Board Meeting Highlights

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Board Meeting Highlights
Municipal Pension Board of Trustees
Meeting Highlights
June 23-24, 2010
Vancouver, BC
The Meeting Highlights 1 document is a summary of issues that were considered, or decisions
that were made, by the Municipal Pension Board of Trustees (the Board) at their latest board
meeting.
Items of Note
Reports from Service Providers
A.
Plan Administration – Report from the Pension Corporation
B.
Plan Investments – Report from bcIMC
Committee Reports
C.
Benefits Committee
D.
Communications and Education Committee
E.
Employer Eligibility Committee
F.
Governance Committee
G.
Investment Committee
H.
Valuation Committee
I.
Appeals Panel
Board policies are posted on the Plan website at www.mpp.pensionsbc.ca; just follow these
links: Plan Governance > Board Governance > Board Policies and Documents.
Items of Note
1. Actuarial Valuation
Every three years the Municipal Pension Plan undertakes an actuarial valuation. The valuation
tells us if the assets will meet the Plan’s obligations, and if contributions need to be adjusted. A
valuation is being conducted as at December 31, 2009.
There was a major asset value loss during 2008. The Plan made a substantial recovery in 2009,
but there are still losses from 2008 to carry forward.
The Board has established the assumptions for the current valuation, including reducing the
assumption for the long-term rate of investment return from 6.75% to 6.5% because we expect
that long-term rates of investment returns will be lower than in the past. The Board also
approved the Actuary's recommendation to revise the mortality assumptions that reflect
increased life expectancy for members of the Plan. These assumption changes will result in
1
Please note that the Official Board Minutes record the business conducted by the Municipal Pension Board of
Trustees and their decisions. If there are any discrepancies between the Meeting Highlights and the Official Board
Minutes, the Official Board Minutes shall govern. Disclosure of any document referred to in the Meeting Highlights
or the Official Board Minutes is subject to applicable board policies.
increased costs to the Plan. The Board approved actuarial assumptions it considers prudent
to ensure that pension benefits are secure.
There will be a contribution rate increase for employers and members on July 1, 2011.
The Board is advising members and employers that they should expect a total contribution rate
increase of 1.6 to 1.9 percent of salaries. This increase will be shared equally between members
and employers (0.8 to 0.95 percent for members and for employers).
The final contribution increases will be known in late September 2010 and the contribution rate
increases will be effective July 1, 2011.
2. Audited Financial Statements
The Board approved the audited financial statements for the Plan for the year ending December
31, 2009. The statements will be published in the Annual Report in HTML format and posted on
the Plan website in August 2010.
3. 2011 Meeting Dates
The Board approved the following dates for meetings in 2011:
Wednesday and Thursday, March 30 and 31, 2011
Wednesday and Thursday, June 22 and 23, 2011
Thursday and Friday, November 24 and 25, 2011
Reports from Service Providers
Administration services are provided by the BC Pension Corporation and investment services are
provided by the BC Investment Management Corporation (bcIMC). Both agents report to the
Board at each regular board meeting.
A. Plan Administration – Report from the Pension Corporation
The Pension Corporation celebrates its tenth anniversary in 2010. Over the past decade, the
corporation has become an award-winning, high-performing service organization. The
corporation has improved service standards and reduced the time to provide purchase quotes,
termination information letters, termination options, pension estimates and first pension
payments. Over the next decade, the corporation will focus on strengthening, developing and
improving the organization to ensure that it maintains high standards of service and meets
changing service demands.
In 2010, a number of multi-year projects will be completed including the entry of
Community Social Services employers and members into the Plan; collection of union
affiliation data for plan members; and the establishment of Group 5 (a group with a higher
accrual rate and contribution rates for members in public safety occupations.)
The corporation has begun providing copies of Member’s Benefit Statements to limited
members (former spouses of members) in compliance with the Pension Benefits Standards
Act.
The corporation has expanded the employer education program to include web-based
modules that allow employers time flexibility and reduce travel costs.
B. Plan Investments – Report from the Investment Management Corporation
2010 is also the tenth anniversary for bcIMC.
Over the past few years, bcIMC has taken a lead in urging the creation of a single securities
regulator for Canada. In April, the federal Minister of Finance tabled legislation for a new
national securities act, and referred it to the Supreme Court of Canada for a ruling on its
constitutionality. The new regulatory authority would be voluntary, and provinces could opt
to join or not.
