Community and Women s Groups Member Funded Pension Plan (MFPP)

Transcription

1 A Presentation on the Community and Women s Groups Member Funded Pension Plan (MFPP) INFORMATION DOCUMENT PRODUCED BY THE COMITÉ DE RETRAITE DU RRFS-GCF AND WRITTEN BY MICHEL LIZÉE January 2017

2 Outline 1. The current approach 2. What income will we be able to count on when we retire? 3. The option put in place: a supplemental pension plan adapted to the needs of community and women's groups 4. Managing the pension plan: balancing risk and return IMPORTANT : official text regulations prevail over the content of this presentation. 2

3 1 The current approach 3

4 1 The current approach (1/2) A collective project initiated in 2004 by Relais-femmes and the Centre de formation populaire (CFP) Governmental Policy on Community Action (2004): in need of a pension plan to reduce the employees precarious situation and improve labour retention Request to the Service aux collectivités de l UQAM for technical expertise and support Questionnaire survey of groups Working group made up of persons in charge for about 15 networks within the Community movement: raising awareness, training and development of a pension plan adapted to the needs for the community and women s groups Presentation tour of the networks and regions in Following the decision of almost 200 groups to join, the Pension Plan has been in operation since October 1st,

5 1 The Pension Plan has been in operation since October 1st 2008 As of November 2016 Plan members Retirees 57 Participating groups 603 Assets $ 44,440,139 A fully operational pension plan! 5

6 2 What will we be able to count on when we retire? 6

7 2 What income can we count on once we retire? Ideally one aims at a rate of replacement of 75% to maintain hers or his standard of living after retirement: why? BEFORE retirement Wages $40,000 Less Contributions $5,080 Taxes (24,6 %) $9,840 Balance $25,080 AFTER retirement Pension (75 %) $30,000 Less Contributions $0 Taxes (18,9 %) $5,880 Balance $24,120 That s why it is said that a replacement rate between 70 to 75% Is sufficient to maintain one s standard of living once retired 7

8 2 The six-storied Canadian pension system 5. Other personal assets and income 4. Registered Retirement Savings Plans (RRSP, VRSP. Locked-in RRSP as well as RRIF) Savings, individual or collective, with public fiscal help 3. Supplementary Pension Plans (SPP) Collective Insurance or savings with public fiscal help 2. Quebec Pension Plan (QPP / CPP) Income replacement, public (25%; max: $13,370) 1. Old Age Security (OAS) Universal ($6,942), but clawvack ($73,333 +) Immigrants : at least 10 yrs (40 yrs full benefit ) 6. Guaranteed Income Supplement (GIS) Assistance (max: $10,369) Reduction by 75 / 50 for each 1$ of income ( # 2 à 5) 8

9 2 What income can we count on once we retire? Income from public plans for a single person retiring in 2016 at age 65, taking into account earned income during the person s lifetime and assuming the person has no other income 0% of average industrial wage If the person, during active life has earned an income equal to : 50% of average industrial wage 75% of average industrial wage 100% of average industrial wage 132% of average industrial wage 0 $ $ $ $ $ OAS $ $ $ $ $ QPP 0 $ $ $ $ $ GIS $ $ $ $ 2 079$ Total $ $ $ $ $ Replacement rate N/A 71% 50% 40% 31% Insufficient public plans, of which the maximum does not even reach the poverty line! 9

10 2 What income can we count on once we retire? How, after 65 years of age, the GIS and the taxation penalize the first $15,000 earned on top of OAS Illustration of the tax trap for a person, according to her total income, which carries out an additional withdrawal of $100 of its RRSP (2010 income tax tables and 2011 GIS benefits ) $19,000 $21,000 $23,000 Additional income (RRSP, pension plan, net rental income, interest income) Lower Guaranteed Income Supplement due to this additional income Additional contributions or taxes to be paid for this additional income + $100 + $100 + $100 - $50 - $50 - $0 - $17 - $34 -$30 Total GIS reductions and taxes to be paid - $67 - $84 - $30 Additional disposable income for every $100 additional income once GIS reductions and taxes are taken into account +$33 +$16 +$70 10

