Non Academic Pension & Benefits Committee (NAPBC)

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1 November, 2010 To: From: Members of the Non Academic Pension Plan Non Academic Pension & Benefits Committee (NAPBC) The primary purpose of this report is to review the actuarial valuation of the Non Academic Pension Plan as at December 31, This report also includes a review of the funding requirements, investments and investment performance of the Plan in 2009 and for the six months ending June 30, Actuarial Valuation Going-Concern Financial Position of the Plan The financial position of the Plan on a going-concern basis is measured by comparing the market value of assets to the actuarial liabilities assuming the Plan is continuing for the longterm. The actuarial valuation performed as at December 31, 2009 shows that the Plan, on a going-concern basis, is in a deficit position of $22.2 million as per Table 1. Comparative numbers as at December 31, 2008 are also provided. Table 1: Going-Concern Financial Position Assets Actuarial Fund Value (net assets available for pension benefits) $296,814,400 $270,410,500 Actuarial Liabilities Present value of accrued benefits for active members (1,399) $149,220,300 $163,725,700 Pensioners (616) $74,557,800 $67,822,400 Inactive, deferred and pending terminations (109) $3,309,600 $1,811,000 Voluntary and Transferred contributions $84,700 $98,600 Present value of future benefits to be paid in excess of future contributions $91,873,500 $71,600,900 Total Liabilities $319,045,900 $305,058,600 (Deficit) as at December 31 $(22,231,500) $(34,648,100) The Plan last filed a valuation report with the regulators at December 31, After extensive analysis and due to the poor market returns during the first 8 months of 2010, the NAPBC recommended to the Board of Governors that the December 31, 2009 valuation be filed with the regulators. The Board of Governors approved this recommendation. The going-concern deficiency of $22,231,500 will be amortized over a period of fifteen years, or until the next funding valuation is certified, with monthly payments being paid by the University.

2 Hypothetical Wind-Up Position of the Plan (Solvency) The Pension Benefits Act (Saskatchewan) requires the University to review whether the assets of the Plan would be sufficient to cover the liabilities of the Plan in the event of a plan wind-up. The actuarial valuation performed as at December 31, 2009 shows that the Plan, on a hypothetical wind-up basis, is in a deficit position of $67.7 million as per Table 2. The solvency ratio at December 31, 2009 is 76%. Comparative numbers as at December 31, 2008 are also provided. Solvency surplus at December 31, 2007 (last filed valuation) was $.29 million. Table 2: Hypothetical Wind-Up Financial Position (Solvency) Assets Market value of assets $215,930,600 $194,463,500 Actuarial Liabilities Present value of accrued benefits for retirees $283,627,000 $262,383,400 (Deficit) as at December 31 $(67,696,400) $(67,919,900) Solvency ratio The solvency deficit position is consistent with prior year, and continues to be a significant issue caused primarily by the relatively low discount rate, 4.5 percent as at December 31, Transfer Deficiency Requirements Because the temporary solvency relief provisions do not apply to lump-sum payments, as the plan has a solvency ratio of.76, it will be necessary to withhold 24 percent of any lump-sum payments. The amount withheld, referred to as the transfer deficiency, will be paid out, with interest, at the end of the five-year period following the date of payout (or earlier in the event of plan surplus). This provision does not impact members retiring and commencing a pension from the plan. The following example is provided to illustrate this provision. Transfer Deficiency Applies to individuals who terminate employment and elect to transfer the lump sum value of their entitlement out of the plan When a plan has a solvency deficiency, legislation requires that a portion of every lump sum (LS) payment be held back Transfer Deficiency = Portion of LS held back = (1- solvency ratio) x total lump sum entitlement Example Date of termination = January 1, 2011 Total lump sum entitlement = $100,000 Solvency ratio = 0.76 LS payment on January 1, 2011 = 0.76 x $100,000 = $76,000 Transfer Deficiency payment on January 1, 2016 = (1 0.76) x $100,000 = $24,000 (with interest)

3 Temporary Solvency Deficiency Payment Relief As indicated in the newsletter of October, 2009, The Pension Benefits Regulations, 1993 has been amended to provide temporary relief from solvency deficiency funding for sponsors of defined benefit plans. The plan administrator may file an election for a three year moratorium from funding a solvency deficiency established in a valuation between December 31, 2008 and January 1, With this filing, the University has undertaken to elect for temporary solvency relief in compliance with the regulations. Funding Requirements Development and Application of a Funding Policy With the assistance of the Plan s actuary, the Committee developed and in November, 2009, approved a Funding Policy for the Plan. The purpose of the Policy is to align the investment policy and benefit policy with the funding requirements of the plan. The Funding Policy is designed to guide decision making about assumptions and margins when actuarial valuations are performed. The primary objective of the plan is to provide the University's Non-Academic Employees with a means to accumulate a reasonable retirement savings relative to their service and earnings while in the Plan. The Plan s funding policy has been posted on the Financial Services Division website. Contribution Changes A collective agreement was concluded with CUPE 1975 which provides for the following contribution increases from the current 6.5%. Effective Date Prior to Jan 1, 2010 Jan 1, 2010 to Dec 31, 2010 Jan 1, 2011 to Dec 31, 2011 On or after Jan 1, 2012 Contribution Rate 6.50% of earnings 7.50% of earnings 8.25% of earnings 8.50% of earnings The revised contribution rates are reflected in the actuarial valuation results as at December 31, 2009 which has been filed with the plan regulator. The actuary has concluded, however, that current contribution rates are insufficient to pay for the benefits currently accruing to members of the Plan. It is estimated that the benefits currently accruing to members cost 19.04% of pensionable earnings, whereas the current contribution rates amount to 16.72% of pensionable earnings. The contribution shortfall, 2.32% of pensionable earnings, amounts to $11,189,700 and has been accounted for in the going-concern financial position of the Plan as at December 31, 2009 (see Table 1 Present value of future benefits to be paid in excess of future contributions ).

