REPORT TO THE BOARD OF GOVERNORS Agenda Item #3.2

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1 SUBJECT UBC STAFF PENSION PLAN ANNUAL REPORT REPORT TO THE BOARD OF GOVERNORS Agenda Item #3.2 MEETING DATE APRIL 14, 2016 Forwarded to the Board of Governors on the Recommendation of the President APPROVED FOR SUBMISSION Martha C. Piper, Interim President and Vice-Chancellor DECISION REQUESTED For Information Report Date March 14, 2016 Presented By Lisa Castle, Vice-President Human Resources Barry Gros, Independent Chair, UBC Staff Pension Plan Board Orla Cousineau, Executive Director, Pensions EXECUTIVE SUMMARY a. SPP Governance Report & Compliance Checklist for the calendar year 2015 The Pension Board provides a comprehensive report to the UBC Board of Governors at least once per calendar year on the Plan s compliance with applicable laws, industry and regulatory standards, and internal policies, including the Terms of Reference & Governance Policy and the Statement of Investment Policies & Procedures. The Pension Board has reviewed the 2015 Governance Report, and the SPP is compliant with legislation and regulations. In addition to the annual governance report, the Board of Governors requested a full governance review be conducted in The review has been deferred and will be completed once the BC pension regulator confirms the classification of the SPP, and the funding rules that will apply in the next actuarial valuation, as at December 31, b. Annual Report As part of its regular duties, the UBC Staff Pension Plan Pension Board provides regular reports to update the Board of Governors on key SPP developments, including investment and funding matters. INSTITUTIONAL STRATEGIC PRIORITIES SUPPORTED Learning Research Innovation Engagement (Internal / External) or Operational International DESCRIPTION & RATIONALE RISKS Financial, Operational & Reputational FINANCIAL Funding Sources, Impact on Liquidity The UBC Board of Governors has governance and fiduciary duties for the administration of the UBC Staff Pension Plan. UBC acting through the Board of Governors and senior management, is the sponsor and administrator of the UBC Staff Pension Plan. There is a risk that the new pension regulations will require the SPP to use more conservative assumptions, requiring a further review of the Plan s benefits. Discussions are underway with the Regulator to clarify the funding rules that will apply to the Plan. Fixed employer contributions to the Plan as defined in the Plan Text.

2 The University of British Columbia Staff Pension Plan Governance Report and Compliance Checklist for the calendar year 2015 Approved by the SPP Board on March 8, 2016

3 The University of British Columbia Staff Pension Plan Governance Report for the Calendar Year Purpose of this Report The University of British Columbia (the University ) sponsors the University of British Columbia Staff Pension Plan (the Plan ). The Plan provides benefits to non-faculty staff of the University and several related employers and bargaining agents. The Plan is registered under the Pension Benefits Standards Act (British Columbia) (the PBSA ) and the Income Tax Act (Canada) (the ITA ). It is a target benefit plan design, which means that benefit levels are defined but the University and other participating employers contribution obligations are limited to approximately 10% of members salaries. Plan members also contribute. A benefits funding test is used to enable coordination of benefit levels and available funding. The University of British Columbia Staff Pension Plan Pension Board (the Pension Board ) has been established to perform administration duties related to the Plan and to oversee the Plan s compliance with governing legislation and regulatory guidelines. The Pension Board meets at least four times per year to oversee the administration of the Plan, supervise agents, review and direct the investment of the Plan s funds, receive reports and provide direction in respect of projects that the Pension Board has initiated. The Pension Board meetings are minuted. As part of its annual duties the Pension Board completes this Governance Report and Compliance Checklist to document the Plan s compliance with key statutory and regulatory obligations and facilitate the annual review of governance documents relating to the administration of the Plan. This report focuses on the compliance and governance aspects of retirement plan management and not on investment or financial aspects. A legislative and regulatory compliance checklist developed by the Pension Board is attached as Schedule A. 2.0 Overview of Plan Administration The UBC Board of Governors will receive a comprehensive report titled Staff Pension Plan 2015 Year in Review in the April 2016 timeframe. This annual publication is produced by the staff of the Pension Administration Office for the Staff Pension Plan Board, the UBC Board of Governors and University Administration, and UBC Investment Management Trust. It presents the year s highlights, discusses the Plan s structure and governance, and provides an update on membership, administrative, and investment trends and statistics. 2.1 Members of the Pension Board As of December 31, 2015, the Pension Board was comprised of the following individuals: Name Position Term Harry Satanove Independent Chair (non-voting) January 1, 2014 December 31, 2015 Mike Leslie Appointed Board Member January 1, 2013 December 31, 2016 Alan Marchant Elected Board Member January 1, December 31, 2016 David Lance Elected Board Member January 1, 2013 December 31, UBC Staff Pension Plan Governance Report and Compliance Checklist Page 1 of 18