11 2 What income can we count on once we retire? Clearly insufficient public plans If we thought we could use a small RRSP to supplement our income of $18,000 or $22,000 a year, we risk falling into a fiscal trap in which only 20% of our withdrawals from our RRSP will in fact be used to increase our disposable income. After the age of 65, the first $24,486 in income (OAS, QPP, pension benefit, withdrawal from an RRSP or an RRIF, income from work above $3,500 or investments) is subject to the GIS reduction and taxation (income tax and contributions), with a marginal rate ranging from 50% to 84%! In fact, in order to get out of this fiscal trap, we need a retirement income above the poverty level for a single person in a large city. In the end, it may be better to accumulate savings outside a RRSP rather than in a smallish RRSP : house, Tax Free Savings Account (TFSA), equities and bonds For more information, see the text «Options pour petits montants» on the Plan s Website. 11

12 2 Supplementary plans on top of public plans Two families of supplementary pension plans Defined Benefit Plans which guarantee a lifelong pension: the risk is supported collectively: «Classic» defined benefit plans Member funded pension plans (MFPP) Defined Contribution Plans, saving plans where the participant supports all the investment risk and longevity risk «Classic» defined contribution plans Simplified pension plans RRSPs and VRSPs 12

13 2 What is the difference between a Member Funded Pension Plan (MFPP) and a group RRSP? Member Funded Pension Plan Group RRSP Pension plan regulated by Quebec s Supplementary Pension Plans Act and by fiscal regulations. Defined benefit pension plan: the pension is guaranteed for life. Employee contribution may increase in case of deficit. Employer contribution must be at least equal to 50% of total regular contribution. For income tax purposes, it is not added to the employee s taxable income. Upon leaving, the accumulated capital beyond a minimum amount is locked-in and can only be withdrawn as a pension once retired. The plan supports the risk Savings plans established essentially under fiscal regulations. We know how much we put in, but we don t know how much we will get at retirement (return). May be used for the purpose of the Home Buyers' Plan (HBP) Employer contribution, if any, must be added to the employee s taxable income. Governments then levy various contributions from the employer or the employee (± 20%), then the employer contribution may be deducted from the employee s taxable income. Member alone supports 100% of risks 13

14 2 And what can we make of the Voluntary Retirement Savings Plan (VRSP) in place since July 1 st 2014? The VRSP is very similar to a RRSP. It came into force on July 1 st VRSP must be put in place by any employer without a pension plan, a RRSP or a TFSA where contributions can be deducted from the salary of employees willing to contribute, sometime between July 1 st 2014 and, at the latest: December 31 st 2016 if more than 20 employees (18 years, 1 year of service); December 31 st 2017 if between 10 and 20 employees; To be determined eventually, but not before December 31 st 2018 if between 5 and 10 employees Employer is not required to contribute, but still gets to choose the firm where the money will be invested. Automatic inscription for any employee with 1 year of continuous service, but it is possible to withdraw in the following 60 days or modify at the certain conditions the contribution rate. Member alone supports all risks (investment, longevity) 14

15 2 Some key elements of the regulations enacted in June 2014 Default contribution rate: 2% of wages (2014 to 2017), 3% (2018) and 4% (2019 and after) Frequency of contribution change regulated by each plan A participant may make the first change of contribution rate after 12 months contributed, or earlier if employer also contributes Default investment option: lifecycle fund where the risk level, based on the member s age, is adjusted as retirement age gets closer. Other options may be offered. Max. fees: 1,25% for the default option; 1,5% for the other options. Duty to inform: annual statement sent to members must include, among other elements, fund s fees as a percent of assets and the actual return compared to the benchmark return Refunds and transfers: among the options, money accumulated in a VRSP can be transferred in a supplementary pension plan such as ours 15

16 2 The MFPP: a more diversified and efficient investment policy than the VRSP generate 61% more income at retirement 5,8 % 4 % Expected return (right-hand scale) Note: for funding purposes, the expected MFPP s return has been reduced to 5,5% in order to provide a security buffer. Furthermore, part of the return difference is due to the fact that part of the MFPP s administrative expenses are paid directly out of the annual contribution while they reduce the VRSP s expected return. 16

17 2 By pooling the risk between old and young and thanks to its indexing reserve, the MFPP is able to put in place a better performing investment policy The first $1 invested at age 25 in the MFPP is worth, at age 88, the double of the same $1 invested in an RRSP! The VSRP can finance only 62% of what the MFPP will be able to pay. And, unlike VRSPs, the MFPP guarantees the pension benefit as long as you live 17

