WorkSafeBC Pension Plan Annual Report. April 1, 2014, to March 31, 2015

Transcription

1 WorkSafeBC Pension Plan 2015 Annual Report April 1, 2014, to March 31, 2015

2 Contents Trustees Message Valuation details It s Your Plan Pension options Safety in numbers Frequently asked questions Financial Information Investments Financial health Plan Membership Member services About the membership Benefits & Contributions How plan benefits work How contributions work Governance & Rule Changes Plan governance and agents Plan rule changes Financial Statements ii

3 Trustees Message We are pleased to report the latest actuarial valuation of March 31, 2014, shows the WorkSafeBC Pension Plan (plan) remains financially healthy. Valuation details As part of our responsibilities, at least once every three years, an independent actuary is asked to assess the financial position of the plan. An actuary is a specialist in financial modelling, the laws of probability and risk management. As required by provincial legislation, the actuary examines the plan from two perspectives: going concern and solvency. The going-concern valuation, which assumes the plan will continue into the future at least as long as the lifetime of all current members, showed an actuarial surplus of $242 million in the basic account. This represents a funding ratio of 124 per cent; it means the plan is in a healthy position. The solvency valuation, which measures the plan s ability to pay promised pensions in the very unlikely event that the plan for some reason were to shut down, showed an actuarial surplus of $91 million. This means that even if the plan had hypothetically shut down March 31, 2014, there would have been more than enough money available to pay promised pensions, even with restrictive investment return assumptions. While cost-of-living adjustments (COLAs) for retired members are not guaranteed, the actuary s review indicated the inflation adjustment account (from which COLAs are paid) remains in a strong position. The valuation also indicates that the ongoing normal cost of providing the promised benefits (i.e., excluding future COLAs, which are not guaranteed) has increased from per cent to per cent of salary above the year s maximum pensionable earnings (YMPE, a dollar amount adjusted annually by the federal government; it s the maximum amount of earnings on which you can contribute to the Canada Pension Plan). A three per cent lower rate applies to salaries below the YMPE. The main reason for the increase is a change to reflect that members are living longer than previously assumed. For more information on the 2014 valuation, visit worksafebc.pensionsbc.ca/2014valuation. The next valuation is scheduled for March 31, Actuarial valuations ($ millions) as at March 31 Basic Pension Benefits * 2009* Actuarial net assets 1,236 1, Actuarial liabilities Net actuarial surplus* * After including $13 million (2012 $9 million; 2009 $7 million) of future cost for benefits in excess of Income Tax Act limits, the 2014 surplus reduces to $229 million (2012 $192 million; 2009 $44 million). 1

4 It s Your Plan Your pension is a valuable asset that offers financial security for you and your family. Between your first day in the plan and your last day of work, your pension quietly accompanies you toward your retirement. Get to know the plan so you can make the most of your pension benefits. Pension options When you retire, you will receive a basic pension for your lifetime. The pension option you choose will affect: the amount of pension you receive over your lifetime, the amount of pension your spouse or beneficiary(ies) may receive after your death, and the length of time your spouse or beneficiary(ies) may receive a pension after your death. You cannot change your decision after 60 days from the date your pension is granted. Depending on the option you choose, you may be able to change it within 60 days. The list of options on the right, while not comprehensive, provides an overview of what s available to you. Your choice is personal and should always be based on your individual and family circumstances. You should consult an independent financial consultant before making the final decision on which option to choose. For more details on these and other options, read Choosing Your Best Pension Option. Looking for more information? Check out the Booklets, Pamphlets and Guides page. These publications talk about your pension, your pension options and information about protecting your beneficiary(ies). The PensionFacts page has lots of information about your work and pension options. Retirement options OPTION: Joint life 100 per cent This option ensures the full amount of your lifetime pension will continue to your spouse upon your death and last for your spouse s lifetime. OPTION: Joint life 60 per cent with a 5-, 10- or 15-year guarantee If you die within 5, 10 or 15 years after the start of your pension, your spouse is guaranteed to receive 100 per cent of your lifetime pension for the remainder of the 5-, 10- or 15-year period. OPTION: Single life with a 5-, 10- or 15-year guarantee This option allows you to choose any individual or organization, or your estate as your beneficiary (subject to a current or former spouse s entitlement). Other options Temporary annuities A temporary annuity supplements your basic lifetime pension and is payable to you until age 65 or death, whichever is earlier. Bridge benefit The bridge benefit is designed to bridge the gap between your earlyretirement income and income that may begin after age 65. 2

5 5afety 1n num6ers A WorkSafeBC Pension Plan 10-year retrospective * MEMB3RS PENS10NS Average value of annual new pensions , ,148 Membership growth of 27% ACTIVE : RETIRED MEMBER RATIO : :1 Active female members % % 2015 $35,100 Safety in numbers 2005 $23,000 INVE$TMENT$ TOTAL ($ MILLIONS) 2015 $1,805 UP 53% 2005 $723 * All dates as at March 31. 3