4 Name Position Term Jay Parker Appointed Board Member January 1, 2014 December 31, 2017 Peter Smailes Appointed Board Member January 1, 2015 December 31, 2018 Brian Evans Elected Board Member January 1, 2015 December 31, 2018 Karen Ranalletta Elected Board Members January 1, 2015 December 31, 2018 Barry Gros Appointed Board Member (Oct 1, 2015) October 1, 2015 December 31, Key Pension Administration Office Personnel As of year-end 2015, the Pension Administration Office was comprised of the following key individuals: Name Orla Cousineau Debbie Wilson Kathy Pang Maricres De Leon Title Executive Director, Pensions; Secretary to the Board Associate Director, Pensions Communications Manager Plan Accountant 2.3 Plan Service Providers Service Provider Duties Comments Aon Hewitt (Actuary) UBC Investment Management Trust Inc. (Investment Manager) PBI Actuarial Consultants Ltd. (Asset Consultant) The Northern Trust Company, Canada (Pension Fund Trustee) Deloitte (Auditor) Pension Administration Office (Administrative Team) Lawson Lundell LLP (External Counsel) Provides professional advice on Plan funding, funded status and related matters; performs actuarial valuations and other filings; annual review of pension administration system. Implements investment directions in the Statement of Investment Policies and Procedures (SIPP), reviews investment performance and advises Pension Board on investment matters Provides independent investment advice on SIPP and review of investment manager performance Holds the pension fund in trust and pays all benefit payments. Conducts annual independent audit of the financial statements of the Plan. Administers the Plan on a day-to-day basis Provides legal advice on Plan design, interpretation, contracts, legislation, governance and compliance tracking 2015 UBC Staff Pension Plan Governance Report and Compliance Checklist

5 3.0 Key Developments affecting the Plan in Calendar Year 2015 The most recent Actuarial Valuation was conducted as at December 31, The Plan s Actuary determines if the Plan is adequately funded based on the Plan s funded status at the date of the Actuarial Valuation and projections of funding adequacy for 25 years into the future. The Benefits/Funding Test that was performed as part of the Actuarial Valuation, as at December 31, 2013, has revealed that a margin of 12.9% permits the Plan to support full formula benefits (both accrued and future), expenses and indexing of all benefits at 50% of the Consumer Price Index (CPI). The Plan s funded ratio on a going concern basis was 124.0% at the beginning of 2015 and ended the year at123.5%. The Plan s solvency ratio was 102.1% at the beginning of 2015 and ended the year at 98.9 %. The annual review of the Plan s Statement of Investment Policy & Procedures (SIP&P) resulted in a number of changes recommended by UBC IMANT and the Plan s asset consultant. The revised SIP&P, effective June 30, 2015, was adopted by the SPP Board and approved by the UBC Board of Governors in December The transition to the long term policy allocation that was approved by the UBC Board of Governors in April 2013 continued in 2015 and it is expected to be fully implemented by The new BC Pension Benefits Standards Act (PBSA) and Regulation came into effect on September 30, The Plan was amended effective September 30, 2015 to comply with the PBSA. The new PBSA only provides for multi-employer target benefit provisions, and the BC government has not yet released funding rules for a single employer target benefit plan. Accordingly, the UBC Staff Pension Plan is still required to meet both the going concern and solvency funding requirements for defined benefit plans. The University has asked its legal counsel Lawson Lundell to conduct a governance review in The Executive Director, Pensions, the Plan s actuary, and the University s legal counsel have initiated discussions with the BC Pension Regulator regarding the future funding requirements for the UBC Staff Pension Plan as a single employer target benefit plan. These discussions are ongoing and the outcome will impact the governance review. Reporting to the UBC Board of Governors Under the Pension Board s Terms of Reference and Governance Policy, the SPP Board regularly reports to the Finance & Property Committee of the UBC Board of Governors. In 2015 the Pension Board reported to the UBC Board of Governors three times (April, September and December). 4.0 Risk Management Report The Pension Board monitors on a quarterly basis the Plan s estimated going concern and solvency funded ratio, as well as the Plan s Benefit/Funding test margin. The asset consultant PBI Actuarial Consultants, conducted an Asset Liability Study in 2012, and recommended an asset mix that is intended to minimize the probability of having to reduce the basic benefits in the future, while allowing for future inflation adjustments. PBI Actuarial Consultants monitors the performance and the activity of the investment manager, and reports their findings to the Pension Board at the end of each quarter. The Pension Board will consider doing a new asset liability study in 2017, after the next actuarial valuation is completed as at December 31, UBC Staff Pension Plan Governance Report and Compliance Checklist

