Community Agencies Retirement Plan. May 12, 2016

Transcription

1 Community Agencies Retirement Plan May 12, 2016

2 1 Retirement Planning

3 Agenda Health of the DB Pension Plan Governance Regulatory Environment Funding Cash Flow Cash Flow History Membership Statistics Contributions - Regular Asset Mix Distribution Asset Rates of Return Solvency Exemption Valuation Summary Future Financial Considerations Company-Sponsored DB Pension Plan Pension Benefits Summary Beneficiary Designation Disability Retirement Dates Retirement Process Retirement Benefits Maximum Retirement Benefits Example Termination of Employment Termination Process Death Prior to Retirement Death After Retirement Comparison of Contributions & Benefits Relationship Breakdown Government-Sponsored Plans Personal Savings Taxation Replacement Ratios Support Disclaimer: The descriptions in this presentation do not create or confer any contractual or other rights. All rights and benefits are determined in accordance with the Plan Text. In the event of any discrepancy between the descriptions in this presentation and the provisions of the Plan Text, the latter will apply.

4 3 Governance Pension Committee Members: Phil Chiappetta, Chair of Pension Committee Cliff Fox, Vice Chair of Pension Committee Ron Brown, Vice Chair of Pension Committee Bev Passey Angela Bishop Barry Miller Nico Velthuys Helen Quinn Gregory Ozechowsky Aida De la Cruz Staff/Support: Kim Larsen, Benefit Administrator Robert Riddell, Past Committee Member Plan Consultant/Actuary: Ellement Consulting Group Auditor: Craig & Ross Chartered Accountants Custodians: Great-West Life Investment Managers: Great-West Life

5 Regulatory Environment Provincial Pension Benefits Act(s) (protection of accrued benefits): Minimum vesting and retirement rules Annual benefit statements and information return Triennial valuation at least every 3 years or annual if solvency ratio is below 90% (next valuation as at December 31, 2015) Monitoring of permitted investments Income Tax Act (contribution& benefit limits) Deduction of contributions Tax sheltering of investment income growth Maximum benefit limits 4

6 Funding Cash Flow The Community Agencies Control Valve 5

7 Cash Flow History Opening Contributions Investment Benefits Expenses Closing Gross Net Year Market Value Employee Company Income Pensions Lump Sums Operating Investment Market Value Return Return 2001 $ 56,805,900 $ 1,543,866 $ 1,543,866 $ (2,068,216) $ (1,849,558) $ (897,555) $ (101,558) $ (197,540) 54,779,205 (3.64%) (4.15%) ,779,205 1,622,010 1,622,010 (1,621,695) (1,964,794) (965,848) (116,801) (200,587) 53,153,500 (2.96%) (3.53%) ,153,500 1,942,718 2,742,390 7,268,513 (2,098,575) (1,219,659) (334,508) (205,251) 61,249, % 12.50% ,249,128 1,643,943 1,943,077 3,837,893 (1,669,951) (38,280,511) * (99,228) (188,395) 28,435, % 8.24% ,435,956 1,041,226 1,352,239 3,841,355 (1,221,143) (1,442,874) (184,274) (147,752) 31,674, % 12.40% ,674,733 1,068,722 1,354,023 3,328,516 (1,272,665) (784,400) (175,343) (142,967) 35,050, % 9.45% ,050,619 1,086,305 1,086,305 1,988,023 (2,050,763) (1,260,879) (144,845) (152,962) 35,601, % 4.90% ,601,803 1,354,109 1,354,109 (5,517,940) (1,424,213) (3,335,672) (155,293) (144,939) 27,731,964 (16.03%) (16.83%) ,731,964 1,425,932 1,425,932 4,048,859 (1,526,596) (999,185) (153,118) (132,686) 31,821, % 13.49% ,821,102 1,512,533 1,659,698 3,901,158 (1,316,412) (840,542) (275,779) (136,276) 36,325, % 10.79% ,325,482 1,740,818 1,740, ,957 (1,293,050) (1,183,199) (182,303) (146,575) 37,391, % 0.17% ,391,948 1,859,630 1,860,773 2,893,551 (1,334,407) (667,549) (137,720) (164,847) 41,701, % 6.77% ,701,379 2,019,770 2,019,770 6,059,684 (1,410,303) (1,734,072) (135,542) (178,214) 48,342, % 13.63% ,342,472 2,288,122 2,303,393 5,115,877 (1,769,102) (1,680,783) (149,176) (194,147) 54,256, % 9.76% ,256,656 2,474,028 2,474,599 2,613,080 (1,649,318) (2,396,633) (160,855) (206,340) 57,405, % 4.11% $ 22,149,704 $ 24,008,403 $ 33,465,535 $ (22,201,532) $ (55,292,728) $ (2,345,488) $ (2,333,138) "15-Year Average" 6.33% 5.45% "6-Year Average" 8.42% 7.54% * Includes a transfer of assets to the Province of Manitoba in the amount of $37,619,737. "3-Year Average" 9.91% 9.17% 6

