Algonquin College Jan. 2013
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Overview
1.
Pensions and politics
2.
Why growth matters to you
3.
Your role in promoting retirement security
4.
Your benefits – a plan worth keeping

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Key Messages - Our mandate
The purpose of the CAAT
Pension Plan is to improve the financial security of members in retirement with appropriate and secure benefits supported by stable and affordable contribution rates.

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Measuring success
Contribution rates
 Minimize probability of increases
 Appropriate for benefits earned
 Reduce volatility
Secure promised benefits
 Avoid benefit reductions (funding level)
 Paying post-2007 conditional indexing
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Key Message – Joint Governance adds value
Jointly-sponsored, multi-employer Plan
 Equal representation
 Bicameral governance structure
 29 employers and growing
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Board of Trustees – joint representation
 12 member Board
 Responsible for
 Administration
 Investments

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Sponsors’ Committee – joint representation
 8 member Committee
 Responsible for
 Benefit design
 Contribution rates

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Key Message - Healthy demographic profile
Active members: 20,500
Retired members: 12,100 (including survivors)
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Key Message - Well diversified asset mix

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Key Message - Strong financials
 Filed valuation with small surplus (01/01/2012)
* Preliminary results to September 30, 2012
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Overview
1. Pensions and politics
2.
Why growth matters to you
3.
Your role in promoting retirement security
4.
Your benefits – a plan worth keeping

Pension plans are facing headwinds
 Historically low-interest rates
 Increasing longevity
 Hangover from the economic crisis of 2008
 Onerous and changing pension legislation
 Pension Envy

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Pensions, politics and the emerging reality
 Federal gov’t announces OAS to start at 67
 Drummond Report – calls for amalgamation of plans for better administrative efficiency
 Budget 2012 – 50/50 cost sharing, JSPP
 William Morneau report - pooling of pension funds under $40 Billion
 Pensions are on the political agenda in 2013 and will likely remain there

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JSPP framework
 Investment pooling
 Annual valuations
 Choose: benefit reductions over contribution increases
 One size fits all
 Pension expense
Hon. Dwight Duncan, Minister of Finance
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Specifics of recent agreement
 Exempt from special legislation
 No forced participation in pooled investment fund
 Granted longer valuation cycle for flexibility and stability
 Governance decisions remain in the Plan
 Benefit restoration at 100% funded
 Funding Policy temporarily changed
 CAAT recognized as a model
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Forced pooling of pension assets? No Thanks
 Misaligned investments results in more volatility
 Risk of too many eggs in one basket
 Diseconomies of scale in certain assets
 Governance structures across unrelated sectors will create costly growing pains
 Untested

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Retaining control of investments means
 We continue with our diversified, sophisticated investment program
 We manage investment risk to our tolerance
 We are focused on Plan needs
 With a single focus our asset size is not a limitation

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Why retaining control matters
 Joint governance structure remains independent
 Benefits and contributions decisions geared to needs of college sector
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Change to Plan Funding Policy – to 2018
 If funding deficit arises
 Future benefits would be temporarily reduced
 Restoration at 100% funding
 Benefits earned remain protected

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CAAT is recognized as the model
 Jointly sponsored plan with good governance
 50-50 cost and risk sharing
 Top quartile investment performance
 Sustainable:
 Liabilities recognize longevity and lower expected investment returns
 Conditional indexing
 Funding policy

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Should you be worried? No, and here’s why
 Pension benefits earned to date are protected
 Plan governors are focused on keeping pensions stable, secure
 Reductions will be minimized, temporary
 CAAT is a model pension plan – tweaks

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More reasons for reassurance
 Changes already made put the Plan on a sound financial footing
 Recognizing longer life span in assumptions
 Realistic assumptions about investment returns
 More diversified investments , aligned with liabilities

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Overview
1.
Pensions and politics
2. Why growth matters to you
3.
Your role in promoting retirement security
4.
Your benefits – a plan worth keeping

Inviting interested universities to join CAAT
 We propose university members join on a future service basis
 Past debt remains the responsibility of the university unless plan to fully fund
 Governance structure to be adjusted as appropriate, but CAAT retains 50% of representation