6 5.0 Calendar Year 2015 Compliance Review In late 2011, the Pension Board adopted the template compliance checklist attached as Schedule A and has committed to using the checklist as a tool to assist in monitoring the administration of the Plan and ensuring compliance with statutory obligations, regulatory guideline standards and standards of administration set out in the Pension Board s pension governance documents. On an annual basis, the Pension Board will review the format and content of the governance report, compliance checklist and other governance documents and recommend updates to the documents to ensure currency vis-à-vis changes in the law and industry best practice. The Pension Board will complete a governance report and compliance checklist in the first quarter of each calendar year in respect of the prior calendar year. The governance and investment practice self assessment set out in Parts 3.0 and 4.0 of Schedule A need not be done annually, but must be completed no less frequently than every four years, at such intervals as the Pension Board considers appropriate. The Pension Board has reviewed the compliance checklist questions for 2015 and sought professional assistance where necessary in order to complete the checklist UBC Staff Pension Plan Governance Report and Compliance Checklist

7 2015 UBC Staff Pension Plan Governance Report and Compliance Checklist

8 SCHEDULE A THE UNIVERSITY OF BRITISH COLUMBIA STAFF PENSION PLAN PENSION BOARD PENSION COMPLIANCE CHECKLIST IN RESPECT OF THE YEAR 2015 Prepared by the Plan Administrator 2015 UBC Staff Pension Plan Governance Report and Compliance Checklist

9 UBC Staff Pension Plan Compliance Checklist In Respect of the Year Compliance with Legislation 1 Category Compliance Question Compliant in 2015? Comments / No / NA / In Process Registered Status 1.1. Has the Plan remained in good standing with the British Columbia Financial Institutions Commission ( FICOM ) and the Canada Revenue Agency ( CRA ) throughout 2015? If not, describe in detail. Required amendments were filed with FICOM and CRA in October Actuarial Valuations and Reports 1.2. If the PBSA or ITA required an actuarial valuation to be prepared for the Plan as of a date in has the actuary for the Plan prepared such a valuation? Note the effective date of the valuation in the Comments column. N/A An Actuarial Valuation, as at December 31, 2013 was required. The AV was completed in 2014 and filed with the Regulators in September (Next valuation is due as at December 31, 2016 and must be filed by September 2017) If the PBSA or ITA required an actuarial valuation as of Q has it been filed with FICOM and CRA in 2014 within 9 months of the review date as prescribed by the PBSA? 3 N/A Audited Financial Statements 1.4. The PBSA requires financial statements for the Plan to be prepared, audited and filed each year in respect of the prior year. With respect to the financial statements for the year 2014: 4 a. Did they receive an unqualified opinion from a qualified independent external auditor? Filed with FICOM & CRA by the prescribed date. b. Were they filed with FICOM by the end of September 2015 as prescribed by the PBSA? 5 1 For the purposes of this compliance checklist, the following legislation is applicable: (i) the Pension Benefits Standards Act (British Columbia) ( PBSA ); (ii) the Pension Benefits Standards Regulations (British Columbia) ( PBSR ); (iii) the Income Tax Act (Canada) ( ITA ); and (iv) the Income Tax Regulations (Canada) ( ITR ). 2 Under the PBSA defined benefit pension plans must be reviewed at least every 3 fiscal years [PBSR s.45] necessitating the preparation and filing of actuarial valuation reports and cost certificates. Actuarial valuations may also be required when a plan is materially amended (amendment affects the cost of benefits, creates an unfunded liability or otherwise affects the solvency or funding of the plan) or terminated, [PBSR s.133]. Under the ITA, an actuary must recommend an employer contribution based on an actuarial valuation, the effective date of which is not more than 4 years before the day on which the contribution is made [ITR 8516(3)(b)(i)]. 3 Under the PBSA, information from the actuarial valuation must be filed within 270 days of the review date [PSBR s.46]. The ITA requires that an actuarial report be filed with the Minister of National Revenue whenever the Minister s approval of an actuary s employer contribution recommendation is sought [ITA s.147.2(3)]. 4 Under the PBSA audited financial statements are required at least annually [PBSR s. 47] unless the plan has less than 10 million dollars in assets. 5 Under the PBSA audited financial statements must be filed within 180 days from the fiscal year-end of the plan [PBSR s.47]. Page 1