6 Frequently asked questions Pension plans can be complicated; there s lots of information to absorb and lots of things to think about. While the website is an amazing resource, sometimes you just want to hear from someone who knows what they re talking about. Below, some of the plan s client services staff help answer your most frequent questions. In my Member s Benefit Statement, even though my salary has remained the same, it shows my estimated monthly lifetime pension has dropped. Why? The reason you see a drop in your monthly lifetime pension has to do with the fact the bridge benefit is calculated based on the year s maximum pensionable earnings (YMPE) for the year prior to retirement. (The YMPE is adjusted annually by the federal government; it s the maximum amount of earnings on which you can contribute to the Canada Pension Plan.) Currently, the YMPE is growing faster than your highest average salary; so the higher the bridge portion of your benefit (which goes up with the YMPE), the lower the lifetime pension of your benefit. However, if you refer to your Member s Benefit Statement, you will notice that the pension you ve accrued, assuming you terminate on a certain date, has increased when compared to last year. For more information on the bridge benefit, read A Guide for Plan Members. Linda Quesnel, WorkSafeBC Pension Plan benefit specialist What is a pension adjustment? A pension adjustment is the annual dollar amount deducted from your registered retirement savings plan (RRSP) contribution limit. Canada Revenue Agency has a cap on the amount of income you can contribute to savings vehicles; since pensions, like RRSPs, are retirement savings vehicles, contributions to your pension will mean you will have less room to contribute to RRSPs. The PensionFacts Your pension and your RRSP room has more information on pension adjustments, RRSPs and other tax implications of your pension. Wolf Barz, WorkSafeBC Pension Plan benefit specialist I want to work part time. How will that affect my pension? Your final pension amount is calculated using your age, actual working time (pensionable service) and highest average salary. In general, working part time may cause a minor impact to your highest average salary, but the biggest effect on your pension will be accumulating pensionable service at a reduced rate, which will affect the amount of your pension. Jules Hooper, WorkSafeBC Pension Plan client service representative 4

7 My spouse is not listed on my Member s Benefit Statement. What are the implications of this? By providing us your spouse s name and information, we ll be able to ensure that, upon your death, your spouse receives their eligible benefits. Though your spouse is automatically your beneficiary (whether we have their name on record or not), a listed name will allow a smooth transition during a difficult time. To update your information and notify us of a spouse, contact the plan directly. If you do not have a spouse and want to nominate a beneficiary, read Protecting your Pension Benefit: A Guide for Nominating Beneficiaries before Retiring. Laura Fitzpatrick, WorkSafeBC Pension Plan client service representative What does it mean to purchase a leave of absence? A leave of absence (LOA) is an employer-approved absence from work. A leave can be with full pay or without pay. For pension purposes, a leave with full pay is treated as if you were not on leave at all. During a leave without pay, you do not receive pensionable or contributory service. If you purchase a leave of absence, you will receive pensionable and contributory service for the leave period, which will increase your future pension benefits. All eligible LOAs must be applied for within five years from when your leave ends or before you terminate employment, whichever occurs first. You must purchase the entire leave period unless it results in pensionable service exceeding 35 years in total or 12 months in a calendar year. If you contributed to another registered pension plan during the leave period, you may be able to purchase the leave. Contact the plan for further information. For information on leave types, rules about purchasing leaves and calculating the cost of leaves, read the PensionFacts Purchasing leaves of absence. Jackie Bouveur, WorkSafeBC Pension Plan benefit specialist Can I move my pension to or from another pension plan? It may be possible if there is a reciprocal transfer agreement in place and you didn t take a refund or commuted value transfer when you left that plan. For more information, read the PensionFacts Transferring service. Monica Gazzola, WorkSafeBC Pension Plan benefit specialist 5

8 What is a reduced pension? If you decide to retire early and you do not meet the criteria for an unreduced pension, your pension will be reduced. The bridge benefit is also proportionately reduced. Your pension will be reduced by three per cent for each year that the sum of your age plus years of contributory service is less than 90 or three per cent for each year under age 60, to a maximum of 15 per cent, provided you: have at least 10 years of contributory service, and are at least 50 at the date of termination. Otherwise, the reduction is five per cent to a maximum of 25 per cent. Reductions are pro-rated by month for partial years. For more information and examples please read A Guide for Plan Members. Kelly Rempel, WorkSafeBC Pension Plan benefit client service representative I m ready to retire. What do I have to do? Congratulations! The first thing you should do (you can do this at any time during your career) is use the personalized pension estimator on My Account. When you are within a year of retirement, contact the WorkSafeBC Employee Benefits Section in the People Services Division and ask for a pension estimate. You must make your request in writing and include: your full name, mailing address, work and home telephone numbers, social insurance number and date of birth; your spouse s name and date of birth (please state if you do not have a spouse); confirmation of any former spouse with an entitlement to your pension; and your estimated retirement date (last day of pay) and last day of work, if earlier. When we receive your request, we will send you a retirement application package containing everything you need to apply for your pension. The earliest you can complete and sign your forms is within 90 days of your pension effective date. Jason Veen, WorkSafeBC Pension Plan client service assistant 6

