Report on the 61 st session of the United Nations Joint Staff Pension Board

FEDERATION OF ASSOCIATIONS OF FORMER INTERNATIONAL CIVIL SERVANTS FÉDÉRATION DES ASSOCIATIONS DES ANCIENS FONCTIONNAIRES INTERNATIONAUX FEDERACION DE ASOCIACIONES DE EX-FUNCIONARIOS INTERNACIONALES Report on the 61 st session of the United Nations Joint Staff Pension Board Rome, 10-18 July 2014 The 61 st session of the UN Joint Staff Pension Board was held at FAO in Rome, from 10-18 July 2014. Theresa Panuccio, representative of the Executive Head of the FAO, was elected Chairperson. FAFICS was represented by its President Linda Saputelli, Katia Chestopalov, Luis Dominique Ouedraogo, Alan Prien, Gerhard Schramek and Marashetty Seenappa. Review of the UNJSPF Appeal Procedures Under the item Adoption of the Agenda, the CEO of the Fund informed the Board that: after bilateral discussions between the CEO of the Fund and FAFICS, it was decided to withdraw agenda item 11 (h) (Review of the UNJSPF Appeal Procedures) and related documents, JSPB/61/R.34 and JSPB/61/R.34/Add.1. The Board was informed that the Fund secretariat would continue its work on improving the appeal procedures as well as the working methods of the Standing Committee in close consultation with FAFICS and would present a report with recommendations to the Board at its 63 rd session. After-service health insurance (ASHI) The Board discussed the GA Resolution A/68/244 related to the management of the after-service health insurance (ASHI) by the Pension Fund. The Assets and Liabilities Monitoring (ALM) Committee had requested the Consulting Actuary to prepare a note on the Option of Broadening the Mandate of the UNJSPF to Include Administration of After- Service Health Insurance Benefits. Based on the Consultant Actuary s note the Board took note of the General Assembly s request and expressed its agreement with the conclusions presented in the note of the Consulting Actuary on the Option of Broadening the Mandate of the UNJSPF to Include Administration of After-Service Health Insurance (ASHI) Benefits. The Board also endorsed the recommendations of the ALM Committee on this matter which are reflected under item 11(c) Report of the Assets and Liabilities Monitoring Committee and contained in document JSPB/61/R.29.

The Board also endorsed the recommendation of the ALM Committee on ASHI: The Pension Board agreed that it would not be advisable to broaden the mandate of the Pension Fund to include the administration of ASHI benefits, noting that this option could jeopardize the Fund s operational viability and could also negatively affect the long-term sustainability of the Fund depending upon the extent of the adopted measure. The Pension Board also supported the participation of the Fund s CEO in the discussion of the HLCM Working Group on ASHI and requested that the CEO clearly communicates the concerns of the Board of exploring or pursuing any options that would potentially broaden the mandate of the Fund to include the administration of ASHI, and recommended that the HLCM Working Group on ASHI pursue other possible options for ASHI: Report on Investments With respect to the Fund s investments, the Board received reports from the Representative of the UN Secretary-General for Investments (RSG), Mr. Y. Takasu, and the Chairman and members of the Investment Committee. The RSG reported that the Fund s market value as of 31 December 2013 was US$ 51.336 billion, an historic high valuation, up from US$ 44.7 billion in 2013, representing an increase of US$ 6.7 billion. The RSG stressed the importance of the Fund s having achieved its long-term investment objective of 3.5 per cent real rate of return over the long term including its success over the past 1, 2, 3, 4, 5, 10, 15, 20, 25 and 50-year periods. The Fund had achieved a 4 per cent real rate of return over the past 50 years, exceeding the target of 3.5 per cent by 0.5 per cent. In the same context, the Fund had achieved an excess return amounting to 1.2 per cent over the 3.5 per cent target. The Board expressed its appreciation to both the current RSG and his predecessor; as well as to the Investment Management Division (IMD) for their hard work, as manifested by the Fund s excellent performance. The Board also expressed its appreciation to the Investment Committee for their hard work, accessibility, good advice and results. Actuarial valuation Article 12 of the Regulations of the United Nations Joint Staff Pension Fund provides that the Pension Board shall have an actuarial valuation made of the Fund at least once every three years. Article 12 further provides that the actuarial report shall state the assumptions on which the calculations are based, describe the methods of valuation used, and state the results, as well as the recommendations, if any, for appropriate action. It has been the practice of the Board to carry out a valuation every two years. The Consulting Actuary submitted to the Board his report on the thirty-second actuarial valuation of the Fund as at 31 December 2013. The Board also had before it the observations of the Committee of Actuaries, which had examined the valuation report prior to its submission to the Board. The Regular valuation as of 31 December 2013, using a real return assumption of 3.5 per cent, indicated that the contribution rate required to achieve actuarial balance was 24.42 per cent of pensionable remuneration, as compared with the required rate of 25.57 per cent shown by the valuation as of 31 December 2011. Measured against the current annual contribution rate of 23.70 per cent of pensionable remuneration, the results reflected an actuarial deficit of 0.72 per cent of pensionable remuneration as compared to a deficit of 1.87 per cent of pensionable remuneration as of the prior valuation.