10 UBC Staff Pension Plan Compliance Checklist In Respect of the Year Compliance with Legislation 1 Category Annual Information Return Compliance Question 1.5. Was the Plan s Annual Information Return for the year 2014 filed with FICOM and CRA by the end of June 2015 as prescribed by the PBSA and ITA? 6 Compliant in 2015? Comments / No / NA / In Process Financial Information Return 1.6. Was a financial information return in respect of 2014 filed for the Plan by the end of June 2015? 7 Contributions 1.7. Have all 2015 contributions for the Plan made in accordance with the provisions of the Plan been remitted to the Trustee within 30 days of the end of the month to which the contribution relates? 8 Employee contributions: $28,312,837 Employer contributions: $37,862,630 Total: $66,175,467 Benefit Payments 1.8. Where lump sum payments were required to be paid under the terms of the Plan during 2015 on account of death or termination of membership, were they paid out in accordance with the PBSA and ITA? 9 There were 616 lump sum payments in Total of termination & death payments was $12,655, Investments 1.9. Was the Statement of Investment Policies and Procedures ( SIPP ) in respect of the Plan reviewed and confirmed/updated by the Pension Board in 2015? 10 Revised SIPP effective June 30, 2015 and ratified by the Board of Governors on December 3, Does the SIPP address all of the factors it is required to address as outlined in the PBSR? 11 6 Annual Information Returns must be filed within 180 days after the plan s fiscal year-end [PBSR s.44] [ITR 8409]. 7 Financial Information returns (FIRs) must be filed within 180 days after the plan s year end [PBSR s.44]. 8 Under the PBSA, contributions in respect of a DB plan (including a negotiated cost plan) are payable within 30 days following the end of the month to which the contributions relate [PBSR s.64]. 9 Under the PBSA a person who is entitled to a deferred pension is entitled to require the administrator to pay an amount equal to the commuted value of the deferred pension out of the pension fund in accordance with the prescribed options within 30 days of receiving all required documentation/evidence [PBSR s.9]. 10 The PBSA requires that the administrator of a plan establish a SIPP, which must be reviewed and confirmed at least every 3 years. See s of SIPP and s of Terms of Reference and Governance Policy which require the SIPP to be reviewed at least annually. 11 Section 51 of the PBSR provides a list of factors that must be considered in a plan s SIPP as follows: a) categories of investments, including derivatives, b) diversification of the investment portfolio; c) asset mix and the basis on which that mix is determined including by reference to volatility and rate of return expectations; d) liquidity of investments; e) the lending of cash or securities; f) the retention or delegation of voting rights acquired through investments; g) the method of, and the basis for, the valuation of investments that are not regularly traded at a public exchange; and h) related party transactions permitted under section 17 of Schedule III and the criteria to be used to establish whether a transaction is nominal or immaterial to the plan. Page 2