9 Financial Information A major responsibility of the plan trustees is to oversee the financial health of the plan. Working with the WorkSafeBC Board of Directors and British Columbia Investment Management Corporation (bcimc), our investment manager, we work to get the strongest possible returns for the plan through prudent, long-term investments. Investments Report on 2014/15 investment results The investment portfolio of the plan grew by $222 million over the fiscal year, ending with a total market value of $1.8 billion as at March 31, The plan s investment portfolio earned a return of 14.0 per cent net of fees, outperforming its market benchmark return of 12.7 per cent. The plan s investments did well in the 2014/15 fiscal year, primarily because of the very strong global equity markets. The plan s combined public equities returned 19.5 per cent, with strong performance by global equities (23.3 per cent) and emerging market equities (21.4 per cent). Canadian equities posted a similar gain and returned 7.5 per cent. Investments in Canadian real estate earned 7.6 per cent. The plan s combined fixed income portfolio, comprised of money market funds, bonds and mortgages, returned 8.5 per cent due to falling interest rates. Following on the trustees strategic review of the plan s long-term policy asset mix, which took into account advice from bcimc and the plan s actuary, a revised policy mix became effective April 1, The revised asset mix reflects an increased focus on real assets such as land, buildings, regulated utilities and renewable resources. These assets, primarily transacted Return on investments year ended March 31, 2015 Benchmark * 12.7% 14.0% * Benchmarks are standards to compare against actual investment returns. in private markets, are tangible physical investments ideally suited for the long-term financial objectives of the plan. They typically provide reliable cash flows, appreciate in value and protect against inflation, while avoiding short-term volatility in public markets. These investments also allow for more direct asset management, which enables bcimc to influence the strategic direction of these companies and create longterm value for the plan. Responsible investing is an integral part of the investment beliefs shared by the trustees and bcimc. The trustees and bcimc believe companies that take environmental, social and governance (ESG) matters into account have less risk and generate long-term value for investors compared to companies with less robust practices. The trustees and bcimc believe assessing and managing investment risk over the long term the cornerstone of responsible investing is a fundamental approach to meeting their mandate to grow and protect the value of the plan over the long term. There is a recognition that ESG matters may differ across companies, regions and asset classes, and over time. Plan members can learn more about bcimc s responsible investment activities by reviewing the Responsible Investing factsheets and newsletters, the Shareholder Engagement Guidelines and Priorities, and proxy voting records available at bcimc.com. 7

10 Managing investment costs is an important component of investment management. The plan s investment fees with bcimc continue to be significantly below those of other investment managers. This is because bcimc operates on a cost recovery, not-for-profit basis and its large asset size provides access to substantial economies of scale. While costs are important, the trustees focus on overall net returns so that a greater proportion of investment return will pass through to the plan, contributing to its long-term sustainability. Market outlook for 2015/16 The WorkSafeBC Pension Plan has a long-term investment horizon and is able to withstand short-term market volatility. The plan trustees and bcimc remain focused on holding a diversified investment portfolio that follows a disciplined, long-term approach to managing the plan s funds. Global stock markets have been volatile in 2015 and global equity returns are expected to be more modest than last year. Most of the gains for global equities are from foreign currency impact due to a depreciating Canadian dollar. Fixed income investments benefitted from an overall decline in 2015, albeit some volatility during the year. This outlook will continually be monitored, taking into account the various risks in the capital markets and the global economy, in order to protect capital and build long-term wealth for the plan. Investment holdings (market value) as at March 31, 2015 Global equities 1 31% Bonds 20% Real estate 13% Canadian equities 10% Short-term 7% Emerging markets equities 1 6% IRR 2 5% Private placements 5% Mortgages 2% Other 1% 1 Asset classifications vary from the financial statements for the purpose of performance reporting on global equities. 2 Infrastructure and renewable resources. Investment portfolio as at March 31, 2015 Market value Asset mix ($ thousands) market value (%) Short-term Money market $112, Government bonds (1 5 years) 13, , Bonds Nominal bonds 273, Global government 16, Real return bonds 62, , Mortgages 35, Canadian equities 185, Global equities 1 U.S. 218, Global 115, Europe 103, Asia 104, Thematic 16, Euro region hedging , Emerging markets equities 110, Real estate 241, Private placements and infrastructure and renewable resources Private placements 83, IRR 2 87, , Other 23, Total investments $1,805, Comparison $1,583,259 1 Asset classifications vary from the financial statements for the purpose of performance reporting on strategic investments and infrastructure. 2 Infrastructure and renewable resources. 8

11 Canadian equities (market value) as at March 31, 2015 Global equities (market value) as at March 31, 2015 Actively managed 62% Actively managed 46% Indexed 38% Indexed 54% Canadian equities, by sector (%) as at March 31, 2015 Global equities, by sector (%) as at March 31, 2015 Utilities IT Indexed Actively managed Utilities Telecom Indexed Actively managed Thematic Consumer staples Materials Telecom Energy Health care Consumer staples Consumer discretionary Industrials Industrials Health care Materials Consumer discretionary Energy IT Financials Financials Information technology. 2 Telecommunication services. 1 Telecommunication services. 2 Information technology. 9