The Board noted that the decrease in the deficit was primarily the result of the increase in normal and early retirement ages for participants whose service commences or recommences on or after 1 January 2014, while all other gain and loss elements, including the effect of the change in actuarial assets valuation methodology, virtually offset one another. The Board was pleased with the outcome of the actuarial valuation results as of 31 December 2013, and took note of the significant improvement in the actuarial condition of the Fund. Emergency Fund The Board established the Emergency Fund in 1973 during its 18th session in Vienna. It had been established on the basis of voluntary contributions from member organizations, staff associations and individual contributors, to alleviate the distress of recipients of small pensions caused by unforeseen hardship. The Emergency Fund, which was not an integral part of the UNJSPF pension benefit system, was financed from assets of the UNJSPF (and voluntary contributions) by an appropriation of US$200,000 each biennium, as approved by the United Nations General Assembly. The Board considered document JSPB/61/R.21on the Status of the Emergency Fund. During the biennium under review, the total amount paid out from the Emergency Fund was US$ 105,889.84 representing 249 disbursements. The majority of disbursements during this reporting period were one-time payments to beneficiaries who had proven hardship owing to illness, infirmity or for funeral expenses. The largest single payment made during the two-year period was to a beneficiary to cover medical expenses in the amount of US$ 7,400. For the period 1 January 2012 to 31 December 2013, 395 cases were reviewed. A total of 249 cases were paid during the period, of which 6 cases relate to prior reporting periods and 243 cases to the current period. Out of the 395 requests considered, there were 83 cases that were not receivable due to the failure by the pensioner concerned to submit appropriate documentation after several follow-ups that lasted more than a year (e.g. medical certificates, original medical bills, appropriate proof of payment). There were 21 cases that the Fund rejected as they were not covered under the Emergency Fund guidelines (e.g. financial assistance to supplement small pensions, request for education expenses, etc.). Those cases that were closed due to a lack of sufficient documentation could be re-opened should the required documentation be provided at a later date. During the discussion, the Fund secretariat agreed to continue its efforts to increase awareness of the Emergency Fund, particularly in developing countries, and to facilitate the process whenever possible in order to mitigate delays in the settlement of claims. The Fund also agreed to continue to collaborate with the AFICS offices as an effective means of facilitating the process for retirees and other beneficiaries. The Board took note of the status report on the Emergency Fund and, in particular, the increasing number of disbursements and total amount paid out since 2007. In addition, the Board also noted the activities during the two-year period 1 January 2012 to 31 December 2013, including the 249 disbursements made amounting to US$ 105,890. The Board was in general agreement with the proposal to increase the authorization to supplement voluntarily contributions to the Emergency Fund by an amount up to US$ 225,000. It requested the Fund to include this increase in its budget proposals for the biennium 2016-2017, which will be presented to the Board in 2015.

Terms of Reference of Staff Pension Committees During the discussion of this item, FAFICS raised the issue of composition of Staff Pension Committees (SPC) and the participation of retirees in the meetings of SPCs. The FAFICS intervention is reflected in the report as follows: FAFICS raised the issue of composition of Staff Pension Committees and the participation of AFICS representatives in the meetings noting the type and level of participation was inconsistent, with some organizations granting AFICS representatives full participation and others only partial participation. The FAFICS representative recommended that the Fund formally request the member organizations to ensure full participation of AFICS representatives in the meetings of the Staff Pension Committees. Human Resources Framework Review The Board considered the Human Resources Framework Review presented by the CEO of the Fund in document JSPB/61/R.35. Document R.35 recalled that in 2013, the Board had requested the CEO and the RSG to review, and if necessary, update the Memorandum of Understanding (MoU) with the Office of Human Resources Management (OHRM), with a view to ensuring that the Fund s human resources management was in line with its operational and investment needs. The CEO informed the Board that the revised MoU would not affect the contractual status of the current staff of the Fund. Once the MoU is available, OHRM, the RSG and the CEO will conduct consultations with staff. The key requirements submitted by the CEO included: extensions beyond mandatory retirement age in exceptional cases; exemption from mobility requirements for Professional staff; flexibility in staff movement from G to P in certain specific technical areas; flexibility in the use of approved HR experts for job classifications (OHRM oversight for UN standards to be retained). The Governing Bodies supported the process undertaken by the CEO and the RSG with regard to advancing this important initiative. They noted that it had taken longer than expected to conclude the MoU and looked forward to the negotiations being concluded and hearing about when it is under implementation. The representative of the Executive Heads also supported the document. He stated that the revised MoU would cover only those human resources policies that were considered not suitable or applicable to the Fund. Furthermore, he recalled that while the matter had been raised mainly in the context of the Budget Working Group in 2013, the Board had also in the past repeatedly requested flexibility in human resources management of the Fund. It was hoped that the revised MoU could be concluded by September. The Participants representative noted that his group had had a lively and extensive discussion on the matter. They wanted to clarify the mandate given to the Fund by the Board and find reasonable solutions to the issues under consideration, namely: retention of knowledge and experience in the Fund; career progression of the Fund staff; fast tracking of classification; and tailored mobility policies for some specific occupational groups. The FAFICS representative informed the Board that the FAFICS Council had discussed the matter at length. FAFICS understood that the Pension Fund, because of its need for highly specialized experience, might require flexibilities and in its report urged the CEO and the RSG to conclude the MoU with OHRM in the near future as recommended in paragraph 72 (b) of R.35. FAFICS recognized and supported the mandate given to the Fund to update the MoU in consultation with the staff and fully supported the CEO and RSG in this endeavour. The FAFICS Council saw this as an internal matter for the Fund to be resolved in cooperation with OHRM. Having being apprised of the specific areas in which the CEO was seeking flexibility - which it understood were not to be viewed as exceptions, but rather as tools to improve the