Leaders of nine major Canadian pension organizations, including the bcIMC CEO, sent a
letter to Canada’s finance ministers on May 19, in anticipation of the ministers’ June 2010
meeting on pension reform. The letter urged the ministers to acknowledge that pension
coverage and management cost problems are real and must be addressed. The letter also
urged the ministers to create a federal-provincial task force to consider research already
conducted and create a practical implementation plan with a short timeframe.
bcIMC has completed the divestment of holdings in five companies involved in the
development, manufacture or distribution of landmines and cluster munitions. bcIMC’s
decision to take this action is in keeping with international treaties signed by Canada
prohibiting such weapons and is also consistent with bcIMC’s long-term investment focus
and fiduciary duty to its clients.
Final returns for 2009 were 10.8% for the Basic Account and 10.3% for the Inflation
Adjustment Account. The Plan’s market value increased from $22.3 billion as at
December 31, 2008 to $24.4 billion at the end of 2009, still somewhat lower than the $25
billion in the Fund at the end of 2007.
bcIMC expects 2010 to be a volatile year with modest equity and bond returns. bcIMC
remains neutral in its positioning, keeping clients’ portfolios close to their strategic
allocations.
Information on the Plan’s investment allocation and 2009 returns can be found in the Annual
Report, which will be published in HTML format in August 2010.
Excerpts from the Quarterly Performance Report, Quarterly Economic Report and Quarterly
Responsible Investing Highlights are available on the Plan website at
www.mpp.pensionsbc.ca. Select “Plan Governance” and then click the “More” button in the
Investment Holdings section.
Committee Reports
The Municipal Pension Board has six standing committees: Benefits, Communications &
Education, Employer Eligibility, Governance, Investment, Valuation and an Appeals Panel.
C. Benefits Committee
The Board approved Plan Rule Amendment No. 30, which clarifies that, when a plan
member changes positions with the same employer and moves to a position in a class of
employment for which the employer does not participate in the Plan, the member will be
treated as though they had terminated employment and will no longer be required or
permitted to participate in the Plan.
The Board clarified that section 3(9) of the Plan Rules is to be interpreted to apply when a
member returns to work with the same plan employer. Because section 3(9) refers to former
and new employers, it has been interpreted not to apply to a member who terminates and
returns to work for the same employer. In the case of members who have applied for a
pension and return to work for the same employer before the pension effective date, their
contributions have restarted and their pension application effectively cancelled. This does not
happen if a retiring member starts to work with another plan employer before the pension
effective date. The intent of section 3(9) is to ensure that there is no interruption in plan
membership for active members who move from one employer to another. If a member has
applied for a benefit (a pension) then this section does not apply. The clarification will ensure
that the pension is not disrupted if a member returns to work for the same employer after
applying for a pension, and that a member who has not applied for a pension and returns to
work with the same employer will be able to contribute without delay.
The Board approved adding the Pacific Blue Cross Group Voluntary Travel Discount
Program to the post-retirement group benefits program. The discount is applicable to travel
health insurance purchased from Pacific Blue Cross. There is no cost to the Plan for this
addition. Members of the Municipal Pension Retirees’ Association (MPRA) also have access
to travel insurance through the MPRA.
The Board approved determining the cost of living adjustment (COLA) effective
January 1, 2011 based on the increase in the consumer price index (CPI) for the 24 months
ending September 30, 2010. The change in the consumer price index over the 12 months
ending on September 30, 2009 was negative and no cost of living adjustment (COLA) was
made to pensions January 1, 2010. To ensure that the next COLA takes account of deflation,
any increase will be determined with reference to the September 30 that last gave rise to an
increase in the CPI. Section 73 of the Plan Rules specifies that the cost of living increase to
pensions may not exceed the percentage increase in the consumer price index (CPI) over the
12 months ending on the immediately preceding September 30 and that the total cost of the
increase may not exceed the available funds in the Inflation Adjustment Account.
The Board approved implementing a manual process to use the “separate member approach”
for Group 5 members with concurrent employment, retroactive to January 1, 2010. With the
separate member approach, service and salary will be tracked separately for each benefit
group in which the member participates over the course of their membership in the Plan. The
benefit for service in each group will be determined based on the service and HAS in that
group but contributory service in all benefit groups will be used to calculate any early
retirement reduction.
The Board will set aside time on its September 21, 2010 agenda to hear a report from the
Benefits Committee about its review of group benefits subsidy and coverage issues.