12 Domestic real estate, by type as at March 31, 2015 Office 47% Residential 23% Equities, by region (% of total equity) as at March 31, 2015 United States 34% Canada 22% Industrial 12% Europe developed 17% Retail 11% Hospitality 6% Other 1% Emerging markets 15% Asia developed 11% Cash and other 1% Real estate, by location as at March 31, 2015 Equities, by country (% of portfolio) as at March 31, 2015 Bonds (market value) as at March 31, 2015 Ontario 36% Prairies 33% British Columbia 18% International 8% Quebec and Maritimes 5% U.S Canada 10.3 Emerging markets 7.3 Other Japan U.K Australia 1.2 France Germany Switzerland 1.1 Corporate 26% Government 74% Infrastructure and renewable resources (market value) as at March 31, 2015 Infrastructure 79% Timber 15% Agriculture 6% 10

13 Top 25 company holdings Total public equity exposure worldwide % of % of public Total exposure Company portfolio equity ($ thousands) Chinese state-controlled companies $ 12,463 Royal Bank of Canada ,545 Apple Inc ,138 The Toronto-Dominion Bank ,882 Valeant Pharmaceuticals International ,950 Canadian National Railway Co ,661 Bank of Nova Scotia ,163 Suncor Energy Inc ,862 Google Inc ,608 Exxon Mobil Corp ,385 Enbridge Inc ,231 Taiwan Semiconductor Manufacturing ,227 Brookfield Asset Management Inc ,214 Microsoft Corp ,589 Canadian Natural Resources Ltd ,575 Samsung Electronics Co. Ltd ,563 Manulife Financial Corp ,399 Aberdeen Asset Management Plc ,266 Roche Holding AG ,184 Bank of Montreal ,901 AIA Group Ltd ,861 TransCanada Corp ,845 Johnson & Johnson ,528 BCE Inc ,431 Actavis Plc ,412 Total top $ 144,883 Total public equity $ 854,054 Total portfolio $1,805,287 1 Company exposures are based on the ultimate parent company exposure regardless of where the security is listed or traded. As a result, the above exposure report shows Chinese state-controlled companies as one of the top exposures because the ultimate parent company for many companies in China is the Chinese government. Investment asset mix and performance as at March 31, 2015 Approved Rate Performance (All values %) range Target Actual of return benchmark Fixed income Short-term Mortgages Nominal bonds Real return bonds Equities Canadian equities Global equities Emerging markets Real estate Private placements IRR 1, Other Asset mix total The illiquid assets are only valued once a year as of December 31. The rates of return for private placements and infrastructure and renewable resources reflect the December 31, 2014, internal rates of return, which is the industry standard for calculating returns for illiquid assets. 2 Infrastructure and renewable resources. 3 Other includes strategies and investments specifically approved by the trustees that do not correspond to the listed asset classes. 11

14 Investment performance year ended March 31 Market value rates of return % of Rate of Performance (All values %) portfolio return benchmarks 1 Annual rates Five-year annualized rates Ten-year annualized rates Annual rates by investment category Short-term FTSE TMX Canada T-Bill 91 day Money market FTSE TMX Canada T-Bill 91 day Bonds FTSE TMX Canada All Government Short-term Bonds FTSE TMX Canada Bond Universe Canadian universe bonds FTSE TMX Canada Bond Universe Global government bonds JP Morgan Global Investment Grade GBI Hedged Real return bonds FTSE TMX Canada Real Return Bond Mortgages Combined mortgages benchmark Fixed-term FTSE TMX Canada ST Bonds + 1% Construction FTSE TMX Canada 1 Year T-Bills +1% Mezzanine FTSE TMX Canada 1 Year T-Bills +2.5% Canadian equities S&P/TSX Composite Index Indexed S&P/TSX Composite Index Enhanced S&P/TSX Capped Composite Index Active S&P/TSX Capped Composite Index Active small cap (9.8) S&P/TSX Small Cap Index Global equities (unhedged) MSCI World ex-canada Net Global MSCI World ex-canada Net U.S. indexed S&P 500 U.S. enhanced S&P 500 U.S. active Russell 1000 U.S. active small cap Russell 2000 Europe MSCI Europe Net Asian indexed MSCI Pacific Net Asian active MSCI AC Asia Pacific ex-japan Net Emerging markets MSCI Emerging Market Active Real estate CPI + 4% Private placements MSCI World ex-canada Net Infrastructure and renewable resources Nominal Other Benchmarks are standards to compare against actual investment returns. 2 Bonds and money market investments with less than five years to maturity. 3 The rates of return for private placements and infrastructure and renewable resources reflect the final December 31, 2014, internal rates of return, which is the industry standard for calculating returns for illiquid assets. The illiquid assets are only valued once a year as of December Other includes strategies and investments specifically approved by the trustees that do not correspond to the listed asset classes. Performance benchmark indices abbreviations CPI = Consumer Price Index FTSE TMX = formerly PC Bond Debt Market Indices (DEX) GBI = Government Bond Index MSCI = Morgan Stanley Capital International S&P = Standard & Poor s S&P/TSX = Standard & Poor s/toronto Stock Exchange Equity or Capped Equity (Source of annual rates: British Columbia Investment Management Corporation) 12