4 Investments of the Pension Plan Investments The long-term investment goal of the Plan is to achieve a minimum annualized rate of return of 3.75% in excess of the Canadian Consumer Price Index. To achieve this goal, the Plan has adopted an asset mix that has a bias in favour of equity investments. Over the last ten years the annualized rate of return for the Plan has been 4.7% compared to an annualized increase in the Consumer Price Index of 2.1%. The responsibility for investing the assets of the Plan has been delegated to four professional investment fund managers with different mandates to ensure adequate investment diversification. Investment Performance For 2009 Last 4 years Plan Return (gross) 15.1% 1.8% Plan Return Benchmark (gross) 12.8% 1.9% The Plan s Return Benchmark is a performance standard developed by the Investment Consultants, Hewitt Associates. The Non Academic Pension & Benefits Committee and the Board of Governors have approved the benchmark. The investment fund managers of the Plan are expected to meet or surpass the benchmark Performance Update Equity markets struggled early in the first quarter of 2010 as concerns over the big issues facing the global economy resulted in market volatility. The stability of the Euro was a key issue, as headlines focused on the Greek debt crisis. There was also general anxiety that markets had factored in too much too soon in terms of a global economic recovery. Capital markets focused on risk in the second quarter. A flight to safety was sparked by sovereign debt concerns, but the equity markets suffered most. Investors were concerned with the uncertainty surrounding the global economic recovery, and there widespread equity market corrections. (Hewitt Associates, 2010) The six month rate of return to June 30, 2010 earned by the Plan was -2.7% before expenses. During the same period, the S&P/TSX index returned -2.5%, the S&P 500 (U.S. equities) returned -5.4% and the Europe, Australia and Far East (EAFE) index, which measures non-north American equities, decreased by -12.1%. The DEX Universe Bond Index posted a 4.2% return. Investment Fund Managers of the Plan The managers and the market value of assets controlled by each at December 31, 2009 are shown below. Greystone Investments Jarislowsky Fraser Limited Phillips, Hager & North Investment Sceptre Investment Counsel $ 14.3 Million $ 69.2 Million $114.9 Million $ 16.3 Million

5 The Value of the Pension Plan as at December 31, 2009 Table 3 shows the value of the Pension Plan as at December 31, 2009 by major asset classes. TABLE 3: Market Value of Pension Plan Assets Asset Class Dec 31, 2009 Per Cent of ($000) Market Value Canadian Equities $ 44, % Non-Canadian Equities 86, % Total Equities 131, % Bonds $ 63, % Mortgages 4, % Real Estate 14, % Short-Term Investments 1, % Total Fixed Income 83, % Market Value of Investments $ 214, % Accrued Investment Earnings 402 Total Market Value of the Fund $ 215,151 Plan Documents The NAPBC met 10 times during Copies of the agenda, minutes, auditor s report, financial reports and all actuarial reports are on file in the CUPE Union Local office and the office of the Director of Pensions (Financial Services). They are available for inspection by any member of the Plan during regular working hours by prior arrangement. Please contact the Pensions Office at or any member of the Non Academic Pension and Benefits Committee if you have any questions about the items covered. Non Academic Pension Plan Information Non Academic Pension and Benefits Committee Members CUPE Union Local 1975 Appointees: Michael Brockbank Wayne Foley Jeff Theis Library Facilities Management Facilities Management Board of Governors Appointees: Cheryl Carver Laura Kennedy Heather Fortosky Human Resources Financial Services Pensions Office

6 Observers Doug Horel Joe Hromek Jamie Rogal Retirees Association Retirees Association ASPA Actuary AON Consulting Investment Consultants Hewitt Associates Investment Custodian CIBC Mellon Global Securities Pension Administration & Support Pensions Office

INVESTMENTS of the PENSION PLAN at December 31, 2016

INVESTMENTS of the PENSION PLAN at December 31, 2016 Non-Academic Pension Plan Annual Report to Membership June 2017 The primary purpose of this report is: to review the actuarial valuation information and contribution requirements of the Non Academic Pension