18 2 Pension plans: nearly 3 times the returns of RRSP/LIRA/RIFF/LIF between 1999 and 2005! 8% 7% 6% 5% 4% 3% 2% Inflation 1% 0% Caisses de retraite (Majority DB) REER, FERR, CRI, FRV Source : Barrette, Chabot et Langis, Les revenus de retraite au Québec. Déterminants de la situation actuelle et projection jusqu'en Régie des rentes du Québec, pp

19 2 RRSPs, a less efficient vehicle to ensure an adequate standard of living at retirement, according to a recent study from Régie des rentes «This short analysis shows that there could be an important difference between the standard of living at retirement of the individuals who have access to a defined benefit pension plan and those who must rely solely on RRSP, LIRA, RRIF and LIF.» Source: Barrette, Chabot et Langis, Les revenus de retraite au Québec. Déterminants de la situation actuelle et projection jusqu'en Régie des rentes du Québec, pp

20 3 Our pension plan: a Member Funded Pension Plan adapted to the needs of community and women s groups, social economy enterprises and cultural not-forprofit groups 20

21 3 A pension plan built by and for the community sector, taking into account its values and constraints Our choice: a «Member Funded Pension Plan (MFPP)», a new type of defined benefit pension plan legally authorized since 2007 and suited for small and medium size employers. Six main characteristics: 1. Defined benefit pension plan : pension is guaranteed for life and may not be reduced, whatever the plan s financial situation or its return. 2. A single multiemployer pension plan for all community and women s groups who voluntarily decide to join the plan, with a joint administration and management of assets, in order to benefit from a critical mass, economies of scale and the ability to act together in solidarity with each other as a movement. Takes into account staff mobility by allowing accumulation of rights when transferring from one participating group to another participating group. 3. Each group chooses its contribution rate (at least 2% of wages) and may modify it over time. Employer must contribute at least 50% of total contribution, but does not have to contribute in case of a deficit: employer contribution is thus fixed, but the group may change it up or down from time to time.. 21

22 3 A pension plan built by and for the community sector, taking into account its values and constraints 4. Each 100$ contributed is sufficient to finance an annual guaranteed pension of 10$ at age 65, and to index it to the cost of living each year for all active and retired participant. Around 35% of the contribution is therefore used to build an indexing reserve, which also serves as a buffer to absorb chocks when returns are low. It is that reserve which explains why, on 31 December 2013, our plan had 1,72$ for each 1$ owed to plan members as guaranteed pensions. 5. Should a deficit arise, part of the employee contribution of ensuing year(s) must be used to eliminate it. The indexing reserve is precisely in place to reduce this risk as much as possible. 6. Retirement age is 65 with a possibility of retiring as early as age 55 (with a reduction) or postponed as late as age 71(with an upward adjustment). 7. Each member may use individual tools in order to increase his or her guaranteed pension : past service buyback, direct transfer, voluntary contributions and partial or total elimination of the reduction for early retirement. 22

23 3 Four reasons to opt for a defined benefit pension plan (DB) and live a secure retirement 1. It guarantees your pension as long as you live. 2. More bang for the buck! For the same level of contributions, a higher retirement income can be provided *. 3. Risks related to return and life expectancy are supported collectively. 4. During your retirement, you will not have to manage your portfolio and face market fluctuations, administration fees, low returns and more importantly, insecurity. * For instance, a study written by an economist and an actuary, A Better Bang for the Buck. The Economic Efficiencies of Defined Benefit Pension Plans, published in 2008 by the National Institute on Retirement Security concluded that a defined benefit pension plan costs 46% less than a defined contribution plan or a RRSP to provide the same income at retirement! 23

24 3 Plan funding as of December 31 st 2015 A pension plan in good shape financially Actuarial surplus transferred into Provision for future events Mandatory indexing reserve (sect. 122 of SPP Act) Minimum funding to pay guaranteed benefits (including indexing) ASSETS LIABILITY AND RESERVE After 7 years, a reserve has been constituted to ensure the security of promised benefits and contribution stability while allowing us to index all pensions acquired between 2008 and