15 Rates of return vs. benchmarks (%) year ended March 31, Annual rate of return Five-year annualized rate Ten-year annualized rate Rates of return Performance benchmarks Financial health 2014 valuation results As part of our responsibilities, at least once every three years, an independent actuary (a specialist with training in financial modelling, the laws of probability and risk management) assesses the financial position of the plan. The most recent valuation assessed the plan as at March 31, 2014, and results were positive. For detailed information about the valuation, read the Trustees Message on page 1. Actuarial valuations ($ millions) as at March 31 Basic Pension Benefits * 2009* Actuarial net assets 1,236 1, Actuarial liabilities Net actuarial surplus* * After including $13 million (2012 $9 million; 2009 $7 million) of future cost for benefits in excess of Income Tax Act limits, the 2014 surplus reduces to $229 million (2012 $192 million; 2009 $44 million). Funding of the total basic benefit liability ($ millions) year ended March Net assets available for benefits ($ millions) as at March 31 1, , , , , , , , , , Actuarial liability Surplus Net assets available for basic benefits Net assets available for inflation benefits 13

16 Five-year financial summary ($ thousands) For the year ended March Increase in assets Investment income $ 224,440 $ 176,136 $ 115,471 $ 82,964 $ 98,394 Contributions Employer 23,011 23,109 23,531 22,763 22,793 Employer solvency payment 138,703 Members 15,949 16,104 15,735 14,404 13,506 Transfers from other plans 1,618 1,964 1,700 2,508 4,472 Total increase in assets 265, , , , ,868 Decrease in assets Pension benefits 40,936 37,690 34,739 32,017 28,604 Termination and refund benefits 4,041 5,520 4,071 5,372 1,221 Transfers to other plans 1, ,173 Investment and administration costs 3,481 3,042 3,034 2,289 1,962 Total decrease in assets 49,616 47,103 42,325 40,420 32,960 Increase in net assets 215, , ,112 82, ,908 Net assets available for benefits at beginning of year 1,584,018 1,413,808 1,299,696 1,217, ,569 Net assets available for benefits at end of year $1,799,420 $1,584,018 $1,413,808 $1,299,696 $1,217,477 Investment & administration costs as a percentage of net asssets Investment management* 0.19% 0.18% 0.20% 0.18% 0.15% Benefit administration 0.05% 0.06% 0.08% 0.05% 0.05% * Includes external investment management costs incurred in the investment pooled funds by wholly owned corporations of $892 thousand (2014 $795 thousand; 2013 $894 thousand; 2012 $708 thousand; 2011 $479 thousand). 14

17 Plan Membership There are more than 5,200 members in the WorkSafeBC Pension Plan, making it one of the larger pension plans in British Columbia. The plan now has more retired members (in total and as a percentage of the plan) than ever before. Member services The WorkSafeBC Employee Benefits Section in the People Services Division offers members a variety of pension services. Staff members in this section are experienced, well-trained and available to help pension plan members with a wide range of requests, including providing plan information and assisting with pension applications. Members can also get plan assistance through BC Pension Corporation, the plan s administrative agent, at worksafebc.pensionsbc.ca. In many cases, the plan sends important information directly to members. For example, each year members receive the Member s Benefit Statement, which summarizes the benefits they have earned. The web plays a significant and expanding role in providing services to plan members. For example, My Account is an online feature that allows active members to view their personal information and access a personalized pension estimator; retired members can review their monthly payment history and tax information. In addition, all plan publications and forms are available at worksafebc.pensionsbc.ca. For additional copies of the print-friendly version of this annual report or any other publication, contact the Employee Benefits Section of WorkSafeBC s People Services Division, the WorkSafeBC Pension Plan or visit the plan website. About the membership Membership is divided into three groups: Active members currently contributing to the plan, on an approved leave of absence or receiving benefits from an approved salary continuance plan (e.g., long-term disability). There are 3,138 active members in the plan. Inactive members having terminated their employment and left their benefit in the plan. There are 464 inactive members in the plan. Retired members receiving a pension, including those receiving a disability pension. There are 1,648 retired members in the plan. 15

18 Number of members as at March 31 4,795 4,883 5,006 5,089 5,250 1,293 1,382 1,462 1,559 1, ,016 3,015 3,043 3,051 3, Active Inactive* Retired * Members no longer employed but with money in the plan. Membership profile as at March 31, 2015 Active members, by gender as at March 31, 2015 Active 3,138 60% Retired 1,648 31% Female 2,004 64% Male 1,134 36% Inactive* 464 9% * Members no longer employed but with money in the plan. Ratio of active to retired members as at March 31 Active members, by age as at March 31, < 40 years % 40 < 45 years % 45 < 50 years % 50 < 55 years % < 60 years % 60 years % 16

