November, 2010
To:
Members of the Non Academic Pension Plan
From:
Non Academic Pension & Benefits Committee (NAPBC)
The primary purpose of this report is to review the actuarial valuation of the Non Academic
Pension Plan as at December 31, 2009. This report also includes a review of the funding
requirements, investments and investment performance of the Plan in 2009 and for the six
months ending June 30, 2010.
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, 2009 shows that the Plan, on a
going-concern basis, is in a deficit position of $22.2 million as per Table 1. Comparative
numbers as at December 31, 2008 are also provided.
Table 1: Going-Concern Financial Position
Assets
2009
$296,814,400
2008
$270,410,500
Present value of accrued benefits for active members (1,399)
Pensioners (616)
Inactive, deferred and pending terminations (109)
Voluntary and Transferred contributions
Present value of future benefits to be paid in excess of future contributions
$149,220,300
$74,557,800
$3,309,600
$84,700
$91,873,500
$163,725,700
$67,822,400
$1,811,000
$98,600
$71,600,900
Total Liabilities
$319,045,900
$305,058,600
(Deficit) as at December 31
$(22,231,500)
$(34,648,100)
Actuarial Fund Value (net assets available for pension benefits)
Actuarial Liabilities
The Plan last filed a valuation report with the regulators at December 31, 2007. After extensive
analysis and due to the poor market returns during the first 8 months of 2010, the NAPBC
recommended to the Board of Governors that the December 31, 2009 valuation be filed with the
regulators. The Board of Governors approved this recommendation. The going-concern
deficiency of $22,231,500 will be amortized over a period of fifteen years, or until the next
funding valuation is certified, with monthly payments being paid by the University.
-----------------------------------------------------------------------------------------------------------------------------------------------------------This communication, future communications and other pension plan information are available online at:
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Hypothetical Wind-Up Position of the Plan (Solvency)
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, 2009 shows that the Plan, on a
hypothetical wind-up basis, is in a deficit position of $67.7 million as per Table 2. The solvency
ratio at December 31, 2009 is 76%. Comparative numbers as at December 31, 2008 are also
provided. Solvency surplus at December 31, 2007 (last filed valuation) was $.29 million.
Table 2: Hypothetical Wind-Up Financial Position (Solvency)
Assets
2009
$215,930,600
2008
$194,463,500
Present value of accrued benefits for retirees
$283,627,000
$262,383,400
(Deficit) as at December 31
$(67,696,400)
$(67,919,900)
0.76
0.74
Market value of assets
Actuarial Liabilities
Solvency ratio
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 .76, it will be necessary to withhold 24 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
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 = 0.76
– LS payment on January 1, 2011 = 0.76 x $100,000 = $76,000
– Transfer Deficiency payment on January 1, 2016 = (1–0.76) x $100,000 = $24,000 (with
interest)
-----------------------------------------------------------------------------------------------------------------------------------------------------------This communication, future communications and other pension plan information are available online at:
www.usask.ca/fsd/faculty_staff/pension_plans
Temporary Solvency Deficiency Payment Relief
As indicated in the newsletter of October, 2009, The Pension Benefits Regulations, 1993 has
been amended to provide temporary relief from solvency deficiency funding for sponsors of
defined benefit plans. The plan administrator may file an election for a three year moratorium
from funding a solvency deficiency established in a valuation between December 31, 2008 and
January 1, 2011.
With this filing, the University has undertaken to elect for temporary solvency relief in
compliance with the regulations.
Funding Requirements
Development and Application of a Funding Policy
With the assistance of the Plan’s actuary, the Committee developed and in November, 2009,
approved a Funding Policy for the Plan. The purpose of the Policy is to align the investment
policy and benefit policy with the funding requirements of the plan. The Funding Policy is
designed to guide decision making about assumptions and margins when actuarial valuations
are performed. The primary objective of the plan is to provide the University's Non-Academic
Employees with a means to accumulate a reasonable retirement savings relative to their service
and earnings while in the Plan. The Plan’s funding policy has been posted on the Financial
Services Division website.
Contribution Changes
A collective agreement was concluded with CUPE 1975 which provides for the following
contribution increases from the current 6.5%.
Effective Date
Contribution Rate
Prior to Jan 1, 2010
6.50% of earnings
Jan 1, 2010 to Dec 31, 2010
7.50% of earnings
Jan 1, 2011 to Dec 31, 2011
8.25% of earnings
On or after Jan 1, 2012
8.50% of earnings
The revised contribution rates are reflected in the actuarial valuation results as at December 31,
2009 which has been filed with the plan regulator. The actuary has concluded, however, 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 19.04% of
pensionable earnings, whereas the current contribution rates amount to 16.72% of pensionable
earnings. The contribution shortfall, 2.32% of pensionable earnings, amounts to $11,189,700
and has been accounted for in the going-concern financial position of the Plan as at December
31, 2009 (see Table 1 “Present value of future benefits to be paid in excess of future
contributions”).