11 UBC Staff Pension Plan Compliance Checklist In Respect of the Year Compliance with Legislation 1 Category Compliance Question If during 2015 there were amendments made to the SIPP, were the amendments submitted to the Plan s actuary within 60 days of such amendment? 12 Compliant in 2015? Comments / No / NA / In Process Plan Amendments If during 2015 there were amendments made to the Plan or to the trust agreement, have all such amendments been filed with FICOM and CRA within 60 days after the date the amendment was made as prescribed by the PBSA and ITA? 13 Indicate in the Comments column whether any such amendments have been approved by FICOM and CRA, and if not, if there has been any indication that the amendment may not be approved? Amendment No. 9 and Plan Restatement were approved by the Pension Board and filed with FICOM and CRA. New trust agreement with Northern Trust was filed with FICOM and CRA If there were amendments to the Plan in 2015, were the members of the Plan provided with an explanation or summary of the amendment (if any) as prescribed by the PBSA? 14 N/A Members were advised of PBSA amendments via newsletter and website If during 2015, FICOM or CRA requested a re-filing or clarification of a filing of any plan document, has the University complied with the request(s) of FICOM or CRA in order to make the filing acceptable? N/A Information for Members In 2015, were all new employees given a plan explanation or summary addressing their eligibility for membership in, rights under and terms of the Plan, within the time limits prescribed by the PBSA? 15 All new employees who are eligible for the Plan receive a letter confirming their eligibility and info on how to join the Plan. 12 The PBSA requires a copy of each amendment to the SIPP for a DB plan be submitted to the actuary of the plan, within 60 days after the SIPP is amended [PBSA s.43]. 13 Under the PBSA and the ITA plan amendments must be filed within 60 days after the date on which the amendment is made [PBSR s.23] [ITR 8512(2)]. 14 Each member must be notified and provided with an explanation of any amendments with the annual member statement [PBSR s. 30(2)(h)]. If the amendment reduced benefits, each member must be notified of the amendment within 30 days of receiving notice of registration of the amendment. 15 Plan information must be provided to plan members and eligible employees according to the following: to an employee who will become eligible to become a member of the plan, within 30 days prior to the date on which the person will become eligible; to a person who is eligible to become a member of the plan upon commencing employment, on or before the person s date of employment [PBSR s.29]. Page 3

12 UBC Staff Pension Plan Compliance Checklist In Respect of the Year Compliance with Legislation 1 Category Compliance Question In 2015, were all requests for information by a member or authorized representative, as applicable, complied with within the time limits prescribed by the PBSA? 16 Compliant in 2015? Comments / No / NA / In Process Statements for Members Have members been provided with their annual member statements for the year ended December 31, 2015, containing the prescribed information, by the end of June as prescribed by the PBSA? 17 The 2015 Annual Statements will be sent in May Have members, spouses or beneficiaries been provided with the appropriate forms and prescribed options on termination of membership, death, retirement, phased retirement, marriage breakdown, or plan windup, as applicable for 2015, within the time limits prescribed by the PBSA? 18 In 2015 the packages were issued: Terminations Retirements - 8 Pre-Retirement Deaths Fines and Penalties If during 2015 fines or penalties were imposed or threatened to be imposed on the University for non-compliance with the PBSA or the ITA, has the University appropriately dealt with such a fine or penalty, or threat thereof, to the satisfaction of FICOM or CRA? Indicate details of any such situation in the Comments column. N/A There were no penalties or fines imposed in 2015 for noncompliance or any other reason. 16 Under the PBSA general plan information must be made available without charge within 30 days of a written request from a person entitled to a benefit, or the spouse or a designated beneficiary or agent of a person entitled to a benefit [PBSR s.43]. Benefit calculation data must be provided within 30 days of the written request [PBSR s.42]. 17 Members must be provided with an annual statement within 180 days of the plan s fiscal year-end containing information on a specified list of matters [PBSR s.30]. 18 Termination statements must be provided to plan members within 60 days of termination or receipt of notification of termination under the PBSA [PBSR s.33]. Retirement statements are due within the one year period before the commencement of a pension and within 60 days after receiving a completed application for commencement of pension under the PBSA [PBSR s.34]. Phased retirement statements (where the plan authorizes phased retirement) are due within 60 days after receiving a completed application for commencement of pension under the PBSA [PBSR s. 35]. Statements upon death prior to pension commencement must be provided to the plan member s spouse, beneficiary or personal representative within 60 days of receiving proof of death under the PBSA [PBSR s.37]. Page 4

