TRAMTelephone Retirees Association of Manitoba

Retiree Pension Representative Report to the TRAM Membership on the MTS DB Pension Plan 2013

November 06, 2013

Retiree Pension Representative Report to the

TRAM Membership on the MTS DB Pension Plan. 


This is my first written report as your Retiree Representative to the MTS Defined Benefit Pension Committee.  Let me first take a moment to thank all of you who supported me in last year’s election, thank you!  I promise to do my very best to represent all TRAM members, retirees and beneficiaries on matters that come before the pension committee or are pertinent to MTS DB Pension Plan and its plan members. 


The most exciting news of course is that the Supreme Court of Canada (SCC) on appeal from a judgment of the Court of Appeal of Manitoba heard our appeal on May 16th, 2013.  As an observer who is very familiar with this case the seven (7) Supreme Court Justices that heard the case were well versed on the facts of the case.  They asked very pertinent question of our counsel and MTS’s counsel.  We are currently awaiting the SSC ruling on the appeal which is expected in the next three (3) months. 


As to our counsels Mr. Brian Meronek Q.C. and Mr. Kris Saxberg’s representation to the court they were very professional, well prepared, answered all of the question put to them and well received by the SCC. 


For those of you who haven’t yet seen the appeal proceedings, but want to see them, there is a link on the TRAM website, to the webcast under tab News, sub title SCC Webcast.  Just clink on the sub title SCC Webcast and it will take you directly there.  Please view, it lasts 2 hours. 


Pension Formula Statement of Claim. 

MTS has filed a motion for summary judgment.  To fight that motion in court prior to the SCC ruling due to costs is not practical.  The Supreme Court decision will likely affect the outcome of the motion and the number of live issues.  We will dispute the summary judgment motion after the Supreme Courts ruling on our appeal of the MB Court of Appeals ruling. 


DB Pension Committee

The Pension Committee reports to the Audit Committee of the Board of Directors.  The Committee meets twice a year (Last meeting was Sept. 20th, 2013).  The next meeting is set for Dec. 02nd, 2013. 


MTS DB Plan - Amendment Number 6 to the Manitoba Telecom Services Inc. and Participating Subsidiaries Employee Pension Plan. 

TEAM had their actuary, also the same actuary TRAM uses Louis Ellement, review the amendments.  TEAM provided his review and comments to us at no cost.  For the most part the changes are compliance changes to conform with changes made to the PBSA which OSFI is charged with administering.  The changes don't take away any benefits and in some cases provide a slight improvement over the existing benefits.  (For example day one vesting is now applicable, before it took 2 years to be vested in pension benefits.) 


The 2012 MTS Pension Plan Annual Report booklet

Sources of Funding

The money necessary to pay the benefits promised by the Plan comes from three sources:

• Company contributions - $26.6 million or 16%;

• Employee contributions - $10.1 million or 6%;

Investment earnings - $131.5 million or 78%,

• $168.2 million in total inflows to the plan in 2012,

The actuarial funding valuation completed as at Jan. 1, 2013.  The next valuation will be as at Jan. 1, 2014.


The going concern valuation assumes that the Plan will continue operating indefinitely.  It showed that the Plan was fully funded with an $18 million surplus on a going concern basis. 


The solvency valuation assumes that the Plan terminated on the date the valuation was done.  It shows the plan is in a deficit position of $514 million on a solvency basis.  The Plan’s going concern funded ratio was 101%, while the Plan’s solvency funded ratio was 76% as at January 1, 2013.  The ratios have improved from the January 1, 2012 valuation due to continued funding and strong investment returns.  Until the Plan is fully funded on a solvency basis, the Company is required to continue to make additional contributions either in cash or by letters of credit.  

Letters of Credit

PBSA regulations were amended effective April 1, 2011 to permit letters of credit to be used, up to a maximum of 15% of plan assets, to meet solvency funding requirements for federally regulated pension plans.  A letter of credit is essentially a guarantee issued by a financial institution.  It provides security to the pension plan up to its face value in the event the plan sponsor defaults in their obligations to the pension plan.  The letters of credit are held by the plan trustee, in our case RBC Investor Services.  The letters of credit automatically renew each year and cannot be withdrawn or reduced by the Company unless they are either replaced with cash funding or it is determined in an actuarial valuation that the letters of credit or a portion thereof, are no longer required. 


In addition, PBSA regulations require that the letters of credit be issued by a financial institution which has a credit rating of A or higher.  The letters of credit held by the Plan, totaling $196.1 million as at December 31, 2012, have been issued by the Canadian Imperial Bank of Commerce, Royal Bank of Canada, Bank of Montreal and Bank of Nova Scotia.  


These letters of credit, in combination with the Plan’s investments in short-term investments, bonds, mortgages, equities and real estate, provide security for the benefit obligations to Plan members. 


Employee Contributions

Employee contributions to the Plan are based on the employee’s earnings:

• 5.1% of earnings up to the YMPE, and

• 7.0% of earnings over the YMPE

Employee contributions totaled $10.1 million in 2012, and since the inception of the Plan in 1997, employees have contributed $164.5 million. 


Plan Performance

The Investment Committee measures the Plan’s rate of return against its long-term performance objective of the annual rate of inflation (which is the annual change in the CPI for Canada) plus 4%.  Although annual returns are reviewed carefully, it is the Plan’s performance over longer periods that best indicate how well the Plan’s funds are invested.  

 Four Years                 Since Inception

                                                One Year        (Annualized)   (Annualized)

   (2012)           (2009–2012)   (January 1997)

MTS Pension Plan Return     10.6%           9.2%                           6.7%

Customized Benchmark          8.9%           8.3%                           5.9%

Performance Objective            4.9%          5.8%                           5.9%

(CPI + 4%)

Because of its diversified nature and strong performance from the investment managers, the Plan returned 10.6% in 2012 and ranked in the top quartile of pension plans in Canada


J. Larry Trach - Retiree Pension Representative

MTS DB Pension Committee