8 Membership Statistics Total membership count as at December 31, 2015: Male Female Total Active Deferred and Pending Pensioner and Beneficiary Total 322 1,255 1,577 The number of agencies participating in the Community Agencies Retirement Plan as at December 31, 2015 is equal to 56. 7

9 Contributions -Regular Members are required to contribute by payroll deduction: Percentage of Salary Effective Date < YMPE > YMPE February 1, % 5.00% July 1, % 6.00% January 1, % 7.00% January 1, % 7.75% July 1, % 8.25% April 1, % 8.75% YMPE: Year's Maximum Pensionable Earnings under the Canada Pension Plan The Community Agencies are required to match employee required contributions PLUS pay any additional legislated required cost. 8

10 Asset Mix Distribution 31-Dec Dec-2014 Investment Policy Market Value % Market Value % Range Target 1 Cash & Equivalents (Cash) $ 2,861, % $ 3,802, % 0-20% 1.00% 2 Fixed Income (Bond) 13,297, % 12,384, % 20-50% 29.00% 3 Mortgages (Mort) 8,353, % 7,756, % 5-20% 15.00% Total Fixed Income $ 24,512, % $ 23,943, % 4 Real Estate (Real Estate) 5,414, % 5,267, % 0-15% 10.00% 5 Canadian Equity (CdEq) 14,149, % 14,400, % 20-50% 27.00% 6 U.S. Equity (USEq) 5,390, % 4,451, % 5-15% 9.00% 7 International Equity (INEq) 7,938, % 6,193, % 5-15% 9.00% Total Equity $ 32,893, % $ 30,312, % Total Market Value $ 57,405, % $ 54,256, % 9

11 10 Asset Rates of Return

12 Solvency Exemption In October 2015 the Government of Manitoba made and registered the Solvency Exemption for Specified Non-Profit Sector Pension Plans Regulation, 175/2015 (Exemption Regulation). The financial health is measured on both a going concern and solvency basis. The solvency basis assumes a hypothetical wind-up of the Plan (which is not the intent). This exemption recognizes that solvency legislation is unsuitable for funding purposes in today s low interest environment. The exemption places greater emphasis on the alternative going concern funding requirements. The Board of Trustees has determined that exemption from solvency funding requirements will reduce the risk to members benefits and the future of the pension plan. The solvency exemption was approved by the office of the Superintendent Pension Commission on February 8, Going concern funding continues to be required. 11