13 UBC Staff Pension Plan Compliance Checklist In Respect of the Year Compliance with Legislation 1 Category Marriage Breakdown Compliance Question Were all pensions affected by marriage breakdowns of which the Pension Board became aware in 2015 divided or otherwise processed and administered in accordance with the PBSA and the Family Relations Act (British Columbia)? 19 Compliant in 2015? Comments / No / NA / In Process Litigation If in 2015 any litigation against the University, the Pension Board or a service provider has been initiated or threatened to be initiated in respect of the Plan or the benefits payable under the Plan, have all appropriate steps been taken to address such a threat or initiation? Indicate details of any such matter in the Comments column. N/A PA/PAR Reporting Were all Pension Adjustments ( PAs ) 20 and all Pension Adjustment Reversals ( PARs ) 21 that were required to be 2015 reported and filed in 2015 reported and filed within the time limits set out in the ITA? PSPA Reporting If the ITA required the reporting of any Past Service Pension Adjustments ( PSPAs ) 22 arising from benefit improvements in 2015, were they reported and filed as required by the ITA? No PSPAs in Section 77 of the PBSA (which cross references Part 6 of the British Columbia Family Relations Act) deals with payment on marriage breakdown. 20 PAs are reported on employees T4 slips, which (except on employer wind up) must be provided to employees and filed in accordance with the ITA by the end of February [ITR 8401]. 21 PARs arising in calendar quarters one, two and three are to be reported to employees and the CRA within 60 days after the end of the calendar quarter. PARs for the fourth calendar quarter are to be reported within 30 days after the end of the quarter [ITR (3)]. 22 When a PSPA does not apply to substantially all plan participants, or when certain other criteria are not met, the PSPA must be filed with CRA for certification before the additional pension service and/or improved benefits giving rise to the PSPA can be granted. PSPAs do not require CRA certification when they apply to substantially all plan participants and certain other criteria are met. Noncertifiable PSPAs are to be reported to employees and to CRA within 120 days after the event giving rise to the PSPA [ITR 8402] [CRA Past Service Pension Adjustment Guide]. Page 5

14 UBC Staff Pension Plan Compliance Checklist In Respect of the Year Compliance with Internal Governance Policies Category Compliance Question Compliant in 2015? Comments / No / NA / In Process Internal Governance Document Compliance 2.1. To the knowledge of the Pension Board during 2015 was there general compliance with the University of British Columbia Staff Pension Plan Pension Board Terms of Reference and Governance Policy? Pension Board Pension Board Compliance 2.2. In 2015 did all new Pension Board Members complete and submit a Written Commitment to Serve document? Are similar documents held on file by the PAO for all existing Pension Board Members? Did the Pension Board have an Independent Chair and Secretary throughout 2015? If not, were vacancies filled in accordance with the Terms of Reference? Did the Pension Board hold meetings at least four times during 2015? 25 There were 6 Pension Board meetings in Was an agenda prepared and notice given to all Pension Board Members prior to each meeting in 2015? 26 Were minutes taken at each meeting? 27 Day to Day Pension Management 2.6. Did the Pension Board and the PAO monitor changes to the PBSA, ITA and other legislation applicable for the Plan? Did the PAO review the performance and fees of service providers and report to the Pension Board? 29 University Obligations 2.8. Has the University considered whether any changes to its Terms of Reference are necessary and taken appropriate steps as necessary? 30 No changes were requested in See s. 3.2 of Terms of Reference and Governance Policy. 24 See. s. 3.5, 3.7 and 3.8 of Terms of Reference and Governance Policy. 25 See s. 3.9(a) of Terms of Reference and Governance Policy. 26 See s. 3.9(c) and (d) of Terms of Reference and Governance Policy. 27 See s. 3.9(g) of Terms of Reference and Governance Policy. 28 See ss.4.2(g)(f) and 4.3(f) of Terms of Reference and Governance Policy. 29 See s. 4.3(d) of Terms of Reference and Governance Policy. 30 See s. 4.1(e) of Terms of Reference and Governance Policy. Page 6