25 3 Financing according to the financial situation of the Plan At least every 3 years, an actuary calculates the exact formula for the Plan's financing (ex.: "a contribution of $100 finances an annual pension indexed to the cost of living of $10"), taking into account, among others the characteristics of the group (age, sex). The actuary determines if assets are sufficient to pay benefits already accrued by active or retired members. In good times (there is a surplus, assets > liabilities), the pension committee must index pension credits of active and retired members to cover inflation for the last 3 years before any other use of surplus. In bad times (there is a deficit, assets < liabilities), the committee must increase the employee contributions to amortize this deficit over a certain number of years and may not index benefits nor introduce any other benefit improvement. Hence the importance of the indexing reserve to prevent a deficit. 25

26 3 Evolution of the pension acquired by a 100 $ contribution, depending on the year of contribution $10,90 $10,80 Pension acquired with a 100$ contribution $10,70 $10,60 $10,50 $10,40 $10,30 $10,20 $10,10 $10, Year Indexing is conditional on the financial situation of the Plan and on the understanding that it will not compromise benefit security or contribution stability, which are priorities. 26

27 3 Membership: the group A group may join the plan if 1) Approved by its Board 2) Approved by the Union or, if none, by a majority of employees of the group. A notice must be sent to each nonunionized employee: 30% may prevent the group from joining. See the Enrolment Guide published by the Pension Plan for more details. Admissible groups Community or women s groups Social economy enterprise Cultural not-for-profit organisation Some foundations 27

28 3 Membership: employees in the group 1. A regular employee must join 3 months after their hiring date 2. A person already member of the plan or who reimburses an amount transferred by our plan (previous employment) must join on hiring date 3. An employee with 5 years of continuous service within a group must join *. 4. When 1 or 2 don t apply, an employee may join if she works 700 hours or earns 35% of YMPE ($19,355 in 2017) in a given year for one or many groups covered by the plan on January 1st of the following year (if working for more than one group, please contact directly the pension plan office) 5. Any employee aged 71 or more may not join to the Plan and may no longer contribute. * An employee already employed by a participating employer before or on February 28th 2011 may join after 2 years of continuous service within that group 28

29 3 The basic formula for the promised benefit Each group that participates determines the level of contribution: The total contribution, employee + employer, for the current service (minimum 2%,of pensionable earnings) The employer s contribution must be at least 50% of the total contribution for the current service and can go up to 100% of this total contribution The employee s contribution is equal to the difference between the total contribution required and the employer's contribution Each $100 contribution annual pension of $10 at 65 plus indexing provision This formula, established on a deliberately conservative basis, also includes a reserve for indexation which, at the same time serves: As a reserve to absorb blows during bad years; To index the accumulated pension credit or the pension paid after retirement, when the financial situation of the plan allows; This formula can vary over time, depending on changes in the characteristics of the group and the financial situation of the plan (actuarial valuation at least every 3 years). The initial objective was to maintain a stable pension formula and contribution rate. 29

30 3 The basic formula: an example Mary works in a group in which the participants and the group each contribute 5% She earned $30,000 in 2016, for a total contribution of (5% + 5%) X $30,000 = $3,000 She therefore contributed 30 times $100, and therefore acquired an annual pension of 30 X $10 = $300. If she lives 23 years after retirement, her initial contribution of $3,000 will «buy» a total pension of $6,900, without taking into account any indexing This amount may be indexed in the future, both before the retirement as well as after, if the financial situation of the plan (indexing reserve) allows This amount is added to the pensions acquired during the other years in which Marie worked 30

31 3 Retirement age Basic formula ($10 per year for each $100 of contributions) applies for a retirement at 65 years of age Early retirement possible at 55 years, but a reduction in the pension of 6% per year before the age of 65 Possibility of receiving a higher pension before 65 years of age, up to the lesser of $22,120 a year (as of 2017) or the accumulated value of the benefits, and then having the pension reduced at age 65 to reimburse these payments: an option for persons with few years in order to minimize the impact of the fiscal trap Retirement after 65 years of age involves an increase in the pension of 6% per year. The payment of the pension must begin at 71 years 31