13 12 Valuation Summary [1] [2] [3] AVR Estimate Estimate GOING CONCERN VALUATION* 31-Dec Dec Dec-2015 Market Value of Assets $ 48,342,472 $ 54,256,656 $ 57,405,217 Expense Reserve (175,000) (175,000) (175,000) Actuarial Liability (45,830,582) (47,848,984) (51,241,518) Surplus/(Unfunded Liability) Before Adjustments $ 2,336,890 $ 6,232,672 $ 5,988,699 Asset Smoothing Adjustment (AS-ADJ) Contingency Adjustment (CR-ADJ) (145,044) - - Surplus/(Unfunded Liability) After Adjustments $ 2,191,846 $ 6,232,672 $ 5,988,699 Funded Ratio Before Adjustments 105.1% 113.0% 111.7% Funded Ratio After Adjustments 104.8% 113.0% 111.7% * On a solvency basis the Plan has an estimated solvency funded rate of 89.7% as at December 31, % of 2015 % of 2016 ANNUAL CONTRIBUTION REQUIREMENTS salary Actual salary Actual salary Estimated Employee Contributions 6.78% $ 2,288, % $ 2,474, % $ 2,546,474 Employer Contributions 6.83% 2,303, % 2,474, % 2,546,474 Total Contributions [A] 13.61% $ 4,591, % $ 4,948, % $ 5,092,948 Normal Actuarial Cost (10.48%) (3,537,076) (10.41%) (3,587,308) (10.41%) (3,694,606) Special Payments: Going Concern Special Payments: Solvency Test** Transfer Ratio Payments Contributions in Arrears with Interest Total Annual Contribution Requirements [B] (10.48%) $ (3,537,076) (10.41%) $ (3,587,308) (10.41%) $ (3,694,606) Contribution Margin/(Deficiency) ([A] + [B]) 3.13% $ 1,054, % $ 1,361, % $ 1,398,342 Actual/Estimated Salary Next Year $ 33,742,958 $ 34,457,214 $ 35,490,931 ** Solvency payments are not required as a permenant solvency exemption has been granted. % of

14 13 Future Financial Considerations Net investment returns in 2015 were less than expected (i.e. <5.75%). Contribution Rates were increased as at April 1, Benefits : Past accrued service protected under MB Section 26(5) of the Pension Benefits Act, etc. Investment, demographic & expense risks are borne directly by The Community Agencies. Going concern fund remains in place, plus a significant contribution margin has been maintained to ensure the future financial health of the Plan.

15 Pension Benefits Summary Disability Retirement benefits Termination of employment benefits Death prior to retirement benefits Death after retirement benefits 50% Test Comparison Partner Relationship Breakdown 14

16 15 Beneficiary Designation Active Employee: As per the Pension Benefits Act of Manitoba, in the event of your death prior to pension commencement your Pension Partner must be your beneficiary, unless the prescribed spousal waiver form has been signed and submitted to the Plan Administrator. Pension Partner means a legal spouse, or a common-law partner If your Pension Partner signs the spousal waiver form, you can elect anyone as your beneficiary If you have a Pension Partner at your date of death and the spousal waiver form has not been signed and submitted to the Plan Administrator, the Pension Benefits Act of Manitoba requires the death benefit to be paid to your Pension Partner You can find the spousal waiver form online on the Government of Manitoba website (Form 2 Waiver of Survivor or Death Benefit) or you can request it from the Human Resources Department Retiree: Upon retirement, you have the option to designate a beneficiary (if applicable). As per the Pension Benefits Act of Manitoba, your Pension Partner must be the beneficiary unless the prescribed waiver form is signed. You will receive all applicable forms, including the waiver form, at the time of your retirement. If you do not have a Pension Partner, you may designate anyone to be your beneficiary.

17 Disability A member is exempted from the requirement to make contributions to the Plan during a period of Total Disability and while in receipt of Workers Compensation benefits or benefits from a disability plan sponsored by an Agency, including any waiting period prior to receipt of such benefits. A member will continue to accrue Continuous and Credited Service during a period of Total Disability. A member who continues to receive Workers Compensation benefits or benefits from the disability plan sponsored by an Agency, until his Normal Retirement Date is deemed to retire on his Normal Retirement date and their pension is calculated based on the provisions of the Plan. Total Disability: means a disability throughout which the member is physically or mentally impaired so that he is prevented from performing the duties of employment in which he was engaged prior to the impairment and which is certified, in writing, as such by a medical doctor licensed in Canada or where the member resides. 16

18 Retirement Dates Normal retirement date is attainment of age 65. Early retirement on a reduced pension is permitted between age 55 and age 65. Postponed retirement is permitted but the member must retire prior to age 71. Early retirements are subject to the lesser of a reduction of ½% per month, for each month prior to the normal retirement date or the actuarial equivalent reduction from the normal retirement date but the Actuarial Equivalent reduction in the pension shall not be less than ¼% for each month that the Early Retirement Date precedes the earliest of age 60, the age when 30 years of Service would have been obtained and the age which the sum of the Member s age and years of Service would have totaled 80 had the Member continued to work. 17