15 UBC Staff Pension Plan Compliance Checklist In Respect of the Year Compliance with Internal Governance Policies Category Compliance Question Compliant in 2015? Comments / No / NA / In Process SIPP 2.9. In 2015, did the Pension Board review the SIPP, including the Investment Policy Portfolio ( IPP ) and provide its views on its appropriateness for the coming year to Senior Management of the University? 31 The SIPP was reviewed and revised in Revisions to the SIPP were approved by the UBC Board of Governors in April & December In 2015, did the Pension Board s investment consultant meet with the University of British Columbia Investment Management Trust Inc. ( IMANT ) at least once each calendar quarter? 32 Confirmation provided by Adam Rennison, PBI Actuarial In 2015, did each of IMANT and the Pension Board s investment consultant prepare a report at the end of each calendar quarter, and were these reports distributed to and discussed with the Pension Board? Has the Pension Board confirmed that a written mandate is in place for IMANT and for each external investment manager? Has the Pension Board confirmed that the President of IMANT met with each external investment manager at least once in 2015 and evaluated each external investment manager s performance relative to their mandate, including compliance with the SIPP? 35 Confirmation provided by Jai Parihar, UBC IMANT. Confirmation provided by Jai Parihar, UBC IMANT Has the Pension Board evaluated whether any information discovered through the various monitoring activities required specific communication to the Board of Governors? 36 Any discoveries would be reported to the BoG in quarterly reports. 31 See ss. 4.1(f), 12.2 and Appendix A of Terms of Reference and Governance Policy. Also see ss and 13.3 of SIPP. 32 See s of SIPP. 33 See ss and 12.5 of SIPP. 34 See s of SIPP. 35 See ss. 3.5(f), 3.5(g), 3.5(h) and 12.1 of SIPP. 36 See s of SIPP. Page 7

16 UBC Staff Pension Plan Compliance Checklist In Respect of the Year Compliance with Internal Governance Policies Category Compliance Question Compliant in 2015? Comments / No / NA / In Process Reports Did the Pension Board submit an Annual Governance Report and Compliance Checklist for 2014? 37 The Governance Report and Compliance Checklist was presented to the UBC Board of Governors on April 14, Did the Pension Board submit quarterly reports to the Board of Governors? 38 No Board of Governors has asked for semi-annual updates. In 2015, the Pension Board submitted Q4 2014, Q2 2015, and Q reports to the UBC Board of Governors Did the PAO report to the Pension Board at every meeting? 39 Did the Pension Board receive the PAO s reports on administration risk and communication risk? 40 Plan Amendments Did the Pension Board determine if amendments to the Plan were required? 41 Amendment No. 9, and Restated Plan effective October 1, Service Providers Did the Pension Board monitor and assess the performance of the Plan s service providers, and take such steps as are necessary to address any concerns raised? 42 The Pension Board monitors the performance of service providers and takes action as necessary In 2015, did the Pension Board appoint an auditor and have an audit of the Plan performed? 43 Deloitte In 2015, did the Pension Board meet with the asset consultant at least twice? 44 Did the Pension Board receive the asset consultant s report on asset management risk? See s. 7.1 and Appendix A of Terms of Reference and Governance Policy. 38 See s. 7.2 of Terms of Reference and Governance Policy. 39 See s. 4.3(j) and Appendix A of Terms of Reference and Governance Policy. 40 See s and 13.5 of Terms of Reference and Governance Policy. 41 See s.6.4 of Terms of Reference and Governance Policy. 42 See ss. 7.3, 8.1(a) and 8.1(f) and Appendix A of Terms of Reference and Governance Policy. 43 See s. 7.3 and 8.1(a) of the Terms of Reference and Governance Policy. 44 See s and Appendix A of Terms of Reference and Governance Policy. 45 See s of Terms of Reference and Governance Policy. Page 8

17 UBC Staff Pension Plan Compliance Checklist In Respect of the Year Compliance with Internal Governance Policies Category Compliance Question Compliant in 2015? Comments In 2015, did the Pension Board review and consult with the actuary for the Plan on the actuarial status of the Plan including the status of the Benefits / Funding Test measures? 46 Did the Pension Board receive the actuary s report on actuarial risk? In 2015, did the Pension Board meet with or receive reports from the custodian? In 2015, did the Pension Board meet with IMANT at least twice? 49 / No / NA / In Process The next Actuarial Valuation report will be done as of December 31, 2016 and will be completed by September The actuary provides an estimate of the Plan s funded position at the end of each quarter. IMANT met with the Pension Board twice in Prudent Investment Practices (CAPSA Guideline #6) 50 Category Compliance Question Compliant in 2015? Comments / No / NA / In Process Investment Objectives and Risk Tolerances 4.1. Are the Plan s investment objectives well defined, articulated in an easily understood manner and consistent with the Plan s risk tolerance? The Plan s investment objectives are well documented in a SIPP approved by the UBC Board of Governors in April and December Have the risks associated with the investments been clearly identified? Section 4.1 Investment Policy Documents 4.3. Does the SIPP: a. identify the kinds of investments that should be held; Section 5 b. indicate the allocation between different kinds of investments; Section See s.12.4, 12.6 and Appendix A of Terms of Reference and Governance Policy. 47 See s of Terms of Reference and Governance Policy. 48 Appendix A of Terms of Reference and Governance Policy. 49 See s and Appendix A of Terms of Reference and Governance Policy. See also s of SIPP and the CAPSA Pension Plan Prudent Investment Practices Guideline. 50 CAPSA Guidelines are best practices documents prepared and endorsed by Canada s provincial and federal pension regulators for use by pension plan sponsors and administrators, but do not have the force of law. All questions in section 4.0 are adapted from the CAPSA Pension Plan Prudent Investment Practices Guideline dated November 15, Page 9

