Pensions in Canada. The Ontario Retirement Pension Plan (ORPP) - An Update. Alternative Investment Strategies An Update

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1 Pensions in Canada The Ontario Retirement Pension Plan (ORPP) - An Update In the last few issues of Pension Matters we have provided updates on the Ontario Retirement Pension Plan (ORPP) or Bill 56. On April 29, 2015 the ORPP was approved by the Ontario Legislature and received Royal Ascent on May 6, The Government is committed to establishing the ORPP by January 1, The ORPP is intended to assist individuals most at risk of under-saving, particularly middle-income earners without a workplace pension plan. Participation would not include those individuals who are currently participating in an employer-sponsored registered pension plan, such as the ESA Pension Plan. Once established, the ORPP will be the first of its kind in Canada, building on key features of the Canada Pension Plan (CPP). It will strengthen Ontario s retirement security system by providing millions of Ontario workers with a predictable stream of retirement income, payable for life. To learn more about the ORPP, please visit Alternative Investment Strategies An Update As described in the February 2015 issue of Pension Matters, in an effort to improve diversification within our Plan portfolio, the Human Resources & Investment Committee (HRI Committee) has decided to add alternative investment strategies to our Pension Plan. Alternative investment strategies are those investments that are not considered traditional stocks, bonds or cash. These can include real estate, infrastructure, private equity and hedge funds. With the aid of our expert advisors at BNY Mellon, the HRI Committee selected real estate as the best fit for our Plan portfolio as it is easily accessible and it has historically proven to be helpful in reducing the volatility of portfolio returns. The HRI Committee has decided to allocate 15% of the Plan portfolio to real estate. Investing in real estate can be accomplished in a number of different ways; however, the most common approach for pension plans is through a fund that invests in a number of existing real estate properties (apartment building, malls, office towers), as well as some properties that are in various stages of development. The HRI Committee reviewed three options for real estate funds. After careful review, the decision was made to move forward with Greystone Managed Investments (Greystone) because of their superior long-term track record as well as having the greatest property type diversification. Greystone is a Regina-based investment management firm, founded in 1988, that focuses on deriving income (and income growth) from investments that offer reliable rental revenue, from a stable tenant base, with the potential to increase that revenue stream over time. Greystone has been investing in real estate since 1988 and has a real estate team of 23 investment professionals. Greystone targets to achieve a return of the change in the Consumer Price Index plus 4% to 6%. Greystone manages $4.9 billion in real estate investments, comprised of 311 Canadian properties with an average value of $21 million.

2 Changes to Accounting Standards In recent issues of this Pension Matters newsletter, we told you about the new post-employment benefit accounting standard for not-for-profit organizations, issued by the Accounting Standards Board (AcSB). These changes became effective for ESA with the fiscal year beginning April 1, 2014 (FY15). Under the previous accounting standard, the full post-employment liability was disclosed in the notes to the financial statements. Beginning in FY15, under the new standard, all liabilities are disclosed on the balance sheet. The FY14 positive Net Asset position previously reported as $28.4 million has now been restated as a $36.9 million deficit. This change does not impact any cash balances nor does it affect the funding status or viability of our pension plan. In the future, current year gains and losses will be recorded as a direct charge to net assets shifting the volatility from the statement of operations to our Company balance sheet. ESA implemented the new standard retrospectively. Following is an overview of the impact of this change. As Previously Presented Restatements As Restated (in thousands of dollars) Statement of Financial Position at March 31, 2014 Pension benefit obligation (deferred pension assets) $(21,817) $55,546 $33,729 Employee future benefit obligation $49,486 $10,679 $60,165 Statement of Operations for the Year Ended March 31, 2014 Salaries and benefits $75,188 $(4,030) $71,158 Statement of Changes in Net Assets for the Year Ended March 31, 2014 Remeasurement and other items $28,431 $(65,329) $(36,898) More details about this change and the impact on our financial statements will be included in our FY15 annual report. A Tour of Your Personal 2014 Pension Plan Statement In June of each year, you receive your personal Pension Plan statement. Your statement is an important source of information about the ESA Pension Plan and the benefits you have earned under the Plan. We encourage you to carefully review your statement.

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4 A Spotlight on a Recent ESA Retiree John Sherwood John Sherwood started off his career as an electrician in Coming from a long line of electricians, it was in his blood. John started off his career with Ontario Hydro/ESA as an Inspector in As a natural leader and with a passion to motivate and inspire, he progressed to Senior Inspector in Today, John reflects proudly on his career and those who once worked under his umbrella. It makes me feel good to see how successful they have become. After a 24-year career with Ontario Hydro/ESA, John retired in He began the retirement process three to four months in advance. He set up meetings with his financial advisor, Human Resources and other ESA retirees. When you ve been doing something for 25 years and now you aren t going to be doing it anymore, it can seem overwhelming to move to retirement. But I think everyone knows in their heart when it s time to retire. I can t explain it; it s just something that comes to you to tell you that you are ready. Don t be afraid of the process. The people involved at ESA in the retirement process are a big help and are very knowledgeable. Before retiring, John had done a lot of missionary work and looked forward to having time to do even more in retirement. Now, five years after retiring, he doesn t know how he found the time to work! John has been very busy in

5 retirement, organizing mission trips, running an outreach program to feed the homeless, leading teams to help with the soup kitchen he volunteers at and working with Hospice London visiting terminally ill patients. John and his wife Laurie still find time to travel the world and have visited places such as Thailand and Morocco. They are currently planning a trip to Australia and New Zealand. And of course, life wouldn t be complete without spending time with his two grandchildren! Looking back on my career, I d say that we did a lot of positive things. I am proud to be part of the Company and enjoyed my time with Ontario Hydro/ESA. I was happy to go to work! Your Pension Support & Resources Do you have questions about the Pension Plan? Are you looking for more information? We re here to help. Your Benefits Resources pension website Logon using your Employee Number and PIN. Get Pension Plan information, such as how the plan works and what benefits you are entitled to, access your personal pension information, run as many pension estimates as you like, see a list of frequently asked questions and find links to other useful sites. Available 24 hours a day, 7 days a week. Human Resources Department Contact Terri Hughes at (905) or terri.hughes@electricalsafety.on.ca. The Human Resources department is available to answer any questions you may have. ESA Pension Information Centre Call Please have your Pension Identification Number ready when you call. Call the Pension Information Centre if you have questions about the ESA Pension Plan or if you are having trouble logging on to the website. Available 8:30 AM to 5:00 PM, EST, Monday Friday. If you are considering retirement The Human Resources Department provides one-on-one retirement counseling. Answering Your Questions Can I split my pension income with my spouse in retirement? If eligible, you can allocate up to 50% or your pension income to your spouse or common law partner when you complete your annual tax return. Pension income splitting is particularly beneficial if your income is significantly more than your spouse s or common law partner s income. Pension income splitting is a complex decision. We recommend that you consult a tax expert or a financial planner to determine if this is the right decision for you.

6 For more information on pension income splitting, please visit the Canada Revenue Agency website at Your Feedback is Important! Pension Matters is designed to answer your questions and address the pension topics that matter most to you. If you have questions, feedback or ideas for future topics, we want to hear from you! Simply click here to send an to the Pension Matters mailbox. This newsletter does not create or confer any contractual or other rights. All rights and obligations with respect to the ESA Pension Plan will be governed solely by the official Plan documents, applicable pension legislation and the Canada Revenue Agency. If there are any discrepancies between this newsletter and the formal Plan provisions, the terms of the Plan and any legislated requirements will apply in all cases.