October, 2009
To:
Pensioners and Beneficiaries of the Retirees Pension Plan
From:
Retirees Pension Committee
The primary purpose of this report is to review the interim actuarial valuation of the Retirees
Pension Plan as at December 31, 2008. This report also includes a review of the investments
and investment performance of the Plan in 2008.
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 interim actuarial valuation performed as at December 31, 2008 shows that the Plan,
on a going-concern basis, is in a deficit position of $4.7 million as per Table 1. Comparative
numbers as at December 31, 2007 are also provided.
Table 1: Going-Concern Financial Position
Assets
2008
$52,088,000
2007
$63,420,000
Present value of accrued benefits for retirees (257)
$56,785,000
$62,176,000
(Deficit)/Surplus as at December 31
$(4,697,000)
$1,244,000
Market value of assets
Actuarial Liabilities
The long term expected rate of return of the plan is 6.0%. The major reason for the decrease in
the going-concern financial position was the investment returns during 2008 of -6.0% (negative
6.0%) being less than expected.
Hypothetical Windup Position of the Plan
The Pension Benefits Act (Saskatchewan) also 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 interim actuarial valuation performed as at December 31, 2008 shows that the
Plan, on a hypothetical wind-up basis, is in a deficit position of $11 million as per Table 2.
Comparative numbers as at December 31, 2007 are also provided.
Table 2: Hypothetical Windup Financial Position
Assets
Market value of assets
2008
$52,088,000
2007
$63,420,000
$63,056,000
$67,784,000
$(10,968,000)
$(4,364,000)
Actuarial Liabilities
Present value of accrued benefits for retirees
(Deficit) as at December 31
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Again, the major reason for the increased deficit was investment returns being less than
expected.
Membership Data
Following is a table that outlines the distribution by age of pensioners in the Plan as at
December 31, 2008 with comparative numbers from December 31, 2007.
Table 3: Membership Distribution
2008
Age
65 to 70
70 to 75
75 to 80
80 to 85
85 to 90
90+
Total
4
36
59
84
54
20
257
2007
10
41
65
88
53
17
274
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 2008 amounted to $292,560.
The current valuation at December 31, 2008 is an interim valuation and is not required to be
filed. The next required valuation must be filed not later than December 31, 2009.
The current monthly pension payment received by pensioners will not be negatively impacted by
the performance of the plan or by the filed actuarial valuation reports.
Temporary Solvency Deficiency Payment Relief
In response to the unprecedented decline in the capital markets in 2008, 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. The decision to
apply for temporary solvency relief will be considered with the next required valuation report to
be filed at December 31, 2009.
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Investments of the Pension Plan
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 4.4%.
Investment Performance
For 2008
-6.0%
-10.4%
Actual Plan Return (gross)
Plan Return Benchmark (gross)
Last 4 years
3.2%
2.4%
The Plan’s Return Benchmark is a performance standard developed by the Investment
Consultants, Hewitt Associates. The Retirees Pension Plan 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 2008, the investment fund managers
outperformed the benchmark by 4.4%.
Investment Fund Managers of the Plan
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, 2008 are shown below.
Barclay’s Global Investors
Jarislowsky Fraser Limited
$24.5 Million
$27.5 Million
The Value of the Pension Plan as at December 31, 2008
Table 4 shows the value of the Pension Plan as at December 31, 2008 by major asset classes.
TABLE 4: Market Value of Pension Plan Assets
Asset Class
Canadian Equities
Non-Canadian Equities
Total Equities
Dec 31, 2008
($000)
$ 8,741
13,935
22,676
Per Cent of
Market Value
17.8%
27.4%
45.2%
Bonds
Short-Term Investments
Total Fixed Income
$ 27,538
1,877
29,415
52.7%
2.1%
54.8%
Market Value of Investments
$ 52,091
100.0%
Accrued Investment Earnings
Total Market Value of the Fund
22
$
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52,113
Note to Table 4:
The market value of the total fund ($52,113,000) reported by the investment fund managers
differs from the fund value ($52,088,000) reported by the actuary. The investment fund
managers report on investment funds only; whereas the actuary includes accounts payable
and contributions receivable with its fund value.
Plan Documents
The Retirees Pension Committee met 6 times during 2008. Copies of the agenda, minutes,
auditor’s report, financial reports and all actuarial reports are on file in 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 note as well that a website is available to review any of the following documents:
•
•
•
•
•
•
Plan Document
Expense Policy
Financial Statements
Governance Document
Investment Policy
Pension Newsletters
The website is http://www.usask.ca/fsd/pensions
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.
Retirees Pension Plan Information
Retirees Pension Committee Members
Bob Brack
Dennis Dibski
Bruce Schnell
Laura Kennedy
Heather Fortosky
Terry Summers
bobbrack@shaw.ca
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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