19 Benefits & Contributions The WorkSafeBC Pension Plan provides a regular lifetime income when you retire from work. Both you and WorkSafeBC contribute to your pension. When you retire, you have a predictable income. Your pension may continue for your lifetime or that of your spouse (depending on the option you choose at retirement). Year at a glance ($ millions) 1, (46.1) - (3.5) = 1,799.4 Net assets, April 1, 2014 Investment income Contributions Benefits payments Investment & administration Net assets, March 31, 2015 How plan benefits work Basic lifetime pension (guaranteed) The basic lifetime pension benefit is defined. This means the pension is based on the member s pensionable years in the plan, average of the highest five years of pensionable salary (not necessarily the last five years) and age at retirement. The pension is not based on contributions to the plan or the investment performance of plan assets. The advantage of a defined benefit plan is that the pension is predictable. Most members are entitled to a pension benefit after two years of contributory service and after reaching a qualifying age. The plan also provides survivor and disability benefits. At March 31, 2015, the plan provided pensions to 1,648 retired members an increase of 5.7 per cent from the previous year. The basic lifetime pension is paid from the plan s basic account. Cost-of-living adjustments (non-guaranteed) A cost-of-living adjustment (COLA) is not guaranteed. COLAs are designed to help maintain the value of retired members pensions against the rising cost of living. They are paid only if there is sufficient money in the inflation adjustment account, which is funded by member and employer contributions. A COLA may be provided any year based on changes in the consumer price index (see Note 15 of the Financial Statements) if funds are available. In 2015, retired members received a COLA of two per cent. Trustees regularly monitor the plan s ability to continue providing non-guaranteed COLAs. While future increases are not guaranteed, once granted, COLAs become part of retired members basic guaranteed benefits. 17

20 Average value of new regular pensions year ended March 31, 2015 Average Average Median Average Total present Years of annual annual annual present value value of pensions service salary base pension pension of pensions ($ millions) < 10 years $77,000 $ 9,100 $ 8,300 $ 137,000 $ < 15 97,000 21,100 18, , < 20 92,000 25,600 22, , < 25 92,000 36,500 33, , < 30 88,000 36,600 36, , < 35 83,000 52,500 51, , years 79,000 51,700 52, , Total $66.9 Average of all pensions $87,000 $35,100 $33,900 $572,000 Percentage of new pensions, by age at retirement year ended March 31, 2015 < 55 years 3 2% 55 < 60 years 40 35% Percentage of new pensions, by years of service year ended March 31, 2015 < 10 years 13 11% 10 < 15 years 4 4% 15 < 20 years 17 15% 60 < 65 years 40 35% 65 years 32 28% 20 < 25 years 30 26% 25 < 30 years 23 20% 30 < 35 years 12 10% 35 years 16 14% New pensions by age and years of service year ended March 31, 2015 Years of Age at retirement service < < < Total < 10 years < < < < < years Total Average years Average age at retirement 61 18

21 Pensions, 2011 to 2015 year ended March 31 $ millions In force Basic Inflation Total New Pension at end pensions supplements pensions pensions terminations of year paid paid paid ,648 $35.7 $5.2 $ , , , , Pensions in pay as at March 31, 2015 Average $26,038 Median $21,866 New pensions by type, 2011 to 2015 year ended March 31 Pre-retirement Post-retirement Long-term Regular limited member* limited member* disability Deferred Survivor Total * Prior to 2013 new limited members were included with new regular pensions Termination and refund benefits paid (number) year ended March 31 Termination and refund benefits paid (value) ($ thousands) year ended March , , ,221 5,520 5,372 19

22 How contributions work Members of the WorkSafeBC Pension Plan contribute to the plan through automatic salary deductions. Both plan members and WorkSafeBC pay contributions to fund future pension benefits. When plan members terminate employment, retire or reach 35 years of pensionable service, they no longer contribute. Members and WorkSafeBC pay different amounts above and below the year s maximum pensionable earnings (YMPE) as defined by the federal government. Members do not make Canada Pension Plan contributions on any earnings in excess of the YMPE but do make WorkSafeBC Pension Plan contributions. The YMPE for 2015 is $53,600. The following contribution rates, effective March 31, 2015, are applied to pensionable salaries: Plan member 6.5 per cent of pensionable salary up to and including the YMPE, and 8 per cent of pensionable salary for salary in excess of the YMPE WorkSafeBC 9.6 per cent of pensionable salary up to and including the YMPE, and 11.1 per cent of pensionable salary for salary in excess of the YMPE The above rates include contributions to both the basic account (which pays pension benefits) and the inflation adjustment account (which pays non-guaranteed cost-of-living adjustments). Contribution revenue ($ thousands) year ended March 31, 2015 Contributions ($ millions) year ended March 31 Transfers from other plans $1,618 4% Member contributions $15,949 39% Employer contributions $23,011 57% Member Employer Purchases (number) year ended March Purchases (value) ($ thousands) year ended March Leaves of absence Reinstatements Arrears 0 Other 4 Leaves of absence Reinstatements Arrears 0 11 Other