Why the CAAT Plan is pursuing growth
 Growth in Plan membership improves stability of pension funding
 Accelerates contribution rate reductions
 Similar demographic profile makes for lower risk and better alignment

How university members benefit
 Strong voice in a well-governed , transparent pension plan
 More of contributions go to benefits than to expenses – economies of scale, no PBGF
 Secure, well-funded, sustainable plan offering good value
 Ready-made long-term solution

How universities benefit
 Avoids solvency funding requirements
 Substantially lowers cost and risks associated with pension administration, investments, governance and compliance
 Stabilizes contribution rates

How Ontario benefits
 An efficient postsecondary sector pension plan achieved without legislation
 The proposal offers an immediate solution
 High interest in its success

Advantages of postsecondary pension plan
 More predictable contribution and secure benefits
 Aligned with gov’t objectives
 True joint governance
 Postsecondary sector alignment
 Lower costs and risks
 Dedicated pension, investment expertise
 Permanent solvency exemption
 Proven solution

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Sign up to receive news directly from the CAAT Pension Plan at your work or personal e-mail address.

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Overview
1.
Pensions and politics
2.
Why growth matters to you
3. Your role in promoting retirement security
4.
Your benefits – a plan worth keeping

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Importance of adequate retirement income
60% of Canadians do not have a workplace pension and most will have inadequate personal savings at retirement.
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DB are complex and ripe for oversimplification
The critics see pension plans as too generous, unsustainable and unfair to Canadian taxpayers.
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“Canada’s pension system is a disaster waiting to happen. Public sector pension plans at all levels of government are massively underfunded which will demand higher taxes and strain Canada’s economy.”
Public Sector Pensions: A Runaway Train
Canadian Federation of Independent Business
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“We need to have a retirement scheme that isn’t going to bankrupt the country . The money is not there to cover these obligations.”
Gregory Thomas, National Director
Canadian Taxpayers Federation
(As quoted the Toronto Sun , August 29, 2012 referencing CD Howe
Institute’s estimate of the federal public service unfunded liability of billions of dollars)
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Towers Watson study – results of pressures
 Many closing or freezing DB plans
 DC members behaviors will lead to insufficient retirement income
 late entry, leaving money on the table
 deferring retirement
 not adequately prepared
 buy high, sell low
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Solution isn’t viable in the long term
 Conversion to DC plans – people will pay more and receive less
 DC plans are less efficient – will need to over save to guard against individual risk
 In DB, risks are pooled
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Five truths about DB pensions worth sharing
1.
Adequately funded
2.
Shared risk
3.
Plans are efficient, low cost operations
4.
Provides long-term capital
5.
Helps combat poverty among the elderly
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Sign up to receive news directly from the CAAT Pension Plan at your work or personal e-mail address.

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Overview
1.
Pensions and politics
2.
Why growth matters to you
3.
Your role in promoting retirement security
4. Your benefits – a plan worth keeping

CAAT benefits comparable to other public plans
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Lifetime and bridge benefits
Pensions based on best-5 years (60 consecutive months
 Flexible retirement options
 60% Survivor benefits
 Conditional inflation protection

Lifetime and bridge benefits
Before 65
 2% x service
After 65
 1.3% to YMPE
 2% over YMPE

Flexible retirement options
 Retire
 as early as 50 with 20 years or (55 and 2)
 as late as 71
 Permanent early retirement provisions
 Unreduced dates (earliest)
 85 factor (age plus service)
 60 years of age and 20 years of service
 Reduction of only 3% per year from earliest

Joint and survivor pension options
 60% survivor pension - included
 If you marry after retirement, your new spouse automatically receives a survivor pension – included

Conditional inflation protection
 Inflation protection at 75% of the CPI conditional on the funding status – subject to the results of the Plan’s most recent filed actuarial valuation.
 Highest priority
 First dollar of surplus
 First priority for reserves
 Perfect record

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Value
Member retires at 60
Lifetime pension: $21,967
Bridge paid to 65: $7,036

48 www.caatpension.on.ca

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