Pension Plan Operations. Positive Changes Coming

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2 Pension Plan Operations Positive Changes Coming Information and Consultation with Members of the Plans August 2016 Joint Pension Board Human Resources

3 Agenda Goals of the Pension Plan/Joint Pension Board Enhanced services and supports we expect Timelines for changes Opportunities for you to share your ideas What you can expect next 3

4 Background Pension Plans Two plans academic (faculty) and administrative (staff) Current service model and structure introduced in 1994 bringing recordkeeping and administration in-house. Approx members - employees, retirees, past employees Assets of $1.1 billion (Dec 2015) Average Pension Plan balance - $160,000 (Dec 2015)

5 Governance Joint Pension Board (JPB) administers Pension Plans. JPB is standing committee of Board of Governors. Four elected faculty and four elected staff sit on JPB, as well as three individuals appointed by the University. JPB sets policies related to investment structure and management, and administration of accounts, and identifies operational, legal or financial risks. JPB has delegated to Human Resources some of the responsibility for the daily operations of the plans.

6 Current Pension Operations Human Resources Orientation of new members One-on-one sessions Annual member meetings Annual pension statements Annual Investment Report Newsletters and mailings Pension website Financial literacy week Lunch and learns Financial statements Regulatory filings Pension Plan amendments Investment research and review

7 Member concerns Investment changes limited to once a month Requests for more details of holdings within investments Increasing requests for financial and investment advice Continued access to low cost investment funds

8 Other considerations Risk unit valuation error Significant technical advances to support financial transactions since 1994 Increased complexity in investments and payment options Importance of flexibility in trading and redemption

9 Current Pension Operations Other Providers Northern Trust Trustee Custodian Benefit payments Securities lending Investment reporting Buck Consultants/Xerox BASIS Pension Recordkeeping system

10 Current Pension Operations Other Providers Morneau Shepell Member education sessions External Legal Counsel Advice on unusual/no precedent External Advisor of Member s Choice Investment Managers BNY Mellon Investment details Some performance reporting Russell/Mercer/Kilgour Investment consulting Due diligence re: managers

11 Pension Board Principles Offer members a diverse choice of investments Allow for liquidity Maintain fairness among members Be responsive to member preferences and concerns Assist members in making well-informed decisions Use prudence in assessing and reviewing operations Ensure cost effective administration

12 Desired outcomes of review Retain competitive fees Member access to daily valuation/trading Member access to advisory services and planning tools Member access to detailed data on investments Continued oversight by JPB to ensure quality investments Minimize risk to Western and to members in transition and operations Maintain member trust Meet or exceed service levels to members 12

13 Possibilities Source: Companies participating in Benefits Canada s 2014 CAP survey.

14 Consolidate all operations, some or none? 1. Status quo - no change to member services, increasing operational costs and higher risks or; 2. New custodian/trustee, but keep recordkeeping, education, member services with different providers doesn t help manage operational risks or increase member services; 3. One provider with a full range of services increase services to members, manage operational risk 14

15 Who can provide bundled services? Sun Life, Great West, Manulife all able to provide custodian, recordkeeping, education and member services as a bundle of services. Each has varying ability and willingness to put Westernselected investment managers on their platform. Sun Life the only company that provides custody and recordkeeping services for Canadian universities 15

16 Western HR Pension Team Northern Trust Russell/Mercer/Kilgour Morneau Shepell External Legal Counsel External Advisors Buck /Xerox Investment Managers BNY Mellon Pension Operations

17 Sun Life Value Proposal Largest DC Plan provider in Canada - $26 billion University recordkeeping and administration 27 universities/18 colleges $5.2 billion in assets and 21,000 university members Significant resources allocated to fund operations, performance measurement, customer care, education confirmed and validated Competitive fee structure with 10 year guarantee

18 Benefits for members Daily valuation of holdings, rather than only having valuation to end of previous month Frequency of changes - trade by 4:00 EST and implemented/updated next business day Advice to help you plan your investment approach

19 Benefits for members Investments: Familiar lineup of investments, similar cost, opportunity for new offerings if chosen by JPB Online information and transactions: high quality member website Getting help: Face-to-face assistance as required 24/7 online access (including mobile) to tools, services and information Phone assistance 8 am to 8 pm on business days

20 Benefits for members Continued oversight by Joint Pension Board of investment manager selections and performance management Continuing role of Human Resource team in investment research and review, onboarding and working with Sun Life team Competitive fee structure Guaranteed for 10 years

21 Member Services

22 Communication with members

23 Investment Details Dashboard on markets, research, download to excel

24 Investment Details Details on performance, holdings, strategy etc.

25 Fee comparison Fund Total Management Expense Ratios (MERs 1 ) Western Sun Life Difference Balanced Income 0.42% 0.42% 0.00% Balanced Growth 0.50% 0.51% 0.01% Diversified Bond 0.36% 0.36% 0.00% Diversified Equity 0.56% 0.57% 0.01% Money Market 0.08% 0.09% 0.01% Target Date Fund % 0.10% -0.01% Target Date Fund % 0.10% -0.07% Canadian Bond 0.12% 0.12% 0.01% Canadian Long Term Bond 0.15% 0.14% -0.01% Socially Responsible Global Equity 1.00% 0.62% -0.38% Canadian Equity 0.31% 0.34% 0.03% US Equity Hedged 0.12% 0.17% 0.05% US Equity Unhedged 0.11% 0.12% 0.01% Non-North American Equity 0.85% 0.80% -0.05% Liquidating Trust 0.18% 0.14% -0.04% [1] Based on the most recent fee schedules and assets as of March 31, 2016

26 Some Investment Opportunities Socially Responsible Global Equity Pension Board has reviewed opportunities at Sun Life MFS a superior product and has had much better performance and cheaper. Target Date Funds - Opportunity to use Sun Life provided Guaranteed Investment Certificates or Guaranteed Insurance Annuities to achieve similar investment objectives.

27 Benefits for Western Many excellent resources of Sun Life can work for Western members.

28 Benefits for Western Consistent and customized messages for members considering retirement and establishing a RIF.

29 Benefits for Western Security and risk management advantages of working with a large, experienced plan manager

30 Timing Move investments September 30, 2016 Move member records and transition client services beginning January 1, 2017

31 Your opinion matters Investments: Services: Records: How important are Target Date Funds v. GIC? What is most important: low fees or manager that has strategy to provide superior returns but at higher cost? Liquidating Trust wind up in Jan-April 2017 what information/support do you need? Concerns about proposed timing to move? Access to computers/mobile applications? Frequency for personal meetings on-site? Engage Sun Life Advisors in financial planning outside scope of the pension plans? RRSP and TFSA savings with Sun Life? Disclosure of fees Unit value starting #

32 Next steps Finalize details of contract Final review by Joint Pension Board Communication and further details as we get closer to transitioning member services

33 Your questions and comments