1 Winter 2014 History in the Making – York’s Pension Plan

2 Purpose of this Seminar Pension Plan text Plan amendments Historical rates of return Historic expectations End of mandatory retirement The 1990s vs. 2000s

3 Pension plan text The pension plan (the Plan) was established July 1, 1960 The Plan is registered in Ontario however any plan amendment has to be filed and approved both federally and provincially Plan registration number is The Plan text can be found on the Pension & Benefits website – it has not been updated with the changes that were recently announced

4 Plan Amendments There are several reasons why a pension plan is amended: Provincial legislation changes Income Tax Act changes Request from the All University Pension Committee (AUPC) University determines the need for an amendment The University along with the York University All-Union Pension Group (YUPG) meet, discuss and agree to amend the Plan.

5 Key changes that have taken place July 1, 1971 (retroactive to July 1, 1960) – hybrid nature of the plan was documented in more detail January 1, 1977 – Pension Fund Board of Trustees assumed new responsibilities July 1, 1984 – minimum guarantee formula improved, provision made for variable pension and minimum guarantee July 1, 1985 – minimum guarantee formula improved again and permanent part-time employees working more than 24 hours per week permitted to participate in the plan

6 Plan changes July 1, 1987 – permit employees to transfer out their retirement entitlement to a locked-in RRSP January 1, 1988 – amendments to complete with changes to the PBA, 1987 such as: Definition of employee and spouse retirement date (i.e. may elect to retire on the 1 st day of any month following their 55 th birthday) Benefits on termination of service (the vesting and locking-in definitions added)

7 Plan changes continued… May 1, 1989 – include the ability for those on revocable or irrevocable reduced load to maintain full service September 1, 1991 – increase the dependent child benefit to $300 per month from $200 January 1, 1992 – incorporate changes required by amendments to the Income Tax Act which included Section 13 of the Plan that describes the Adjustments to Pensions October 1, 1993 – July 1, 1999 – a number of early retirement windows

8 Plan changes continued… January 1, 2005 – provide the ability for non-unionized employees to maintain full service when on a leave of absence without pay September 1, 2010 – CUPE 3903 unit 1 and 2 eligibility amended January 1, 2012 – Government of Ontario amended the Pension Benefits Act with respect to marriage breakdown – there is now a prescribed process. The University charges $400 for the first calculation and $800 for any subsequent calculation

9 Plan changes continued… July 1, 2012 – anyone that terminates employment on or after this date is immediately vested and locked-in (with the exception of those with a small pension – 2% of the YMPE) January 1, 2014 – the University no longer contributes an additional 3% to the member’s account March 1, pension contributions will be 4.95% on earnings up to the Year’s Maximum Pensionable Earnings (YMPE) and 6.63% on earnings above the YMPE;

10 Plan changes continued… September 1, pension contributions will be 5.4% on earnings up to the Year’s Maximum Pensionable Earnings (YMPE) and 7.26% on earnings above the YMPE January 1, For retirements on or after January 1, 2015, the moving four-year average fund rate of return will be lengthened to a moving five year average fund rate of return with the fund rate of return equal to 6.0% for the plan years in the five year average up to and including the plan year in which the date of pension commencement occurs

11 Plan changes continued… March 1, pension contributions will be 5.85% on earnings up to the Year’s Maximum Pensionable Earnings (YMPE) and 7.89% on earnings above the YMPE September 1, pension contributions will be 6.3% on earnings up to the Year’s Maximum Pensionable Earnings (YMPE) and 8.52% on earnings above the YMPE March 1, pension contributions will be 6.75% on earnings up to the Year’s Maximum Pensionable Earnings (YMPE) and 9.15% on earnings above the YMPE

12 Historical rates of return YearRate of ReturnPensioner Adjustment % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % %0%( %) %0% ( %) %0% ( %) % % % % % % %0% (-5.141%) %0% ( %) %0%( %) % 0%( %) 2013Estimate 15 – 16%To be determined

13 Rate of return process The annual rate of return is typically determined by the middle of February for the previous year. The pensioner adjustment is also determined at the same time. The rate of return is applied to each active and deferred member’s account. The pensioner adjustment is applied to those that have retired and are receiving a monthly pension. Letters go to each retiree with their updated information. If the pensioner adjustment is negative the pension payable is tracked in the pension system