career progression of staff in the Fund - the Federation considered that any micro-management by the Board as a whole would not be needed nor advisable. The Board, confirming its earlier decision to ask the CEO and the RSG to finalize the MoU, decided: a) to reaffirm its earlier decision that the Fund should continue using the UN machinery for its administrative service and that the CEO and the RSG conclude the MoU with OHRM no later than 30 September 2014. b) that the MoU outlines the scope of the delegation of authority in HR matters, bearing in mind the unique governance of the Fund, its inter-agency status, mandate and funding sources as well as its maturing status and complexity and scope of its operations; c) to request the CEO, RSG and OHRM to advocate and improve the overall knowledge and understanding of all stakeholders regarding the Fund s sui generis governance structure; and to actively engage in communication with all stakeholders on the Fund s identity, challenges and priorities, with the support of SPC secretaries and the Staff Pension Committees of all member organizations. The Board requests the CEO to report on its implementation at the 62 nd session of the Board. Application of paragraph 26 of the Pension Adjustment System (PAS) Under this item the Board first considered the decision of the CEO to suspend the local currency track in Argentina effective 30 June 2014, as well as the local currency track benefits already in payment as of 31 July 2011. The representative of FAFICS expressed its satisfaction with the decision taken by the CEO to suspend the local currency track in Argentina, as outlined in paragraphs 11 and 12 of document R.36. He further appreciated the decision by the CEO to discontinue retroactively back to July 2011 the application of the local currency track to benefits already in payment. The outcome of that decision has been to provide the majority of those beneficiaries with an increase in their benefits. The Board noted the discontinuation of the application of the local currency track benefits in Argentina. With regard to the application of paragraph 26 of the Pension Adjustment System (PAS), the Board was informed that the CEO had implemented a semi-annual systematic review of the currency fluctuations vis-à-vis the US dollar as well as of inflation in countries where UNJSPF retirees and beneficiaries have elected a local currency benefit. The results of the 2013 reviews were summarized for the Board in document JSPB/61/R.36. It was noted that after extensive review, four countries were posted on a watch list, indicating that detailed reviews would continue to be completed. The four countries were Syria, Ethiopia, Nigeria and Uruguay. In his statement, the FAFICS representative reported that the FAFICS Council had reviewed the analysis and observations in document R.36 and concluded that the newly implemented semi-annual monitoring of the local currency track benefits is working well; it should, therefore, be continued. With regard to the complexity of the Two-Track feature referred to in document R.36, FAFICS recalled that the shortcomings of paragraph 26 are well known and the Board has been discussing them for years. Given that history, the Federation would have expected to see some concrete proposals for improvements in the administration of paragraph 26.