23 Governance & Rule Changes Your pension plan is managed by WorkSafeBC Pension Plan trustees, who administer the plan and establish the pension plan rules. Trustees are responsible for managing the health of the pension plan and make decisions on plan rules and policies. Plan governance and agents The WorkSafeBC Board of Directors is responsible for appointing plan trustees. As at March 31, 2015, there were three WorkSafeBC Pension Plan trustees: Brian Erickson (employer trustee), James Morrison (member trustee) and Paul Martin (independent trustee). Among other duties, the trustees are responsible for overseeing the prudent investment of plan assets and monitoring the plan administration services provided to plan members. British Columbia Investment Management Corporation provides investment management services as the investment agent of the board. One of Canada s largest investment managers, it administers approximately $120 billion in assets on behalf of public sector pension plans, the Province of British Columbia, publicly administered trust funds and public bodies. British Columbia Pension Corporation is the administrative agent working on behalf of trustees to provide benefit administration services. The corporation enrols members, collects contributions, processes benefits and issues pension payments. It is one of Canada s largest pension benefit administrators, serving trustees for the largest public sector pension plans in British Columbia. These plans represent more than 500,000 plan members and 1,000 plan employers. Eckler Ltd. provides consulting and actuarial services. As consultants and actuaries, Eckler Ltd. prepares actuarial valuations, which report on the financial health of the plan and costings for the plan. Plan rule changes Wills, Estates and Succession Act amendment (passed April 23, 2014, received order-in-council approval January 16, 2015) The Wills, Estates and Succession Act is legislation passed by the BC government to modernize the law respecting the making of wills, nomination of beneficiaries, administration of estates and distribution of property from estates. Plan rules changed in 2014/15 to reflect this new legislation, including who you can nominate as your beneficiary for pension purposes and how you can make that nomination. For more information, visit Wills, Estates and Succession Act Q&A. 21

24 Financial Statements 22 Financial Statements

25 Financial Statements 23

26 24 Financial Statements

27 Financial Statements 25

28 STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS ($ Thousands) Inflation Supplemental Basic Adjustment Benefits Totals For the year ended March 31 Notes Account Account Account Investment income 11 $ 188,749 $ 35,691 $ - $ 224,440 $ 176,136 Contributions 12 Members' 13,639 2, ,949 16,104 Employers' 20,307 2, ,011 23,109 33,946 4, ,960 39,213 Transfers from other plans 1, ,618 1,964 Total Increase in Assets 224,012 40, , ,313 Benefits 13 42,969 1, ,977 43,210 Transfers to other plans , Investment and administration costs 14 3, ,481 3,042 Total Decrease in Assets 46,717 2, ,616 47,103 Increase in Net Assets Before Transfers 177,295 38, , ,210 Account transfers 15 (3,912) 3, Increase in Net Assets 173,383 42, , ,210 Net Assets Available for Benefits at Beginning of Year 1,344, ,430-1,584,018 1,413,808 Net Assets Available for Benefits at End of Year $ 1,517,971 $ 281,449 $ - $ 1,799,420 $ 1,584,018 The accompanying notes are an integral part of these financial statements including: Supplemental Benefits Account (Note 16) WORKERS' COMPENSATION BOARD SUPERANNUATION PLAN 26 Financial Statements

29 S TATEMENT OF CHANGES IN ACCRUED PENSION BENEFITS ($ Thousands) For the year ended March 31 Note Interest on accrued pension benefits $ 60,352 $ 56,259 Benefits accrued 37,294 36,383 Changes in actuarial assumptions 25,166 - Account transfers 8,589 4,493 Increase in Accrued Basic Pension Benefits 131,401 97,135 Experience gains 11,909 - Benefits paid 45,018 42,297 Decrease in Accrued Basic Pension Benefits 56,927 42,297 Net increase in Accrued Basic Pension Benefits 74,474 54,838 Accrued Basic Pension Benefits, Beginning of Year 994, ,486 Accrued Basic Pension Benefits, End of Year 4a 1,068, ,324 Increase in accrued non-guaranteed benefits 4b 42,019 24,255 Accrued Non-Guaranteed Pension Benefits, Beginning of Year 239, ,175 Accrued Non-Guaranteed Pension Benefits, End of Year 4b 281, ,430 Accrued Pension Benefits, End of Year $ 1,350,247 $ 1,233,754 The accompanying notes are an integral part of these financial statements. Financial Statements 27

30 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, DESCRIPTION OF THE WCB SUPERANNUATION PLAN The following brief description of the Workers Compensation Board Superannuation Plan (Plan) is a summary and is provided for general information only. For more information, please contact the Workers Compensation Board of BC (WorkSafeBC) Compensation and Benefits Department. a) General The Plan is a contributory defined benefit pension plan, which was established in 1939 under the authority of the Workmen s Compensation Act Amendment Act. The Plan is registered with the Superintendent of Pensions which administers and enforces the Pension Benefits Standards Act (PBSA). The PBSA governs employment pension plans that have active, inactive and retired members primarily based in British Columbia. Membership in the Plan is open to all eligible employees of the Workers Compensation Board. b) Roles and Responsibilities WorkSafeBC WorkSafeBC is fully responsible for the management of the Plan, including investment of the assets and administration of the Plan. WorkSafeBC appoints Plan trustees. There are three trustees, one representing WorkSafeBC as the employer, one representing Plan members and one to provide an independent perspective. British Columbia Investment Management Corporation (bcimc) bcimc provides investment management services as an agent of WorkSafeBC. British Columbia Pension Corporation (Pension Corporation) The Pension Corporation provides benefit administration services as an agent of WorkSafeBC. c) Funding Contributions and investment earnings fund plan benefits. Contributions are made by active members of the Plan and WorksafeBC. The determination of the value of the benefits and required contributions is based on periodic actuarial valuations for funding purposes (Note 5a). The trustees funding policy is intended to secure the pension benefit obligation and achieve long-term stability in contribution rates for both WorkSafeBC and members. 28 Financial Statements