19 Retirement Process What happens to my pension benefit when I retire? Upon termination of employment the Agency must send the Termination of Service form to the CAB office. CAB will then send all the information to the administrator (Ellement Consulting Group) to being the process. Ellement will calculate your benefit according to the Plan Text and issue a retirement package. The retirement package is mailed to you within 2 weeks from the date Ellement receives the information. Once you have returned your signed package, please allow 2 3 weeks for the benefit to be processed. *All timelines are dependant on complete and accurate information. 18

20 Retirement Benefits The normal retirement pension is: 50% of the Employee Required Contributions made to the Plan from January 1, 2002 to December 31, 2002 (Base year) times the number of years of credited service prior to January 1, PLUS 40% of the Employee Required Contributions made to the Plan from January 1, 2002 to December 31, 2002 (Base year) times the number of years of credited service from January 1, 1992 to December 31, PLUS For each year of credited service after 2002, 1.4% of your Earnings up to the YMPE in each year and 2% of Earnings over the YMPE in each year. Earnings: equal to twelve times an Employee s regular salary or wage for one month at the rate in effect on the first day of that month as reported by the Community Agencies. 19

21 Maximum Retirement Benefits The pension payable upon retirement, termination of employment or termination of the Plan must not exceed the lesser of: $2,890, or the amount permissible under the Income Tax Act in your year of retirement, multiplied by the number of years of Credited Service, and An amount that is equal to 2.0% multiplied by years of Credited Service and the average of the best three non-overlapping 12-month periods of Earnings paid to the Member by the Community Agencies. 20 *In the above calculation, Credited Service prior to December 31, 1990 shall be limited to 35 years.

22 EXAMPLE If your: 2015 YMPE is equal to $53,600 Average Earnings from January 1, 2003 to December 31, 2015 is $30,000 Years of Credited Service prior to January 1, 1992 are 12.0 Years of Credited Service from January 1, 1992 to December 31, 2002 are 10.0 Years of Credited Service from January 1, 2003 to December 31, 2015 are 13.0 Contributions made to the Plan between January 1, 2002 and December 31, 2002 are $875 (based on a $25,000 salary in 2002) Your Annual Pension is: 1. In respect of Credited Service prior to January 1, 1992: 50% x $875 x 12.0 = $5,250.00per year 2. In respect of Credited Service between January 1, 1992 and December 31, 2002: 40% x $875 x 10 = $3,500.00per year 3. In respect of Credited Service on and after December 31, 2002: $30,000 x 1.4% x 13 = $5,460.00per year Total pension = $14, per year (or $1, per month) 21

23 Termination of Employment On termination of employment a member is entitled to choose either: a) A deferred pension commencing at age 65 or as early as age 55 reduced for early retirement, at least 50% of which must be paid for by the Employer, or b) A lump sum commuted value of the pension in (a) transferred to an eligible financial institution (bank, credit union, insurer, trust fund, etc.) of the member s choice from among the following options: Locked-In Retirement Account (LIRA), or Life Income Fund, or Locked-In Retirement Income Fund, or Transfer to another registered pension plan 22

24 Termination Process What happens to my pension benefit when I leave my job? Upon termination of employment the Agency must send the Termination of Service form to the CAB office. CAB will then send all the information to the administrator (Ellement Consulting Group) to being the process. Ellement will calculate your benefit according to the Plan Text and issue an options form. The options form is valid for 120 days from the time the calculation was performed, if no decision is made within the 120 days, the benefit amount may be subject to an increase or decrease depending on the current interest rates. The options package is mailed to you within days from the date of your termination. Once you have returned your signed package, please allow 2 3 weeks for the benefit to be processed. *All timelines are dependant on complete and accurate information. 23

25 Death Prior to Retirement If you die prior to retirement, a death benefit will be paid from the Plan. If you have a Pension Partner, they will be offered the following options: An immediate life annuity purchased from an insurer using the commuted value of the accrued pension, or A commuted value transfer to one of the following: Locked-In Retirement Account (LIRA), or Life Income Fund, or Locked-In Retirement Income Fund, or Transfer to another registered pension plan If you do not have a Pension Partner, your beneficiary or estate will be paid the commuted value of your accrued pension in the form of a taxable lump-sum payment. 24

