension Plan
From:
Academic Defined Benefit Pension Committee
The purpose of this report is to provide an update on the 1999 Academic Pension Plan, and
committee activities since our report of June 2009. Included in this report are highlights of the
actuarial valuation as at December 31, 2009 and the implications of that valuation. Also included
in this report is commentary regarding investments and investment performance of the plan in
2009.
Developments during the Year
The 2009/10 year has been another intense year in terms of committee activities and other plan
developments. To assist members in understanding plan results, it is useful to provide an
overview of some of the key activities and developments.
Development and Application of a Funding Policy
Over the course of four meetings (November/December 2009) the committee developed a
funding policy, which was approved by the Board in December 2009. The funding policy works
with the Investment Policy and Plan Document (benefit policy) and assists in ensuring a
sustainable, orderly funding plan through establishment of funding goals and principles.
Application of the funding policy enhances transparency and provides for consistent
measurement of the financial position of the plan. The approved funding policy works with the
actuaries “best estimates” of plan liabilities and establishes a tolerance range for plan assets of
between 105 percent to 120 percent of plan liabilities.
At a required valuation filing date, where plan assets are less than the 105 percent minimum
level, then additional payments by the sponsor would be required. The “going-concern” results
(e.g. surplus position and current service cost) presented in this report uses the 105 percent
funding minimum as approved by the funding policy.
Contribution Changes
A collective agreement was concluded with the Faculty Association which provides for cessation
of the defined contribution component of the plan effective September 1, 2010, and provides for
an increase in defined benefit pension contributions to 8.5 percent from the current 6.82
percent. The revised contribution rates are reflected in the actuarial valuation results as at
December 31, 2009 and that valuation has been filed with the plan regulator.
Temporary Solvency Relief and Transfer Deficiency Provision
A three year moratorium has been approved for solvency payments based on actuarial
valuations filed during the period December 31, 2008 and January 1, 2011. The university has
elected solvency relief for the December 31, 2009 valuation. (If this solvency moratorium was
not in place, given a solvency deficit of almost $25 million, annual payments of about $5 million
would be required).
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Despite the three-year relief period, the solvency deficit will have immediate implications. Any
lump-sum payments from the plan will be limited to the solvency ratio amount. As at December
31, 2009, the solvency ratio of the plan is 85 percent. For any lump-sum payments, the
solvency deficiency amount, (which in this case is 15 percent of the calculated payment
amount) will be held in trust, with the full holdback amount plus interest paid to the individual
following the end of the five-year solvency payment period or earlier if a solvency surplus arises.
An example of this calculation is provided in the subsequent section of this report, (reference
“transfer deficiency requirements”).
Actuarial Valuation
For defined benefit pension plans, an actuarial valuation is required to determine the financial
health of the plan and to determine future contribution requirements. The valuation must be filed
with the Superintendent of Pensions at minimum every three years. For the 1999 Academic
Defined Benefit Pension Plan, the valuation as at December 31, 2009 was filed as required by
September 30, 2010. There are two basis of valuation for funding purposes: the results of each
are presented in subsequent sections of this report.
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 longterm. The actuarial valuation performed as at December 31, 2009 shows that the plan, on a
going-concern basis, is in a slight surplus position of $0.232 million as per Table 1. As
discussed in the foregoing section, this surplus position considers the requirement to meet 105
percent of “best estimates” liabilities. Comparative numbers as at December 31, 2008 are also
provided.
Table 1: Going-Concern Financial Position
Assets
Fund Value (net assets available for pension benefits)
Actuarial Liabilities
Present value of accrued benefits for active members (214)
Pensioners (79)
Inactive, deferred and pending terminations (50)
Temporary pensioners (22)
Present value of future benefits to be paid in excess of
future contributions
Voluntary and Transferred contributions
Defined contribution account balances
Total Liabilities
Surplus / (Unfunded Liability) as at December 31, 2009
2009
2008
$142,413,000 $135,472,000
$94,183,000
33,935,000
7,336,000
2,615,000
$90,691,000
33,862,000
7,229,000
1,583,000
1,384,000
5,768,000
2,264,000
2,264,000
368,000
204,000
$142,181,000 $141,601,000
$
232,000 $ (6,129,000)
The major reason for the improved financial position was the investment returns during 2009 of
11 percent compared to plan expectation of 6.75 percent.
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Funding Requirements (Going-Concern Valuation)
The actuary has also concluded that current contribution rates are insufficient to pay for the
benefits currently accruing to members of the plan. It is estimated that the benefits currently
accruing to members cost 17.15 percent of pensionable earnings, whereas the current
contribution rate effective September 1, 2010 amounts to 17.00 percent of pensionable
earnings. The contribution shortfall, 0.15 percent of pensionable earnings, amounts to
approximately $30,000 per year, with approximately $500,000 paid representing the additional
payments required retroactive to January 1, 2010 when the contributions were at the 6.82
percent level. These additional going-concern contribution requirements will be paid by the plan
sponsor.
As the University has filed a valuation with regulatory authorities as at December 31, 2009 the
next required valuation must be filed not later than December 31, 2012.
Hypothetical Wind-Up (Solvency) Position of the Plan
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 windup.
The actuary has concluded that the plan had a hypothetical wind-up deficit as at December 31,
2009 as the actuarial liabilities of the plan exceed the market value of the assets on that date.