31 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, DESCRIPTION OF THE WCB SUPERANNUATION PLAN (continued) d) Contributions Basic Account Members contribute 5.5% of salaries up to and including the Canada Pension Plan Year s Maximum Pensionable earnings (YMPE) ($53,600 in 2015) and 7.0% of salaries above the YMPE, less amounts allocated to the Supplemental Benefits Account (Notes 5a, 12 and 16). WorkSafeBC contributes 8.63% of salaries up to and including the YMPE and 10.13% of salaries above the YMPE, less amounts allocated to the Supplemental Benefits Account. (Notes 5a, 12 and 16). Inflation Adjustment Account (IAA) Members and WorkSafeBC each contribute 1.0% of salaries to the IAA (Note 5b). e) Pension Benefits All members with two years of contributory service are eligible for a pension benefit. Members are eligible for unreduced pension benefits: at age 65; at age 60, with at least 2 years contributory service; or at age 55 or older, with age plus years of service equaling 90 or more. Other retiring members have a reduction formula applied to their pensions. The defined basic plan benefit is integrated with the Canada Pension Plan (CPP). As a result, the Plan provides an unreduced benefit of 1.3% of pensionable earnings up to the YMPE and 2% of pensionable earnings over the YMPE, for each year of pensionable service (to a maximum of 35 years). Pensionable earnings are based on the member s five-year highest average annual salary (HAS). The Plan also provides a bridge benefit payable to age 65 (or the date of death, if earlier). The bridge benefit is 0.7% of the lesser of the YMPE or the HAS for each year of pensionable service. Financial Statements 29

32 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, DESCRIPTION OF THE WCB SUPERANNUATION PLAN (continued) e) Pension Benefits (continued) Increases to pension payments related to cost-of living adjustments are not guaranteed, but may be provided each January 1 in accordance with the cost-of-living adjustment provisions of the Plan. These cost-of-living adjustments are based on the annual increase in the Canada Consumer Price Index (CPI) as at the previous September 30, subject to availability of funds in the IAA and reduced for the CPI decrease, if any, in the prior years (Notes 5b and 15). At January 1, 2015, retired members received a cost-of-living adjustment of 2.0% (2014: 1.1%). f) Termination and Portability Benefits A terminating member who is eligible for a pension, but has not reached the earliest retirement age, may choose: a deferred pension; or a transfer of the commuted value of the pension benefit (the minimum value is the member s contributions with interest) to a locked-in registered retirement savings plan or similar tax-sheltered plan. A terminating member may also choose to leave monies on deposit in anticipation of future re-employment with WorkSafeBC, or if under age 60 with less than two years of contributory service, may choose a refund of contributions with interest. Where there are portability arrangements between the Plan and other pension plans, members may be able to transfer certain pension rights. g) Other Benefits Disability and survivor benefits are also available under the Plan. A disability pension is available to a member under age 60 who becomes totally disabled as defined by the Plan, has at least two or more years of contributory service, is not eligible to receive benefits from the WorkSafeBC approved long-term group disability plan and meets other eligibility requirements. The pension is calculated using a member s years of pensionable service to the date of the disability retirement and HAS. Disability pensions continue until normal retirement or until the member is able to return to work. A death benefit may be available to a surviving spouse or designated beneficiary upon the death of an active member. Depending on eligibility requirements, the benefit may be paid in the form of a survivor pension or lump-sum payment (Note 13). Supplemental benefits (Note 16) may also be funded from the Supplemental Benefits Account. 30 Financial Statements

33 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, DESCRIPTION OF THE WCB SUPERANNUATION PLAN (CONTINUED) h) Tax Registration The Plan is a Registered Pension Plan (RPP) (registration number ) as defined in the Income Tax Act (Canada) (Tax Act), except for any supplemental benefits (Note 16), which are funded in addition to the RPP. The Plan is not subject to income taxes, but is subject to indirect taxes including British Columbia provincial sales taxes (PST) and Canadian federal goods and services tax (GST). The Plan receives a 33% rebate of the GST paid. 2. SIGNIFICANT ACCOUNTING POLICIES a) Basis of Presentation These financial statements are prepared on the going concern basis in accordance with Canadian generally accepted accounting principles (GAAP) for pension plans, Part IV of the Chartered Professional Accountants of Canada (CPA Canada) handbook, and present the Plan as a separate financial reporting entity, independent of the Plan's contributing employer and members. Accounting standards for private enterprises in Part II of the CPA Canada handbook have been chosen for accounting policies that do not relate to the Plan s investment portfolio or accrued pension benefits. International Financial Reporting Standard (IFRS)13, Fair Value Measurement which is applicable for annual periods beginning on or after January 1, 2013 was early adopted effective April 1, The application of this standard resulted in increased disclosure of the fair value of the Plan s investments. b) Investments Investments are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial Statements 31