A Plan for Growth ASCC / COFO Session 2 October 29, 2013 Kevin Rorwick – Chief Financial Officer
Today’s topics Financial growth Funding stability Service growth Membership growth Advocating efforts Stakeholder survey 2
FINANCIAL GROWTH 3
Adding value 4 “Our 2012 net return of 11.3% added $50 million in value compared to the policy benchmark return of 10.4%.” Julie Cays Chief Investment Officer
5 5 Year ending December 31 GrossNet %11.3% %3.4% %12.6% %14.7% Solid returns, low costs
Positive returns from all asset classes 6
Returns in excess of requirements 7
CAAT Plan is well-positioned 8 “The Plan is 103% funded with a reserve to provide some cushion during this period of continued economic uncertainty.” Derek W. Dobson CEO & Plan Manager
Growing surplus 9
FUNDING STABILITY 10
Agreement reached with province Jointly Sponsored Pension Plan (JSPP) Framework Agreement 11 October 2012
Contribution Rates – stable to to the YMPE to RCA limit Over RCA limit MembersEmployers %14.4% 43.2% %14.8% 44.4% YMPE (Year’s Maximum Pensionable Earnings) - $51,100 in 2013 RCA Limit - $152, in 2013
JSPP Framework Agreement Highlights Exempted from special legislation, including forced participation in pooled investment fund Granted 4-year valuation cycle for flexibility and stability Governance remains with Plan Sponsors 13
JSPP Framework Agreement Highlights Funding Policy temporarily changed – until 2017 Contribution rates stay at announced levels Phase-in of adjustments finishes Any shortfall would be addressed with temporary reductions to future benefits Could be restored when Plan funding improved 14
Plan is financially stronger because: Healthy demographic mix Realistic assumptions Solid returns More diversified investments aligned with liabilities Prescriptive Funding Policy 15
16 Active members: 21,400 Retired members: 12,600 (including survivors) 16 Healthy demographic mix
Plan is financially stronger because: Realistic assumptions Longer lifespan - age 88 versus national avg. 85 Discount rate – 5.8% 17
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Plan is financially stronger because: Prescriptive Funding Policy Uses mix of reserves, stability contributions and conditional benefits to manage through volatility 19
Outlook Interest rates up Investments continue to perform strongly 20
SERVICE GROWTH 21
Service growth Plans for: People Processes Tools 22
People New Director, Client Services: Angela Goodchild Additional staff 2 Permanent for service improvement 2 Temporary for part-time enrolment, manual processes before new system Training support for employer administrators 23
Processes Realigned employer services team Centralized support for employers through their main Plan contact (Pension Analyst) Broader data collection allows Plan to do more Part-time notification Estimating liabilities Proper calculations 24
RCA changes Needed to adjust way administrative expenses were charged Separate charge for portion of administrative expenses Offset by lower contribution – no change in overall amount Still one remittance – change to form only 25
Tools Pension administration system will reduce manual processing, risk and help improve service experience, including timeliness Data collection tool being rebuilt 26
MEMBERSHIP GROWTH It’s in our best interests 27
Growth benefits the Plan 28 Growth in Plan membership improves stability of pension funding Accelerates contribution rate reductions Similar demographic profile makes for lower risk and better alignment Further reduces administration and investment costs
Growth benefits funding levels 29
Drummond Report – Recommendation 7:27 “Establish a single pension fund administrator for all university and college pensions, while recognizing differences in pensions.” Commission on the Reform of Ontario’s Public Services February 15,
How universities benefit 31 Avoids solvency funding requirements Substantially lowers cost and risks associated with pension administration, investments, governance and compliance Stabilizes contribution rates
How Ontario benefits 32 An efficient postsecondary sector pension plan achieved without legislation The proposal offers an immediate solution High interest in its success Recognizes post-secondary sector alignment trends
Growth must be in the best interest of CAAT members CAAT members will not subsidize university debts 33 Fundamental principles
Preparing for growth 34
Earlier eligibility for part-time employees On Jan. 1, 2014 all OTRFT employees can choose to join anytime vs. 24-month continuous service qualification Change made to manage legal risk with minimal administrative work, especially by employers 35
ADVOCATING EFFORTS 36
FATCA Would have required withholdings for any retirees who are US citizens. Exemption for pension plans received. 37
Bill C-377 Would require “labour trusts” to disclose personal information about those in receipt of payments Written submission by Plan requesting exemption Bill may be reintroduced 38
HST Relief Relief for accounting for tax on deemed taxable supplies made by an employer to a pension plan Response to advocacy Plan participated in College does not have to remit HST where GST portion of deemed taxable supply is less than $5,000 (about $70,000 in activities) Do NOT make election to ignore HST on actual taxable supplies 39
STAKEHOLDER SURVEY 40
Broad response received Nearly 5,000 responses from 24 stakeholder groups Over 3,500 active members responded for a 16% participation rate 41
Key findings 65% said pension plan was important part of decision to join college system 90% said pension plan was important part of remaining employed in college system 90% said pension is important part of total compensation received 90% said having an independent organization manage the plan is important 1.3% do not believe they are deriving good value for money from the plan 42
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