The hypothetical wind-up deficit is estimated to be $24.338 million as of December 31, 2009
(solvency deficit at December 31, 2008 was $25.174 million).
Table 2: Hypothetical Wind-up Financial Position
Solvency Position
Total Assets
Dec. 31, 2009
$142,213,000
Dec. 31, 2008
$135,272,000
Total Actuarial Liabilities
$166,551,000
$160,446,000
Surplus / (Solvency Deficiency)
Solvency Ratio
$(24,338,000)
0.85
$(25,174,000)
0.84
The solvency deficit position is consistent with prior year, and continues to be a significant issue
caused primarily by the relatively low discount rate, 4.5 percent as at December 31, 2009.
Transfer Deficiency Requirements
Because the temporary solvency relief provisions do not apply to lump-sum payments, as the
plan has a solvency ratio of .85, it will be 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 five-year period following the date of payout (or earlier in the event of
plan surplus). This provision does not impact members retiring and commencing a pension
from the plan.
The following example is provided to illustrate this provision.
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
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

Transfer Deficiency = Portion of LS held back
= (1- solvency ratio) x total lump sum entitlement
Example
– Date of termination = January 1, 2011
– Total lump sum entitlement = $100,000
– Solvency ratio = 0.85
– LS payment on January 1, 2011 = 0.85 x $100,000 = $85,000
– Transfer Deficiency payment on January 1, 2016 = (1–0.85) x $100,000 = $15,000 (with
interest)
Membership
Table 3: Membership Data
Membership
Average age
Average Pensionable Service
Expected average remaining service
Average Pensionable Salary
Number of Pensioners
Average annual pension
Number of Temporary Pensioners
Average monthly pension
Average total number of payments remaining
2009
2008
214
56.9
18.4 years
7.8 years
$111,506
228
56.0
17.6 years
7.5 years
$106,611
79
78
$39,625
22
$3,336
38.2 months
$39,359
24
$$3,461
24.9 months
Investments of the Pension Plan
Investments
The long-term investment goal of the plan is to achieve a minimum annualized rate of return of
3.25 percent 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. Over the last ten
years the annualized rate of return for the plan has been 4.2 percent compared to an annualized
increase in the Consumer Price Index of 2.2 percent.
Investment Performance
For 2009
11.8%
13.0%
Plan Return (gross)
Plan Return Benchmark (gross)
Last four years
3.2%
2.1%
The Plan’s Return Benchmark is a performance standard developed by the Investment
Consultants, Hewitt Associates. 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 Fund Managers of the Plan
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
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diversification. The managers and the market value of assets controlled by each at December
31, 2009 are shown below.
BlackRock Asset Management
Jarislowsky Fraser Limited
Tweedy, Browne Company LLC
$75.7 Million
$53.2 Million
$13.0 Million
The Value of the Pension Plan as at December 31, 2009
Table 4 shows the value of the pension plan as at December 31, 2009 by major asset classes.
TABLE 4: Market Value of Pension Plan Assets
Asset Class
Canadian Equities
Non-Canadian Equities
Total Equities
Dec 31, 2009
($000)
$ 25,829
55,464
81,293
Per Cent of
Market Value
18.2%
39.0%
57.2%
Bonds
Short-Term Investments
Total Fixed Income
$ 57,863
2,892
60,755
40.8%
2.0%
42.8%
Market Value of Investments
$ 142,048
100.0%
Accrued Investment Earnings
Total Market Value of the Fund
157
$ 142,205
Note to Table 4:
The market value of the total fund ($142,205,000) reported by the investment fund managers differs
from the fund value ($142,413,000) reported by the actuary. The investment fund managers report
on investment funds only; whereas the actuary includes accounts payable and contributions
receivable within its fund value.
Committee Activities
The ADBPC met 11 times during 2009/10. The following “special” activities were undertaken by the
committee:
 Development and application of Funding Policy
 Implemented a plan amendment whereby if negative CPI occurs in the future, pension
payments will not be adjusted negatively unless approved by the committee.
 Considered several presentations regarding liability-driven investing.
 Approved a committee name change to the Academic Defined Benefit Pension Committee
 Approved a change in the timing of annual meetings of the committee, to occur in the spring to
coincide with completion of the actuarial report.
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Plan Documents
Copies of the agenda, minutes, auditor’s report, financial reports, funding policy and all actuarial
reports are on file in the Faculty Association office and the office of the Director of Pensions. They
are available for inspection by any member of the plan during regular working hours by prior
arrangement.
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.
Academic Pension Plan Information
Members for 2009/10
Faculty Association Appointees:
Pat Krone
Ron Cuming
Cristina Echevarria
College of Medicine, Anatomy and Cell Biology
College of Law
College of Arts and Science, Economics
Board of Governors Appointees:
Laura Kennedy (Chair)
Bob Elliott
Marion Van Impe
Financial Services
Financial Services
Financial Services
Observer (ASPA)
Al Rung
Martin Gonzalez
Veterinary Medicine
Vice-President (Finance and Resources)
Actuary
AON Consulting
Investment Consultants
Hewitt Associates
Investment Custodian
CIBC Mellon Global Securities
Pension Administration & Support
Pensions Office 966-6633
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