1. Multi-Sector Pension Plan

2. Outline Retirement Income Sources Types of Pension Plans
Outline of the MSPP – Eligibility, Benefits, etc.

3. Retirement Income in Canada

4. Canada’s 3 sources of Retirement Income
Public Pension Plans
Canada Pension Plan (CPP)
Old Age Security (OAS)
Guaranteed Income Supplement (GIS)
Workplace Pension Plans
Defined Benefit
Defined Contribution
Personal Savings (RRSP)
CPP: Depends on the amount of contributions you’ve made. Benefits are up to a maximum of $908 per month. (taxable)
OAS: Maximum of $517/month – provided you’ve been a resident of Canada for 40 years after 18th birthday. (taxable)
GIS: For seniors who have low incomes – provides up to ~$650 per month, if you have no other income aside from OAS (not taxable)

5. Why a Workplace Pension Plan?
Average monthly benefits paid from public plans:
Canada/Quebec Pension = $501.82
Old Age Security = $489.57
Total = $ (Jan. 2009)
Many, especially women will not receive maximum benefit from public pension plans.
Women will, on average receive much less than men from CPP. This is due to a number of factors, including lower paying jobs and less time in the paid workforce. CPP is like a workplace pension – you receive benefits based on how much and how long you contribute to the plan.

6. Workplace Pension Plans

7. Defined Contribution (DC) Group RRSP
Defined Benefit (DB)
Defined Contribution (DC)
Group RRSP
Contributions
Set by the terms of the plan
As per the collective agreement.
Employer contributions are considered taxable income
Benefits
Pension wage is based on a formula
Pension wage depends on the amount of money in individual’s account. Based on amount contributed, gains/losses on market and fees to purchase pension
Same as DC

8. Defined Benefit (DB)
Defined Contribution (DC)
Group RRSP
Risk
Shared between the employer and plan members
The employee faces the risk alone, through potentially poor investment returns, or retiring at the wrong time (i.e. after the market drops or when interest rates are low)
This is not a pension plan, it is individual savings. The individual faces market risk alone.

9. Problems with DC Plans Employees must face risk alone
Market fluctuations on investments
Interest rates on annuities
No guarantee of retirement benefits
Members are not professional investors
Must pay fees on investments

10. The Multi-Sector Pension Plan

11. Multi-Sector Pension Plan (MSPP)
Defined Benefit Plan – with hybrid features
Collective Approach
Retirement wages based on set formula
100% union-run (CUPE and SEIU)

12. The Proposal
This proposal is only for members who are on the DC Plan, not for members who are on the DB Plan (i.e. those hired before July 1, 1992)

13. The Proposal Current DC Plan: Contributions
Proposed MSPP + DC: Contributions
6% Employee Contribution
6% Employer Contribution
Total: 12% contribution
Current DC Plan
Proposed MSPP + DC
10.5% to the MSPP
12% to the DC Plan
1.5% to the DC Plan

14. The Proposal
All of the benefits from the MSPP will be in addition to what you have already accrued in the DC plan and with your own RRSPs
There is no change to what you have saved under your current pension plan
CPP is not affected by participation in the MSPP: i.e. CPP benefits are in addition to the MSPP

15. MSPP – Eligibility
Everyone in the bargaining unit must be covered after 500 hours of employment
Some exceptions can be made (e.g. if some are on superannuation, they can stay there)

16. MSPP – Benefits: Future Service Credit
$100 of contributions = $1.55 monthly retirement wage at age 65
Roughly equivalent to 1.95% of salary per year of service
Contribution
Monthly Retirement Wage
$20,000
$310.00
$40,000
$602.00
$100,000
$1,550.00
Explain that it is 1.95% of THAT YEAR’s salary each year. It’s not a fund that takes the average of your best years.