32 3 Taking stock on my financial situation A total contribution of 8 to 12% over at least 25 years with retirement at 65 offers hope of a pension income close to our objectives The Excel calculator (only available in French) available on the website can project the retirement income from public pension plans and from our pension plan. One can increase the replacement ratio thus obtained by: Taking advantage of past service buyback, direct transfer or voluntary contributions;(see next slide); Contributing to a RRSP, especially the Solidarity Fund s or Fondaction s RRSP, and converting the accumulated amount at retirement into an additional guaranteed pension; Retiring later. Time plays in favour of the participants who are in their 20s or 30s to ensure income security on their retirement. The least advantaged groups are those who do not manage to avoid the fiscal trap because they joined too late, have insufficient years of contributions, or retire young, AND do not have enough voluntary contributions or transfers to compensate. For more information, read the document «Options pour petits montants» available on the plan s website. 32

33 3 Make individual additional participation possible We are aware that the contribution level in your group may not be sufficient to provide you with enough pension income, taking into account your age when you became member. The pension plan is therefore providing individual tools that rely on and reinforce the collective instruments put in place: 1. It is possible for a participant to purchase past service and thus increase immediately the guaranteed pension. This can be done by transferring amounts held in a RRSP (including a labour fund in the 3 months prior to retirement) or by contributing taxdeductible amounts. 2. It is possible for a participant to make a direct transfer from the pension plan of a former employer (or the LIRA where the funds had previously been transferred) and thus increase immediately the guaranteed pension. 33

34 3 Make individual additional participation possible (foll.) We are aware that the contribution level in your group may not be sufficient to provide you with enough pension income, taking into account your age when you became member. The pension plan is therefore providing individual tools that rely on and reinforce the collective instruments put in place: 3. The participant can make additional voluntary contributions which are tax deductible - in order to benefit from pension plan returns and eventually buy back past service or choose at retirement between a conversion into an additional guaranteed pension or a refund/transfer 4. It is possible for the employer or the employee, when retiring before reaching age 65, to eliminate in whole or in part the reduction for early retirement by financing the cost of this reduction. For the employee, the money can come from a RRSP or a VRSP, It can also be paid in cash, and the employee can take advantage of a tax deduction, even when he or she has no more fiscal space for contributing to a RRSP. 34

35 3 Past service buyback: an example Mary s group joins the pension plan in 2017, but she has been working for that group since 2009 (7 years) The group s contribution rate is 8% (4%, 4%) Her salary is $30, 000 The maximum benefit that Mary can buy back is: 7 years X $30,000 X 8% X 10% = $1,680 If Mary is 40 years old, an annual benefit of $1,680 required a buyback of $1,680 X 7,84536 = $13,180 Mary has only $6,590 (i.e. 50% of $13, 180): she can therefore buy back a pension of $840 and will be able to buy the rest later As one gets older, buyback becomes more expensive 35

36 3 What happens during leaves? The group must pay the employer contribution if the employee chooses to pay the employee contribution for some types of leaves*, including: professional illness or labour related accident (maximum 24 months) illness (maximum 26 weeks over a 12 month period) maternity leave (max. 18 weeks) or paternity (max. 5 weeks) parental leave (maximum 52 weeks. May be prolonged if required given the child s health condition) leave because presence is required near a close parent because of a grave illness (max. 12 weeks, or 104 weeks if the employee s child has a grave illness, potentially life threatening) Candidate or elected at the municipal, provincial or federal level (depending on applicable legislation) The employee may keep contributing employer and employee contributions: - Leave without pay (maximum 6 months) Each group may agree with employees to put in place more generous terms, such as who pays contributions or the maximum length, subject to applicable legislation and approval by the pension committee (see Appendix 4 of the pension plan text). * A description of all the leaves covered by various legislations and a form to be signed at the beginning of each leave have been prepared by the pension plan and are available on demand (In French) 36

37 3 What happens when the employee changes jobs? To another group covered by the plan Participation in the plan continues at the time of hiring, independently of the status with the new employer (regular employee or not) Elsewhere: choice between Retaining the right to a deferred annuity (which could be indexed regularly before or after retirement, depending on the financial situation of the plan) Transferring to another pension plan or a locked-in retirement account (LIRA), a type of RRSP, an amount equal to: Accrued pension s value X Plan s solvency ratio If the amount is sufficiently low (< $11,060 in 2017), the reimbursement can take the form of a check (less taxes) 37

