Orchestras Canada. October 27, Musicians Pension Fund of Canada. Caisse de Retraite des Musiciens du Canada. 1 Orchestras Canada

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1 Orchestras Canada October 27, 2010 This presentation is a summary based on the Plan provisions currently in effect. In the event of any differences in interpretation between this presentation and the official Rules and Regulationsand the Trust Agreement, the official Rulesand Regulations of the Plan and Trust Agreement will apply. The Rules and Regulations can also be amended by the Trustees at any time. 1 Orchestras Canada

2 Presenters Ellen Versteeg-Lytwyn, Fund Administrator Humbert Martins, Manager, Pension Benefits Chair and Moderator, Katherine Carleton, -Executive Director-Orchestras Canada 2 Orchestras Canada

3 NAME CHANGE We are now the 3 Orchestras Canada

4 Registered Status The Musicians Pension Fund of Canada is registered with the: Financial Services Commission of Ontario Canada Revenue Agency 4 Orchestras Canada

5 A BIT OF HISTORY Established in 1962 as a result of collective bargaining between employers and the AF of M. The Fund was administered in New York until 1971 when the administration was moved to Canada In 1972 the Fund was a one person operation with $3M in assets and 18 pensioners 5 Orchestras Canada

6 History (cont d) It has grown to an operation of 9 staff with assets of $550M and over 2200 pensioners and beneficiaries receiving in excess of $24M per year 6 Orchestras Canada

7 Some Facts about the Pension Fund: The Musicians Pension Fund of Canada is a multi-employer pension plan with members and participating employers across Canada; The funding of the Plan is based on contributions by employers. Employee contributions are not required nor are they permitted. 7 Orchestras Canada

8 Some Facts about the Pension Fund: The Plan is administered by a Board of Trustees, consisting of three employee and three employer representatives, who are responsible for the overall operation of the Plan. They serve without compensation; The Trustees are aided by professional advisors -Legal Counsel -Investment Counsel -Plan Actuary 8 Orchestras Canada

9 Some Facts about the Pension Fund: Legal Counsel -ensures legal compliance with provincial legislation and the Income Tax Act Investment Counsel -advises on the asset mix of Fund s Portfolio -aids Trustees in hiring Investment Managers -Fund currently has 12 Managers with mandates that diversify the Fund s assets, with a goal to minimize risk 9 Orchestras Canada

10 Some Facts about the Pension Fund: Plan Actuary -Performs and signs off on actuarial valuation to demonstrate the Fund s ability to pay its promised benefits -Does actuarial calculations to determine what rate of contributions are needed to be able to provide a certain level of benefits and what rate of return on investments are needed to hold benefits at a certain level, among other things. -Helps the trustees create a plan that not only satisfies all legislation, but one that balances legal requirements with fairness to all participants, regardless of province. 10 Orchestras Canada

11 Some Facts about the Pension Fund: Members can accrue pension credits under the Pension Fund whenever they are working for participating employers, anywhere in Canada; Under this Plan there are Normal, Early, Deferred, Special Retirement, Disability, and Survivor Benefits. The Pension Fund provides defined benefits and therefore, members benefits are not directly related to the Pension Fund s investment returns. In other words, members benefits do not fluctuate from year-to-year, depending on the Pension Fund s rate of return. 11 Orchestras Canada

12 Some Facts about the Pension Fund: Members benefits are secured by Pension Fund assets of over$550 million. The Plan has over 2200 monthly pensioners and beneficiaries receiving benefits in the total amount of $2.025 million monthly (over $24 million annually). 12 Orchestras Canada

13 PENSION The greater the contributions made on their behalf, the larger the monthly benefit When a member retires their monthly benefit payable from the Musicians Pension Fund of Canada will be based on the total contributions made on their behalf 13 Orchestras Canada

14 CONTRIBUTIONS Contributions can only be made by: Employers that have an agreement: with or approved by the AFM; with or approved by an AFM Local 14 Orchestras Canada

15 Types of Pension Plans Universal rule applying to all pension plans Contributions + Investment Income = Benefits + Expenses Two basic approaches Defined Benefit (DB) DB plans have a benefit formula that defines the pension payable Musicians Pension Fund of Canada is a DB pension plan Defined Contribution (DC) Work and appear like a savings account RRSP is a form of DC pension plan 15 Orchestras Canada