-----------------------------------------------------------------------------------------------------------------------------------------------------------This communication, future communications and other pension plan information are available online at:
www.usask.ca/fsd/faculty_staff/pension_plans
Investments of the Pension Plan
Investments
The long-term investment goal of the Plan is to achieve a minimum annualized rate of return of
3.75% 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 4.7% compared to an annualized increase in the
Consumer Price Index of 2.1%.
The responsibility for investing the assets of the Plan has been delegated to four professional
investment fund managers with different mandates to ensure adequate investment
diversification.
Investment Performance
Plan Return (gross)
Plan Return Benchmark (gross)
For 2009
15.1%
12.8%
Last 4 years
1.8%
1.9%
The Plan’s Return Benchmark is a performance standard developed by the Investment
Consultants, Hewitt Associates. The Non Academic Pension & 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.
2010 Performance Update
Equity markets struggled early in the first quarter of 2010 as concerns over the big issues facing
the global economy resulted in market volatility. The stability of the Euro was a key issue, as
headlines focused on the Greek debt crisis. There was also general anxiety that markets had
factored in too much too soon in terms of a global economic recovery. Capital markets focused
on risk in the second quarter. A flight to safety was sparked by sovereign debt concerns, but
the equity markets suffered most. Investors were concerned with the uncertainty surrounding
the global economic recovery, and there widespread equity market corrections. (Hewitt
Associates, 2010)
The six month rate of return to June 30, 2010 earned by the Plan was -2.7% before expenses.
During the same period, the S&P/TSX index returned -2.5%, the S&P 500 (U.S. equities) returned
-5.4% and the Europe, Australia and Far East (EAFE) index, which measures non-North American
equities, decreased by -12.1%. The DEX Universe Bond Index posted a 4.2% return.
Investment Fund Managers of the Plan
The managers and the market value of assets controlled by each at December 31, 2009 are
shown below.
Greystone Investments
Jarislowsky Fraser Limited
Phillips, Hager & North Investment
Sceptre Investment Counsel
$ 14.3 Million
$ 69.2 Million
$114.9 Million
$ 16.3 Million
-----------------------------------------------------------------------------------------------------------------------------------------------------------This communication, future communications and other pension plan information are available online at:
www.usask.ca/fsd/faculty_staff/pension_plans
The Value of the Pension Plan as at December 31, 2009
Table 3 shows the value of the Pension Plan as at December 31, 2009 by major asset classes.
TABLE 3: Market Value of Pension Plan Assets
Asset Class
Canadian Equities
Non-Canadian Equities
Total Equities
Dec 31, 2009
($000)
$ 44,299
86,770
131,069
Per Cent of
Market Value
20.6%
40.4%
61.0%
Bonds
Mortgages
Real Estate
Short-Term Investments
Total Fixed Income
$ 63,423
4,790
14,296
1,171
83,680
29.5%
2.3%
6.7%
0.5%
39.0%
Market Value of Investments
$ 214,749
100.0%
Accrued Investment Earnings
Total Market Value of the Fund
402
$ 215,151
Plan Documents
The NAPBC met 10 times during 2009. Copies of the agenda, minutes, auditor’s report, financial
reports and all actuarial reports are on file in the CUPE Union Local 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 arrangement.
Please contact the Pensions Office at 966-6633 or any member of the Non Academic Pension
and Benefits Committee if you have any questions about the items covered.
Non Academic Pension Plan Information
Non Academic Pension and Benefits Committee
Members
CUPE Union Local 1975 Appointees:
Michael Brockbank
Wayne Foley
Jeff Theis
Library
Facilities Management
Facilities Management
Board of Governors Appointees:
Cheryl Carver
Laura Kennedy
Heather Fortosky
Human Resources
Financial Services
Pensions Office
-----------------------------------------------------------------------------------------------------------------------------------------------------------This communication, future communications and other pension plan information are available online at:
www.usask.ca/fsd/faculty_staff/pension_plans
Observers
Doug Horel
Joe Hromek
Jamie Rogal
Retirees Association
Retirees Association
ASPA
Actuary
AON Consulting
Investment Consultants
Hewitt Associates
Investment Custodian
CIBC Mellon Global Securities
Pension Administration & Support
Pensions Office 966-6633
-----------------------------------------------------------------------------------------------------------------------------------------------------------This communication, future communications and other pension plan information are available online at:
www.usask.ca/fsd/faculty_staff/pension_plans