38 3 What happens if the employee dies before her retirement? The plan must pay the present value of the pension, multiplied by the rate of solvency to the spouse or, if there is none, to the designated beneficiaries or the estate. Defined benefit: the amount of money that must be put aside today in order to pay the accrued benefit, taking into account the solvency ratio Additional contributions: the accumulated value of the contributions with interest 38

39 3 Protecting the spouse after retirement According to the Quebec s Supplemental Pensions Act: When the employee retires, the spouse decides, in the event the member dies, whether or not he/she wishes to be entitled to a surviving spouse's pension equal to 60% of the member's pension (the pension of the member must then be reduced by + 15% to finance this option) At the time of death, the spouse receives 60% of the member's pension for the rest of his/her life The spouse may renounce to a survivor benefit: in this case, it is the designated beneficiaries that are entitled to benefits, if applicable (e.g. 5 years guarantee) The participant may also choose a guaranteed 10-year annuity (see following slide) 39

40 3 Guaranteed 5 or 10-years guarantee: an interesting option to protect your loved-ones The pension plan automatically guarantees 5 years of pension disbursement to the spouse or, if there is none, to the designated beneficiary On the member's retirement, he/she may choose an option guaranteeing the payment of the pension for 10 years to his/her spouse or, if there is none, to the designated beneficiary (premium of about 3% of the pension) Interesting protection for the spouse or for persons who are financially dependent on the member 40

41 3 For more information: two documents available on our Web site (in French only) 41

42 3 How will the pension plan be administered? The envisioned governance For a democratic, transparent management that respects our values Democratic governance representative of the various participating groups Concerned with the appropriate male/female representation Reflects the actual contribution and sharing of risk between the participants and groups 42

43 3 An annual meeting, to ensure democratic and transparent management The retirement committee must hold an annual meeting To be held in each region/location where numbers justify, if possible Goal: To report on the administration of the plan and its financial situation To provide information on changes to the plan that have been made or are being considered To elect the retirement committee which is responsible for administering the pension plan 43

44 3 A representative pension committee Comité de retraite On top of the representation required by Law (1 active, 1 retiree, 1 active et 1 retiree without the right to vote, 1 independent), 4 elected by the actives and 4 by the groups (employers). Half of active and employer representatives are up for election every year. A composition that reflects the higher risk supported collectively by plan members. Pension committee is comprised of 13 members : 6 members representing active members (1 without the right to vote) 2 members representing inactive members (1 without the right to vote) 4 members representing the groups 1 independent member Gender equality: at least 2 women from groups and 3 from actives 44

45 45

46 3 Mandate of the pension committee Legally, administrator and trustee of the plan 151. The pension committee shall exercise the prudence, diligence and skill that a reasonable person would exercise in similar circumstances; it must also act with honesty and loyalty in the best interest of the members or beneficiaries. Supplemental Pension Plans Act Adopt and modify the text of the pension plan and apply it, while respecting the applicable laws Apply the participation and, if applicable, retirement procedures of the groups Receive the contributions, pay benefits, manage the pension fund Retain the services of external managers, actuarial accountants Conclude transfer agreements with other pension plans Adopt a funding and socially responsible investment policy Provide information to the groups and members and raise their awareness of issues related to retirement Report to the groups and members on the plan's administration and financial situation at each annual meeting 46

47 4 Managing the pension plan: balancing risk and return 47

48 4 A funding and use of surplus policy centered on prudence 3 main objectives to ensure the Plan s security and sustainability: 1. Be able to pay promised benefits 2. Aim for a stable contribution 3. Subject to the 2 preceding objectives, to ensure the indexing of the pensions Conservative assumptions for the conversion formula of contributions into pension ($100 buys $10 per year at age 65) Use of surplus policy aims to constitute reserves equal to the Indexing reserve plus 10% before granting improvements, in order to have a cushion to go through more difficult periods 1. Indexing is the priority, beginning with the earlier years up to the last actuarial valuation 2. Convert into a pension benefit any contribution paid by active participants when there was a deficit to be amortized 3. Improve the active and retired participants benefit by a uniform percentage up to the point when the surplus goes back down to the 10% lower limit 48

