Retiree Pension Reps Report on the MTS DB Pension Plan For the 15th Annual TRAM AGM
May 27, 2014
Retiree Pension Reps Report on the MTS DB Pension Plan
For the 15th Annual TRAM AGM.
Good afternoon everyone, let me first take a moment to thank all of you for your support through the 15 years of the MTS DB Pension Plan Lawsuit over the initial surplus and Plan governance. While I think the courts were incorrect on the plan governance issue, as a plaintiff I am overjoyed with the results of the Supreme Court of Canada on the Initial surplus claim. We final got our due.
I hope most of you have seen the SCC appeal proceedings, but if you haven’t, there is a link on our website, traminfo.com to the webcast. Just clink on the sub title News and the item SCC Webcast, it will take you directly to the broadcast. Please view it if you can it last about 2 hours.
The best part of the SCC hearing other than winning of course is that more than one of the seven (7) Supreme Court Justices kept asking the same question “so if the pension benefits are equal in both plans then what did the plan members get for their additional surplus contribution of 43M”? This question was never answer to the satisfaction of the SCC because it was nothing.
Let me tell you as an observer who is very familiar with this case the Supreme Court Justices who heard our case were well versed on the facts of the case unlike the MB Court of Appeal. They asked very pertinent question of our counsel and MTS’s counsel. My impression was, for the most part, they really seemed to get what the case was about. And clearly that was shown in their decision on the initial surplus including full cost on a solicitor - client basis.
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. On the other hand MTS’s council not so much.
If Still Here: I would like all of you here to stand and give our counsel a round of applause for their tremendous efforts over the past 15 years on our behalf and the unprecedented win.
Pension Formula Statement of Claim (File by TEAM Re - Cal Halstead).
As you may be aware MTS has filed a motion for summary judgment on the Pension Formula Statement of Claim. And our council recommended we delay fighting that motion in court until after the SCC ruling on the initial law suit was made. Off the record MTS has indicated they would like to settle all outstanding issues as part of the over all implementation process.
Hopefully, that can be achieved but if not we may have to return to court.
DB Pension Committee
The DB Pension Committee reports to the Audit Committee of the Board of Directors. The Pension Committee meets twice a year (Last meeting was Dec. 2nd, 2013).
The next Pension Committee meeting is set for June 5th, 2014.
The current members of the Pension Committee have not changed. They are:
Rod Pennycook (Chair) - Retired (formerly with The Great-West Life Assurance Company)
Paul Beauregard - Chief Legal Officer & Corporate Secretary
Bob Linsdell - TEAM Representative
Debbie Marantz - CEP Representative
Brenda McInnes - Vice-President & Treasurer
Don Rooney - Director Labour Relations
Don Senkow - IBEW Representative
Laurie Stewart - Director Operations – Consumer
Larry Trach Retiree Representative
From a Draft Copy of the 2013 MTS Pension Plan Annual Report booklet which should be sent out to all plan members shortly I have ascertained the following;
· Plan assets are as at December 31, 2013 approximately $1.7B compare to approximately 1.4B as at December 31, 2012.
· The plan Rate of Return for 2013 was an outstanding 19.2%.
· We are cautiously optimistic about the investment environment in 2014.
Sources of Funding
The money necessary to pay the benefits promised by the Plan comes from three sources:
• Company contributions - $19.1 Million for accrued benefits plus a special contribution of $117 million for a total of $136.1M or 32%;
• Employee contributions - $9.9 Million for accrued benefits or 2%;
• Investment earnings - $275.9 Million or 66%,
• Total inflows to the plan in 2013 are $421.9 Million.
The going concern valuation of the plan assumes that the plan will continue operating indefinitely. The Plan’s going concern funded ratio was 98% as at January 1, 2014.
The solvency valuation of the plan assumes that the plan terminated on the date the valuation was done. It shows the plan had a solvency ration of 90% as at January 1, 2014, quite an improvement from the 76% solvency ratio as at January 1, 2013.
The ratio has improved from the January 1, 2013 valuation due to continued and additional 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.
The next actuarial funding valuation will be completed as at January 1, 2014.
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 trustee, RBC Investor Services.
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 $207.7 million as at December 31, 2013, 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
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)
(2013) (2010–2013) (January 1997)
MTS Pension Plan Return 19.2% 9.7% 7.4%
Customized Benchmark 14.8% 8.6% 6.4%
Performance Objective 5.3% 5.7% 5.9%
(CPI + 4%)
