October, 2010
To:
Members of the Retirees Pension Plan
From:
Retirees Pension Committee
This report reviews the interim actuarial valuation of the Retirees Pension Plan as at December
31, 2009. It also includes a review of the investments and investment performance of the Plan
in 2009.
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, 2009 shows that the Plan, on a
going-concern basis, is in a deficit position of $3.46 million (Table 1).
Table 1: Going-Concern Financial Position
Assets
2009
$49,097,000
2008
$52,088,000
Present value of accrued benefits for retirees (250)
$52,559,000
$56,785,000
(Deficit) as at December 31
$(3,462,000)
$(4,697,000)
Market value of assets
Actuarial Liabilities
Hypothetical Windup 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 the Plan, on a hypothetical
wind-up basis, is in a deficit position of $8.59 million (Table 2).
Table 2: Hypothetical Windup Financial Position
Assets
Market value of assets
Present value of future unfunded liability payments**
Total Assets
2009
$49,097,000
1,531,000
$50,628,000
2008
$52,088,000
$59,221,000
$63,056,000
$52,088,000
Actuarial Liabilities
Present value of accrued benefits for retirees
$(8,593,000)
$(10,968,000)
(Deficit) as at December 31
**the present value of future unfunded liability includes five years of University payments at
$29,800 per month for the going concern liability.
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Funding Requirements
The University was required to file a valuation with regulatory authorities as at December 31,
2006. As mentioned in past newsletters, the valuation revealed a solvency deficiency of
$1,323,000. This deficiency is being amortized over a period of five years, with monthly
payments of $24,380 being paid by the University at the end of each month from January 1,
2007 to December 31, 2011. Payments to the Plan for 2009 amounted to $292,560.
The current valuation at December 31, 2009 must be filed with regulatory authorities. The goingconcern deficiency (unfunded liability) of $3,462,000 will be amortized over a period of fifteen
years, or until the next funding valuation is certified, with monthly payments of $29,800 being
paid by the University.
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. This relief does not apply to valuations filed previous to December 31, 2008.
The current payment schedule, with respect to the solvency deficiency established at December
31, 2006 as outlined above, remains unchanged. Table 3 outlines the required monthly
payments.
Table 3: Required Monthly Special Payments (With Solvency Relief)
Unfunded liability
2006 Solvency deficiency
2009 Solvency deficiency
Total Monthly Payments
Jan 1, 2010 to
December 31, 2011
$ 29,800
24,380
---
January 1, 2011 to
December 31, 2014
$ 29,800
-----
$
$
54,180
29,800
The University has undertaken to elect for temporary solvency relief as permitted by regulations
and accordingly will remit $54,180 per month effective January 1, 2010.
Please Note: As these ongoing required payments are being made by the University,
there will be no decrease in current monthly pension payments received by pensioners.
Due to the current financial position of the Plan, there will be no ad-hoc increases to
current pensions.
Funding Policy
With the assistance of the Plan’s actuary, the Committee developed and in June, 2010,
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 maintain the security of the current
benefits; the secondary objective is to provide ad-hoc indexing. When the Plan has assets with
a value that is more than sufficient to sustain future benefit payment obligations, the surplus
may be allocated to ad hoc indexing on an equitable basis for all Plan members. The Committee
continues to monitor the situation, but recognizes the challenges in realizing this objective in the
long term.
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Membership Data
Table 4 outlines the distribution by age of pensioners, as at December 31, 2009, with
comparative numbers from December 31, 2008.
Table 4: Membership Distribution
Age
2009
65 - 70
3
71 - 75
29
76 - 80
57
81 - 85
82
86 - 90
57
91+
22
Total
250
2008
4
36
59
84
54
20
257
Investments
The long-term investment goal of the Plan is to achieve an annualized total rate of return of
6.0%. To achieve this goal, the Plan has adopted an asset mix that has a bias to fixed income
investments. Over the last ten years, the annualized rate of return for the Plan has been 4.7%.
Investment Performance
For 2009
Actual Plan Return (gross)
Plan Return Benchmark (gross)
9.4%
11.4%
Last 4 years
3.3%
2.9%
Last 10 years
4.7%
3.8%
The Plan’s Return Benchmark is a performance standard developed by the Investment
Consultants, Hewitt Associates. The Retirees 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. In 2009, the investment fund managers underperformed the
benchmark by 2.0%. The Committee is currently undertaking a comprehensive review of the
investment policy for the Plan.
Investment Fund Managers
The responsibility for investing the assets of the Plan has been delegated to two 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, 2009, are shown below.
BlackRock Asset Management Limited
(formerly Barclays Global Investors)
Jarislowsky Fraser Limited
$29.1 Million
$20.0 Million
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The Value of the Pension Plan as at December 31, 2009
Table 5 shows the value of the Pension Plan as at December 31, 2009 by major asset classes.
TABLE 5: Market Value of Pension Plan Assets
Asset Class
Canadian Equities
Non-Canadian Equities
Total Equities
Dec 31, 2009
($000)
$ 7,267
12,047
19,314
Per Cent of
Market Value
14.8%
24.5%
39.3%
Bonds
Short-Term Investments
Total Fixed Income
$ 29,046
718
29,764
59.2%
1.5%
60.7%
Market Value of Investments
$ 49,078
100.0%
Accrued Investment Earnings
Total Market Value of the Fund
22
$
49,100
Plan Documents
The Retirees Pension Committee met seven times during 2009. Copies of agendas, minutes,
auditor’s report, financial reports and actuarial reports are on file in 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.
As well, a website is available to review any of the following documents:
•
•
•
•
•
•
•
Plan Document
Expense Policy
Financial Statements
Governance Document
Investment Policy
Funding Policy
Pension Newsletters
The website is http://www.usask.ca/fsd/faculty_staff/pension_plans
Please contact the Pensions Office at 966-6633 or any member of the Retirees Pension
Committee if you have any questions about the items covered.
The address of the Pensions Office is Room 220 Research Annex – 105 Maintenance Road,
Saskatoon, SK S7N 5C5.
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Retirees Pension Plan Information
Retirees Pension Committee Members
Dennis Dibski
Bruce Schnell
Laura Kennedy
Heather Fortosky
Terry Summers
Martin Gonzalez (to December 31, 2010)
djdibski@shaw.ca
schnellbj@sasktel.net
laura.kennedy@usask.ca
heather.fortosky@usask.ca
terry.summers@usask.ca
Actuary
Aon Consulting
Investment Consultants
Hewitt Associates
Investment Custodian
CIBC Mellon Global Securities
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