17. MSPP - Benefits
Accruing Contributions: assuming full contribution level (10.5%) and wage increase of 3% per year
Annual Wage
Annual Contribution
5 years of contributions
10 years of contributions
25 years of contributions
$40,000
$4,200
$22,298
$48,148
$153,129
$50,000
$5,250
$27,873
$60,185
$191,411
$60,000
$6,300
$33,448
$72,222
$229,693
$70,000
$7,350
$39,022
$84,260
$267,976

18. MSPP – Benefits: Past Service Credit
A unique feature of the plan may increase your retirement wage by as much as $ per month at age 65.
Based on years of service with your employer at the time the employer commences participation in the MSPP.

19. MSPP – Benefits: Past Service Credit
$26.60 per year of service to a maximum of 7 years ($186.20) at age 65

20. MSPP - Benefits Some Examples: Total Contributions Future Service
Past Service
Retirement Wage
$20,000
$310.00
$186.20
$496.20
$40,000
$620.00
$806.20
$100,000
$1,550.00
$1,736.20
**These examples are in addition to CPP and to any RRSP coverage

21. MSPP - Benefits
Retirement rates: comparison between annuity rates and MSPP benefits, assuming $100,000 contribution
Data as of May 29, 2009
Company
Guarantee?
Age 55
Age 60
Age 65
Sun Life
None
$568
$613
$678
BMO Insurance
$576
$642
$701
Standard Life
$527
$577
$646
MSPP
5 years
$835
$1,158
$1,550
Annuities are currently at historic lows.
MSPP rates – 6% deducted for each year that you retire before age 65.

22. MSPP – Retirement Options
Must be “vested” to retire (24 months of contributions or Age 65)
“Normal” retirement is Age 65
Can retire as early as Age 55 (6%/year reduction)
Several guarantee options available:
Joint and survivor benefits (50%, 60%, 75%, 100%)
5-year, 10-year or 15-year guarantee
The standard option is survivor benefits at 60% or a 5 year guarantee for singles

23. MSPP – Leaving before Retirement
If you have 24 months of “vesting service”, you can:
Collect pension at a later date
Move value to locked-in pension vehicle
Move value to new employer’s plan if the new plan accepts the pension transfer

24. MSPP – Leaving before Retirement
With less than 24 months of “vesting service”, your contributions are refunded with interest accrued.

25. MSPP – Plan Statistics As of May 2009: 80+ participating employers
5,600+ plan members
~60 pensioners
$26 million in fund assets

26. MSPP – Plan Statistics Issue of under-funding
Young pension plans all face under-funding issues
MSPP based on Nursing Home plan:
20 years – never cut benefits
Plan profile is excellent for the current downturn – growing plan with low retiree numbers
Pooled risk vs. individual risk
The employer has been putting out information about the fact that the plan is insufficiently funded.
There are a few issues with this:
first, as you all know, and as I’m sure you know by looking at your RRSP statements, everyone has felt the hit
all plans have felt some degree of pinch, but this plan is actually very well suited to weather the storm. It has a very low number of retirees, which means that it doesn’t have to pay out very much – something that hurts pension plans during a market downturn.
As you see on the screen, the plan is modelled on the nursing home plan – it is almost exactly the same plan. And that plan has been in operation for 20 years. There have never been any cuts to benefits – in fact, even in these economic circumstances, their board of trustees is considering an improvement to benefits.
The MSPP, though, is a young plan. All new pension plans face under-funding issues related to their liabilities. And this plan, because of the past service credit especially, faces them like all of the others. The past service credit introduces liability to the plan (think of giving people money without the contributions) – and since the plan is registered in Ontario, the plan has 15 years to amortize that liability. This makes the plan look more underfunded than it really is.
The plan is growing in membership.
There are no guarantees. However, going with a plan that helps people to pool their risk is better than going it alone. This way takes out the individual bearing all of the risk, and it gets rid of the uncertainty that you’d have based on the time that you retire.

27. MSPP – Additional Information
Questions/comments:
Seth Sazant –