49 4 The fund manager structure adopted by the pension committee in February 2016 Asset class Fund and manager Canadian bonds (30%) Fiera Long term Bonds (10%) Desjardins obligations opportunités Fund (20%) Canadian equities (30%) Jarislowsky Canadian equity (15%) NEI Ethical Canadian equity (15%) Global equities (33%) Fiera Global equity (13%) Hexavest Global equity (13%) DGIA Emerging Markets equity (4%) DFS BlackRock Global Infrastructure Index Fund (3%) Real Estate (7%) Fiera Real Estate Fund (7%) All those funds are on the investment platform of Desjardins Assurances, and Fiducie Desjardins is the custodian for some of the funds. Pension plan funds are secure. They are held by a custodian and are managed professionally. 82% of plan assets are managed in Quebec. 49

50 4 Value added for total fund and according to managers for the year ending December 31 st 2015 and since inception Since 2008, annualized return of 9,53 % and value added of 1,06% All managers, except Fiera and Bisset, have added value since the beginning of their respective mandate.

51 4 Assets growing Evolution of fees as a % of assets Over the years, fees as a % of assets tend to go down: 2,4% of average assets in Stable between 2014 and 2015 for 2 main reasons: low return in 2015 and decision to maintain expenditure in member education, despite the end ot a grant from SACAIS The key for the future: more members and assets 51

52 4 A plan designed with significant reserves in order to sail through the ups and downs of markets 174 % 112 % 90 % The most important measure is the funding ratio relative to guaranteed benefits (solid black line), which measures the Plan s capacity to pay guaranteed benefits. The funding ratio relative to indexed pensions (solid green line) measures the Plan s assets if we wanted to guarantee immediately full indexing annually from now until the death of every plan member. The solvency ratio (dotted red line) measures the plan s situation if we were to terminate the plan and had to buy annuities from insurers : this ratio is used to compute how much money we transfer to those who leave the plan before retiring. The orange arrow shows years which have been indexed to the cost of living. 52

53 4 How viable would the MFPP be should the returns replicate those which happened in ? Indexing reserve is always full and the plan is in surplus. Plan is never in deficit (funding ratio < 100 %), even when faced to a financial crisis such as the one which happened in Plan is able to index benefits every year. Since the surplus rises above the legal ceiling (125 % / indexed liabilities), pension plan would probably have from time to time to increase benefits beyond inflation. 53

54 4 Prizes recognizing the contribution, the benefits and the achievements of the Plan «Conceived with the active involvement of with representatives from several Quebecwide organisations, this pension plan aims to allow groups and their employees to improve their working conditions and thus ensure that these workers will not end up poor once they retire after a lifetime of fighting for the dignity and rights of individuals and communities. It has been adapted to the diverse circumstances of organisations. It is attractive for the incoming young replacing older workers and respectful of our values and democratic practices. As a whole, putting this pension plan in place will help structure a sustainable development for the social economy and community action sector.» Prix «Initiative gagnante»,

55 4 Prizes recognizing the contribution, the benefits and the achievements of the Plan «With innovative approaches to employer contributions, plan member education and surplus management, RRFS-GCF has crafted a solution that meets the needs of both employers and their employees. Over the past 18 months, they have worked hard to manage costs without sacrificing quality. They reached into their own community of plan members to assist with enrolment presentations and to help make certain that new and future plan members understand how the plan will operate and the benefits they can expect. In addition, they ve prudently applied the latest technologies for plan member communications and contribution processing which allows them to effectively manage costs, reduce risks and ensure a high quality experience for plan members. Understanding the unique needs of both plan sponsors and their participants has resulted in prudent and flexible benefits and funding policies. These policies, combined with a pension committee composed of representatives of both the employers and participants, demonstrates RRFS-GCF s commitment to providing solutions that work for the community and ensuring everyone has an opportunity to effectively plan for retirement.» - Tim Rourke, Vice-President, Relationship Management with CIBC Mellon, at the Awards gala held in Toronto Plan Sponsor Award,

56 For more information: Marie Leahey, coordonnatrice générale ( 1402) Sylvia Roy, coordonnatrice administrative ( 1401) Maria Luisa Apaza, responsable de la comptabilité ( 1403) Anne-Marie de la Sablonnière, responsable de la formation ( 1404) Tél. : (514) / 1 (888) RRFS-GCF@regimeretraite.ca Web Site :