26 Death After Retirement The normal form of pension if you do not have a Pension Partner is a monthly pension payable for your lifetime, guaranteed for 5 years. 25 On an actuarially equivalent basis, the automatic form of pension if you have a Pension Partner is a actuarially reduced joint and survivor pension payable for your lifetime. Following your death, your Pension Partner, if then living, will receive monthly payments for their remaining lifetime equal to 60% of the monthly pension you received. Other actuarially reduced optional forms of joint and survivor 100%, 75%, 66.67%, and 50% pensions are available. The reduction depends on the option chosen, the member s age, and the spouse s age.

27 Comparison of Contributions & Benefits 50% Excess Test: If your required contributions with interest exceed 50% of the commuted value of your pension then the excess may be paid to you in the following ways: A taxable lump-sum payment, or Used to increase your pension, or Transferred to another registered vehicle. 26

28 Partner Relationship Breakdown This Plan is governed by the Pension Benefits Act of Manitoba. Effective January 1, 1984, all divorces, separations, and written agreements involving the splitting of family assets of a marriage or common-law relationship are subject to a 50/50 split of pension credits accumulated during the period of marriage or common-law relationship. The mandatory division of pension benefit credits can be waived after both parties have been informed of the amount of entitlement and have received independent legal advice. 27

29 Government-Sponsored Plans The maximum CPP pension is 25% of the average of your CPP pensionable earnings (up to the Year s Maximum Pensionable Earnings (YMPE)) in the five years prior to retirement. IfyourannualincomehasbeenlowerthantheYMPEduring any of the years you were working, your CPP pension may notbeatthemaximumlevel. A CPP pension may commence at any time between age 60 and 70. If you choose to commence your CPP pension before age 65, your pension will be reduced by 0.6% in 2016 for each month between the date of commencement of your CPP pension and age 65. Threemonthsbeforethelaterofage60oryouranticipated retirement date you should submit your CPP application, with proof of age and T4 earnings, to the nearest Federal Income Security Programs office. OAS pensions are paid to all Canadians who meet the age and residency requirements, subject to certain restrictions. Six months before your OAS eligibility date, you should submit your OAS application, with proof of age, to the nearest Service Canada office. For more information, call or visit 28 Year's Maximum Pension Earnings Monthly Maximum Year (YMPE) CPP OAS CPP & OAS 1991 $ 30,500 $ $ $ , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,100 1, , ,500 1, , ,600 1, , ,900 1, ,663.02

30 Personal Savings Tax-Free Savings Account(TFSA) Contribution up to $5,500 per year(2016) Do not pay taxes on investment growth or when you withdraw funds No tax-deduction for contributions Registered Retirement Savings Plan(RRSP) Contributions are tax-deductible Do not pay taxes on investment growth Taxes payable upon withdrawal Other non-registered investments House, condo Other properties, investments 29

31 30 Taxation Contributions remitted to the Defined Benefit Pension Plan are taxdeductible by the employee and employer respectively Investment income during the accumulation period in the DB Pension Planisnottaxed. The DB Pension Plan is a tax-deferred pension savings vehicle Once pension payments commence, they are taxed Taxes may be mitigated by the following: Spousal RRSP contributions Sharing CPP credits with your spouse Pension income splitting with your spouse (only credits while married or common-law may be split) Age 65 or older: up to 50% of CPP pension, life insured annuity, RRIF and LIF Under age 65: up to 50% of CPP pension, life insured annuity, DB pension

32 Retirement Planning (Replacement Ratios) 29% Replacement 41% Replacement Replacement Ratio at Retirement Monthly Benefit Annual Benefit Salary at Retirement Replacement Ratio CPP and OAS (50% of current maximum) 832 9,978 35,000 29% Cummunity Agencies Retirement Plan Benefit 1,184 14,210 35,000 41% Total Retirement Benefit (excludes personal savings) 2,016 24,188 35,000 69% 31

33 Support Kim Larsen Benefits Administrator Community Agencies Benefit Plans Donald Street Winnipeg, MB R3L 2T4 Tel: You can also refer to your Plan Member Booklet for further information. Ellement Consulting Group Tel: Website: Thank You 32