FAFICS noted with regret the delay in the improvement of paragraph 26 and the prospects of still further delay. Nevertheless, the Federation supported the request by the CEO that financial and administrative parameters be developed for the administration of paragraph 26 of the Pension Adjustment System. FAFICS offered its full cooperation in that endeavour. In its conclusion, the Board considering the complexity of the Two-Track feature, the change in the global economic environment relative to the US dollar since the inception of this feature and the difficulty of consistent administration, the Board requested the CEO to develop possible economic and administrative parameters and updated language for the Pension Adjustment System to assist in the administration of paragraph 26, to be presented for consideration of the Board at its 63 rd session. Small Pensions In document JSPB/61/R.45 on Small Pensions it was recalled that, as part of the review of the Pensionable Remuneration, the ICSC and UNJSPF secretariats had considered the subject of small pensions paid by the Fund in 2011. In 2012 and 2013, the Fund secretariat presented to the Board results of studies it had completed regarding the level of benefits provided both through the small pension and minimum benefit provisions, as well as consideration of possible alternatives for simplification. Those studies had been undertaken in consultation with FAFICS. In 2013, the Board took note of the detailed analyses completed by both the Fund secretariat and FAFICS on the small pension provisions and requested that the CEO continue the development of sample alternatives, including those presented by FAFICS, as well as a possible interim adjustment to the thresholds. In response to the Board s request, the Fund secretariat presented two alternatives for updating the small pension table on an interim basis: A. Update the table on a one-time basis, effective 1 April 2016. The 1 April date would coordinate with other retiree benefit updates, such as periodic cost-of-living increases. A one-time adjustment to this table in an amount such as 5% or 10% would have a negligible increase in the actuarial costs of the Fund. B. Provide for an indexed increase in the table, such as the cost-of-living increase periodically applied to the US dollar track benefit for all retirees und the PAS. An ongoing increase to the table would have a higher cost to the Fund as it would result in applying future increase into perpetuity. An alternative to this approach would be a cost-of-living increase only for a specified period of time, say until 2017, to limit the cost of this improvement until a long-term solution on minimum benefits can be agreed upon. It was suggested that this could become effective as from the first CPI adjustment due on or after 1 April 2016. The FAFICS representative recalled that the issue of adjusting small pensions has been before the Board since 2006. At that time, FAFICS submitted a note to the Board proposing a number of enhancements to the Pension Adjustment System, including a request for the revision of the special adjustment for small pensions. Eight years after FAFICS first brought the issue of small pensions to the attention of the Board, the Board was now considering document R.45. That document, however, offered merely an interim solution, which - if the Board and the General Assembly were to approve - might ultimately enter into effect in 2016. If that were the case, no fewer than 21 years would have elapsed since the previous updating of the small pension adjustment table in 1995! For the retirees with the lowest pensions, it would have taken 21 years to bring about the most modest

increase in their benefits. Of the two interim measures proposed by the Fund secretariat, FAFICS would support alternative A - a one-time increase of the small pension thresholds by 10%. Further, FAFICS requested that the increased small pension adjustment table be applied also to current retirees. With regard to the effective date of the increase, FAFICS requested implementation as of 1 April 2015. The request for an interim measure for the small pension adjustment was supported by the Executive Heads Group and the Participants Group. Members of the Governing Bodies Group, referring to the deficit situation of the Fund, considered that any increase of the small pension table was a benefit improvement which would not be approved by the General Assembly. After consultation with FAFICS representatives, who argued that the one-time increase in the thresholds is not a benefit increase but only a modest step restoring the indexation of the small pension adjustment table, the Group agreed to the proposed one-time adjustment of the small pension thresholds. Finally, the Board decided that the table of small pension threshold amounts should be adjusted by 10%, on a one time basis, effective 1 April 2016. This would be an interim measure pending a more permanent solution to the question of the linkage between the small pension and minimum benefit provisions, with alternatives being presented to the Board at its 2015 session for its consideration and information noting that the decision will be taken in 2016 when the results of the next actuarial valuation will be available. Situation of former UNJSPF participants from the former USSR Republics, the Ukrainian Soviet Socialist Republic, and the Byelorussian Soviet Socialist Republic The FAFICS introduced a note on the above subject which was noted by the Board and reflected in its report: FAFICS submitted a conference room paper to inform the Board on the situation of the former participants in the Fund from the former Union of the Soviet Socialist Republics, the Ukrainian Soviet Socialist Republic, and the Byelorussian Soviet Socialist Republic. FAFICS reported that AFICS Moscow has recently written to a Member of Parliament and the Ombudsman for Human Rights in the Russian Federation requesting that a study be carried out by the Constitutional Court of the Russian Federation as to the legality of Decree Number 229 of 23 March 2001 and its consistency with the Constitution and the international obligations of the Russian Federation.

The role of FAFICS in the Pension Board Under item Other matters a member of the Executive Heads Group took the floor and made a statement on the role of FAFICS in the Pension Board. His statement is reflected in the report of the Board session as follows: A member of the Executive Heads Group recalled the long-standing discussions on the need for appropriate representation of the retirees and beneficiaries on the Board, given the long experience and institutional memory that the retirees and beneficiaries brought to the Board. It was noted that FAFICS is currently allowed to send four representatives and two alternates to the Pension Board, and that representatives are accorded all the rights of members, except the right to vote. FAFICS is also contributing to various consultations and working groups. While FAFICS has many common interests with the Participants Group and often attends their meetings, it was noted that FAFICS should also feel free to join the other two groups. The Board recognized the valuable contribution of FAFICS. Gerhard Schramek 7 August 2014