D. Communications & Education Committee
The Board approved the draft 2009 Annual Report, which will be published in HTML format
on the Plan website in August 2010.
E. Employer Eligibility Committee
The Board approved 11 new employers. With the new employers that are part of the
Community Social Services Employers’ Association (CSSEA) joining the Plan
April 1, 2010, there are more than 860 plan employers in several sectors, including
municipalities, health, schools and colleges. The Plan has also gained close to 8,000 new
members in the CSSEA sector.
F. Governance Committee
The Board will set aside time on its September 21, 2010 agenda to hear a report from bcIMC
on potential ways of responding to adverse public opinion about pension plans globally.
The Governance Committee will coordinate the agenda for the third annual meeting between
the Board and the Plan Partners and Appointing Authorities, to be held in November 2010.
The Governance Committee is developing a strategic planning framework, which will be
presented to the Board at a future meeting.
G. Investment Committee
The Board approved a new benchmark for private placements, effective April 1, 2010: the
MSCI All Country World Net Index plus 2%. The previous private placement benchmark
was the ten-year annualized BMO – Small Cap Equity Only Index (BMO SCI) plus 4.5%.
The elimination of the foreign content limits has provided the opportunity for more global
diversification. Significant mismatches between the program portfolio and the BMO SCI
benchmark mean that the benchmark was not a meaningful or useful measure of private
placements performance. The new benchmark will be better aligned in terms of regional
exposure, sector composition and return volatility and correlation, and will be consistent with
benchmarking practices of other institutional investors.
H. Valuation Committee
Section 4.6 of the Funding Policy provides that the Board will set actuarial assumptions in
the context of the funding objectives set out in section 4.4 of the Policy, based on
recommendations from the Actuary within the parameters of the Policy. You can find the
Policy on the Plan website at www.mpp.pensionsbc.ca; just follow these links: Plan
Governance > Board Governance > Board Policies and Documents.
The Board approved the following assumptions for the actuarial valuation as at
December 31, 2009:
Economic Assumptions
1. Nominal Investment Return
2. Real Return
3. Implied CPI (1-2)
4. Real Salary Growth
5. Nominal Salary Growth (3+4)
Resulting Net Rates
6. Pre-Retirement (1-5)
7. Post-Retirement (1)
Best Estimate
6.75%
4.00%
2.75%
0.50%
3.25%
Margin
-0.25%
-0.50%
0.25%
0.25%
0.50%
Valuation
6.50%
3.50%
3.00%
0.75%
3.75%
2.75%
6.50%
Mortality Assumption
80% of GAM 94
Demographic Assumptions
as determined by the Actuary based on Plan demographic
trends
The Board approved actuarial assumptions it considers prudent to ensure that pension
benefits are secure.
There will be a contribution rate increase for employers and members on July 1, 2011 in the
expected range of 1.6 to 1.9 percent of salaries, which will be shared equally between
members and employers (0.8 to 0.95 percent for members and for employers). The final
contribution increases will be known in late September 2010 and the contribution rate
increases will be effective July 1, 2011.
I. Appeals Panel
Appeals Panel Decision #M235 regarding changing the pension option chosen at retirement
has been posted on the Plan website.
The MPBT Appeals Panel posts decisions issued by the Panel on the Plan website, with all
information that could identify an individual removed from the written decision. You can
find these decisions at www.mpp.pensionsbc.ca by following these links: Plan Governance>
Board Governance > Appeals.
Municipal Pension Trustees also represent the Board on a number of committees with the other
public sector pension plans. These include the Interplan Audit, Interplan Benefits, Interplan
Investment, and Interplan Trustee Education committees.
Future Board Meeting Dates
The next regular meeting of the Municipal Pension Board of Trustees will take place
November 17 - 18, 2010 in Victoria.
The following dates have been set for other Board meetings in 2010:
Tuesday, September 21, 2010 – Vancouver
The 9th Annual General Meeting will be held on Saturday, October 16, 2010 in Sidney at the
Mary Winspear Centre, starting at 9:30 a.m. Pacific Time (10:30 a.m. Mountain Time). The
meeting will also be webcast. Look for more information on our website in the coming months.
The following dates have been set for Board meetings in 2011:
Wednesday and Thursday, March 30 and 31, 2011
Wednesday and Thursday, June 22 and 23, 2011
Thursday and Friday, November 24 and 25, 2011
Contact us:
By phone
By fax
By email
By mail
250 356 6220
250 356 6245
[email protected]
PO Box 9460
Victoria BC V8W 9V8