May 16, 2008
To:
Members of the 1999 Academic Pension Plan
From:
Fringe Benefits Committee
The primary purpose of this report is to review the interim actuarial valuation of the 1999
Academic Pension Plan as at December 31, 2007. This report also includes a review of the
funding requirements, investments and investment performance of the Plan in 2007.
Interim Actuarial Valuation
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, 2007 shows that the Plan, on a
going-concern basis, is in a surplus position of $9.6 million as per Table 1. Comparative
numbers as at December 31, 2006 are also provided.
Table 1: Going-Concern Financial Position
Assets
Fund Value (net assets available for pension benefits)
2007
$156,402,000
2006
$171,640,000
$96,522,000
$33,517,000
$6,230,000
$2,076,000
$5,884,000
$2,467,000
$88,000
$146,784,000
$9,618,000
$105,001,000
$30,846,000
$9,742,000
$1,877,000
$6,163,000
$2,708,000
Actuarial Liabilities
Present value of accrued benefits for active members (241)
Pensioners (76)
Inactive, deferred and pending terminations (50)
Temporary pensioners (24)
Present value of future benefits to be paid in excess of future contributions
Voluntary and Transferred contributions
Defined contribution account balances
Total Liabilities
Surplus as at December 31, 2007
$156,337,000
$15,303,000
The major reason for the decrease in surplus was the investment returns during 2007 (-0.9%)
being less than expected (6.25%).
Hypothetical Wind-Up 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,
2007 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 $3.856 million as of December 31, 2007
(solvency surplus at December 31, 2006 was $8.010 million).
Again, the major reason for the deficit was investment returns being less than expected.
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Funding Requirements
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 17.42% of pensionable earnings, whereas the current contribution
rates amount to 13.64% of pensionable earnings. The contribution shortfall, 3.78% of
pensionable earnings, amounts to $5,884,000 (see Table 1 “Present value of future benefits to
be paid in excess of future contributions”). This has been deducted in calculating the Plan
surplus on a going-concern basis.
The University filed a valuation with regulatory authorities as at December 31, 2006. The
valuation at December 31, 2007 is an interim valuation and is not required to be filed. The next
required valuation must be filed not later than December 31, 2009.
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% 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 6.5% compared to an annualized increase in the
Consumer Price Index of 2.2%.
Investment Performance
For 2007
-0.9%
0.1%
Plan Return (gross)
Plan Return Benchmark (gross)
Last 4 years
7.6%
7.9%
The Plan’s Return Benchmark is a performance standard developed by the Investment
Consultants, Hewitt Associates. The Fringe Benefits 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
diversification. The managers and the market value of assets controlled by each at December
31, 2007 are shown below.
Barclay’s Global Investors
Jarislowsky Fraser Limited
Tweedy, Browne Company LLC
$82.9 Million
$56.4 Million
$16.7 Million
The Value of the Pension Plan as at December 31, 2007
Table 2 shows the value of the Pension Plan as at December 31, 2007 by major asset classes.
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TABLE 2: Market Value of Pension Plan Assets
Asset Class
Canadian Equities
Non-Canadian Equities
Total Equities
Dec 31, 2007
($000)
$ 26,685
61,732
88,417
Per Cent of
Market Value
17.1%
39.5%
56.6%
Bonds
Short-Term Investments
Total Fixed Income
$ 65,319
2,376
67,695
41.8%
1.5%
43.4%
Market Value of Investments
$ 156,112
100.0%
Accrued Investment Earnings
Total Market Value of the Fund
109
$ 156,221
Note to Table 2:
The market value of the total fund ($156,221,000) reported by the investment fund
managers differs from the fund value ($156,402,000) 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.
Plan Documents
The FBC met 18 times during 2007. Copies of the agenda, minutes, auditor’s report, financial
reports 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 Fringe Benefits
Committee if you have any questions about the items covered.
Academic Pension Plan Information
Fringe Benefits Committee
Members
Faculty Association Appointees:
Pat Krone
Ron Cuming
Anatomy & Cell Biology
Law
Board of Governors Appointees:
Laura Kennedy
Bob Elliott
Matt Webster
Financial Services
Financial Services
Financial Services
Observer (ASPA)
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Al Rung
Veterinary Medicine
Actuary
AON Consulting
Investment Consultants
Hewitt Associates
Investment Custodian
CIBC Mellon Global Securities
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