18 UBC Staff Pension Plan Compliance Checklist In Respect of the Year Prudent Investment Practices (CAPSA Guideline #6) 50 Category Compliance Question Compliant in 2015? Comments / No / NA / In Process c. address the nature and extent of risk that is anticipated in the investment portfolio; Sections 5.3 and 5.4 d. identify the expected return on investments; Section 5.2 e. include processes for regular monitoring and review of investment objectives, risk tolerances and established processes; and Section 13 f. include processes for selecting, evaluating and replacing investment managers and ways to monitor and review their performance? Section 12 g. Is the Board satisfied that investment activities in 2015 were in accordance with its SIPP? IMANT provided written quarterly compliance certificates as of June 30, September 30, 2015, and December 31, Prudent Delegation and Monitoring 4.4. Is the Pension Board satisfied that all investment decisions about the Plan have been made by individuals/organizations with the authority, skills, knowledge, expertise, information and resources to effectively make the decisions? 4.5. Is the Pension Board satisfied that the contract with IMANT clearly sets out its terms, the functions being delegated, any reporting obligations and IMANT s powers to subdelegate? The contract is between the UBC Board of Governors and UBC IMANT, not the Pension Board Is the Pension Board satisfied that IMANT has carried out independent and thorough investigations to determine the advantages and disadvantages of each particular investment? 4.7. Is the Pension Board satisfied that IMANT uses appropriate methods to review investment decisions once implemented? 4.8. Does the current asset allocation reflect the characteristics of the Plan s liabilities, demographics and risk tolerances? Confirmed by the Plan s Asset Consultant. Page 10

19 UBC Staff Pension Plan Compliance Checklist In Respect of the Year Prudent Investment Practices (CAPSA Guideline #6) 50 Category Compliance Question Compliant in 2015? Comments / No / NA / In Process Prudent Investment Selection and Documentation 4.9. Has the Pension Board clearly documented key investment decisions made, including the reasons for the decision and the circumstances that were considered? N/A The Pension Board has reviewed and approved the Asset Mix Policy recommended by the Plan s Asset Consultant. Page 11

20 UBC Staff Pension Plan Pension Board s Annual Report to the UBC Board of Governors

21 Objective To update the UBC Board of Governors on the Staff Pension Plan in the following areas: Governance Report & Compliance Checklist for 2015 Risk Management Funding Position Plan Member Communications 2

22 Governance Report & Compliance Checklist for 2015 Pension Board has reviewed the Annual Governance Report & Compliance Checklist for Plan compliant with Legislation. Plan compliant with checklists; 1.0 (Legislation), 2.0 (Internal Governance Policies) & 4.0 (Prudent Investment Practices). Compliance with checklist 3.0 (Self-Assessment ) is on hold pending completion of governance review. 3

23 Governance Review Board of Governors requested a governance review of the SPP in No funding rules yet for single employer target benefit plan in BC. SPP continues to be regulated as a defined benefit plan and must meet going concern and solvency funding rules. Discussions with BC pension regulator are ongoing and outcome will impact the governance review. 4

24 Risk Management Funded position is reviewed quarterly by actuary Aon Hewitt. Under the current rules, the Plan can continue to support indexing at 50% of Consumer Price Index (CPI) level. Next actuarial valuation required as at December 31, Outcome of discussions with pension regulator will impact the future funding requirements. 5

25 Plan Member Communications Survey to evaluate member communications ed to members in early March. Preparation has started for the annual Pension Fair on June 8, May newsletter will be mailed to members with annual member statements in May. Plan s 2015 Year in Review report will be completed in April. Members version of the report will be posted on the Plan s website in May. 6