16 Defined Benefit (DB) Plans Similar to insurance, DB plans pool risks of all members together Facilitates retirement planning by offering predictable levels of retirement income Economies of scale from pooling result in very low expense levels Less than 0.45% of assets per year for Musicians Pension Fund of Canada Professional oversight 16 Orchestras Canada

17 Defined Contribution (DC) Plans Amount of pension at retirement is whatever amount can be supported by the account balance Investments are usually directed by individuals Good investment experience will result in higher pensions Poor investment results can result in inadequate pensions 17 Orchestras Canada

18 Defined Contribution (DC) Plans Expense levels are typically much higher than for DB plans (0.50% to 4.50% per year) All risks are borne individually by each member Retirement planning can be difficult and plans are often revised for financial reasons 18 Orchestras Canada

19 Musicians Pension Fund of Canada Monthly pension is based on contributions remitted to the Plan $3.80 for every $100 of contributions remitted prior to 1992 $3.70 for every $100 of contributions remitted after 1991 Normal retirement at age Orchestras Canada

20 Musicians Pension Fund of Canada Normal Retirement Example Mark worked in pensionable employment for 20 years, averaging $25,000 in covered earnings and a contribution rate of 8%. Mark retires in October, 2010 when he turns 65 He has $40,000 in contributions,$10,000 for the period prior to 1992 and $30,000 for the period after January 1, Orchestras Canada

21 Musicians Pension Fund of Canada Mark s pension would be calculated as follows: Pre-1992 Pension $3.80x100 = $ Post Jan. 1, 1992 Pension $3.70x300 = $1, Total Monthly Pension = $1, Orchestras Canada

22 Musicians Pension Fund of Canada Early retirement as early as age 55 Pension is reduced to reflect earlier payment and longer payout period (at age 55, the reduction is 50%) Special early retirement benefit for activemembers who retire with 15 years or more of service The normal reduction for Special early retirement is either waived entirely (at age 61) or reduced Disability pension payable to activemembers for total & permanent disabilities 22 Orchestras Canada

23 Musicians Pension Fund of Canada Death benefits at any age Pre-Retirement Post Retirement 23 Orchestras Canada

24 Comparison of Projected Pensions Based on Future Contributions Comparisons Contributions to Contributions invested in RRSP 24 Orchestras Canada

25 Comparison of Projected Pensions Based on Future Contributions Economic assumptions Salary increases 2.5% per year RRSP investment income of 7.5% per year with 2.0% expenses, for net earnings of 5.5% per year Life annuity purchase interest rate of 4.5% per year 25 Orchestras Canada

26 Comparison of Projected Pensions Based on Future Contributions Sample individual 30 year old married male with spouse three years younger Current annual earnings of $41,000 and 10.0% contribution rate 26 Orchestras Canada

27 30 Year Old Based on Future Contributions Monthly Pension 10,000 8,000 6,000 4,000 2, Years AFM RRSP Age at Retirement 27 Orchestras Canada

28 Contributions During Approved Leaves of Absence Required by law (ie: Maternity Leave) Unpaid leave, subject to Income Tax Act provisions, authorized by Employer Symphony agreement can provide for pension contributions during unpaid authorized leave 28 Orchestras Canada

29 Employers Responsibilities Pay musicians for services as per their agreements Remit pension contributions on a monthly basis Report contributions to Canada Revenue Agency as Pension Adjustments. Seek tax counsel from accountants /legal. Funding Deficiencies/Plan Windup MPFCanadais a multi employer plan so a windup is extremely unlikely. Contributions are fixed by agreements and there is no provision, as with a single employer plan, to have employers make up funding shortfalls. 29 Orchestras Canada

30 Plan Changes Effective January 1, 2011 OCSM and Canadian Conference of Musicians were both advised that change is coming Background Plan subsidized Benefits in pay, or accrued/earned at December 31, 2010 will not be affected 30 Orchestras Canada

31 Plan Changes Effective January 1, 2011 Accrual rate reduced to $3.25 from $3.70 Benefits no longer subsidized on a go forward basis Changes made to forms of pensions Additional options provided for pensioners which will not be any additional cost to the Fund 31 Orchestras Canada

32 Questions and Answers? 32 Orchestras Canada