14 Rate of Return process continued… Pension statements are produced and are typically loaded to the system in May Pension statements have to be made available by June 30 of each year Once the pension statements have been loaded the Retirement Planner is updated with the year end data All the year end data is compiled and sent to the Plan actuary During this process the external auditors (and at times the internal auditors) are reviewing the data to ensure accuracy

15 Historic Expectations The expectation was that most if not all employees would retire under the money purchase component of the Plan The Plan actuary has now indicated that more than 95% of York employees will retire under the minimum guarantee portion of the Plan

16 Historic results YearMGPMPCTotal% that are MGP % % % % % % % % % % % % % % % % % % % % % % %

17 End of mandatory retirement December 12, 2006 the Ontario government abolished mandatory retirement The Plan continues to have a normal retirement date as all retirement figures work off that date Normal retirement is defined as the July 1 coincident with or following your 65 th birthday While you can continue to work you must begin receiving your pension December 1, in the year you attain age 71 If you have RRSPs you also have to access those funds in the year you attain age 71

18 End of Mandatory Retirement More than a dozen individuals attained age 71 in 2012 and elected to continue working and receive their pension An additional 31individuals attained age 71 in 2013 Individuals need to determine if it is in their best interest to receive their pension in addition to their income as an active employee We suggest you contact a financial advisor or speak to an accountant regarding tax implications

19 The 1990s vs 2000s The 1990s saw an average rate of return in the Plan of % while the 2000s saw an average rate of return of % Between 1993 and 1999 ten early retirement windows were provided Retirees consistently received an increase in their pension in the 1990s while five of the first ten years in the 2000s increases were not provided

20 Pensioner adjustment When you first retire, the actuarial factors used to calculate the money purchase pension assume the Pension Fund will earn 6% annually throughout your retirement. Your retirement pension may be adjusted at the beginning of each calendar year if the moving four- year average fund return is in excess of 6% at that time. In the event the moving four-year average fund return is below 6%, no reduction will be made to your pension; however, this deficit will be tracked and future adjustments (positive or negative) will be applied to the reduced amount. You won’t receive any further increments until the deficit is paid up.

21 Pensioner adjustment pre/post 2015 For those member’s retiring prior to January 1, 2015 the pensioner increment remains with the actual rate of return for the four year period prior to retirement less 6%. For those member’s retiring on or after January 1, 2015 the pensioner increment ‘backfills’ the actual rate of return for the five year period prior to retirement less 6%. The potential volatility of the pensioner adjustment will be reduced with the change

22 The 1990s vs 2000s continued… Retiring January 1, 1990 with a $1,000 per month pension that pension would be $1,842 at January 1, 2011 Retiring January 1, 2000 with a $1,000 per month pension that pension would be $1,126 at January 1, 2011 Those individuals that retired in 2008 will likely never see an increase to their pension

23 The 1990s vs. 2000s The going concern valuation results changed dramatically between the 1990s and 2000s YearGoing concern position (in millions) YearGoing concern position (in millions)

24 Moving forward We have no way of knowing that the future holds. The Plan is affected by: Government bond rates – this rate is used in the actuarial valuation and as it has been decreasing steadily it means a higher cost to the Plan Rate of return – if the rate of return is low or negative the employee’s money purchase account doesn’t increase quickly meaning more retiring on the minimum guarantee - this also affects the four year moving average for those that retire prior to January 1, 2015 Mortality experience – the money purchase pension is affected Government legislation – what will the government(s) do with respect to public service pension plans?

25 Moving Forward continued… Increasing employee mandatory contributions will result in more money credited to your money purchase account on a tax-deferred basis. The University matches your mandatory contributions. Depending on the rate of return of the fund this may also mean more individuals retiring on a money purchase basis. The University and YUPG continue to meet to discuss further potential changes.

26 Need to contact Pension & Benefits? Call extension (askpb) – the phone line is open from 8:30 am to 4:30 pm Monday to Friday. For Fridays in June, July and August the phone line closes at 3:30 pm. Please have your employee ID ready when you call us. Any form or document that we may need from you can be completed, scanned and ed to