McMaster University Retirees Association (MURA) MURAnews - pension

Approaching 65? Beware of “The Gap” -- McMaster Bridge Benefit, CPP and OAS [First published Spring 2011, updated August 2019]

Fri, 16 Aug 2019 18:43:21 GMT

If you elect to start receiving your CPP earlier than age 65, it is reduced according to a formula set out in the Canada Pension Plan Act, currently by 0.6% for every month before you turn 65. In 1995-96 the McMaster University pension plan established a 'bridge' payment for those faculty and staff who retired before the age of 65, so that they could delay taking their CPP pension until they turned 65 and thus avoid having a reduced CPP pension.

An employee who retires under the special retirement date provisions receives a bridge benefit equal to $19.00 per month per year of pensionable service up until June 30, 1996, to a maximum of 20 years of service. The bridge is paid as part of the McMaster pension from the age of 60, or from the date of retirement, whichever came later, and ceases the month after they turned 65. At that time, the pensioner can elect to start receiving their unreduced CPP pension. Of course, if they had elected to receive their CPP early, they would still be receiving a reduced CPP. If you are eligible for a bridge payment, and do not get the first payment in the month you turn 60, contact McMaster Human Resources.

MURA members who retired under the rule of 80/85 provision and have not yet reached age 65 are reminded that there may be a “gap” between receiving their last monthly bridge benefit from McMaster and their first Old Age Security (OAS) payment. This gap will also exist for the first Canada Pension Plan (CPP) payment for those who retired early and chose to have their CPP start at age 65.

Retirees approaching age 65 are advised to review their retirement documentation and prepare for a gap of up to 2 months between their last bridge payment and their first OAS (and possibly first CPP) payment.

One of our members who retired under the Special Retirement Date provision (rule of 80/85) wrote to MURA, having been surprised by the occurrence of this time gap. After investigating the issue, MURA has confirmed the following:

The bridge benefit provided under the McMaster Salaried Pension Plan is payable until the month a retiree attains age 65. A retiree’s last bridge benefit payment is paid in advance on the first of the month in which the retiree turns 65 (e.g. 65th birthday between October 1st and 31st, last bridge payment on October 1st).
The first OAS benefit payment will be received at the end of the month following the month an individual turns 65 (e.g. 65th birthday between October 1st and 31st; first OAS payment at the end of November).
The first CPP payment for retirees opting to start CPP at age 65 will be paid with the same timing as OAS.

Human Resources has also confirmed that details of pension and bridge benefits and exact payments are explained verbally and in writing in retirement interviews, and that a document detailing the exact start and end date of the bridge is mailed to the retiree’s home shortly after retirement.

[First published Spring 2011, updated August 2019]

January 2017 pension plan increases, Winter 2017

Thu, 02 Feb 2017 02:12:47 GMT

On December 15th MURA notified members (those who have provided MURA with an email address) of a 1.4% increase in pensions starting January 2017. This increase applies to both the Salaried Pension Plan and the Hourly Pension Plan.

The full increase of 1.4% applies to those who were receiving a pension from either of the plans on June 30, 2015, and is equivalent to the average monthly increase in the Consumer Price Index (CPI) for 2015/16. Those who retired between July 1, 2015 and June 30, 2016 received a pro-rated increase. Those who retired after June 30, 2016 received no increase. There were no supplementary increases this year.

Additional pension plan information can be found on HR's Retirement Plans page.

Salaried pension report & how long our pension lasts, Winter 2016

Mon, 01 Feb 2016 21:57:58 GMT

On December 15th, MURA notified members (those who have provided MURA with an email address) of the 1.49% increase in pensions starting January 2016. The full increase applies to those who were receiving a pension from the Salaried Pension Plan on June 30, 2014, and is equivalent to the average monthly increase in the Consumer Price Index (CPI) for 2014/15. Those who retired between July 1, 2014 and June 30, 2015 received a pro-rated increase and those who retired after June 30, 2015 received no increase. Unlike the increase in January 2015, there is no supplementary increase this year.
The rate of return on pension assets for the year ended June 30, 2015 was 8.31%, the 5th consecutive year of positive returns. The 5-year average rate of return was 11.26%, considerably above the 4.5% threshold that is required before a pension increase is given. Investment markets for the first half of the 2015/16 year have been volatile and generally negative. While it is not possible to predict the rate of return for the full 2015/16 year, any negative return would have to be very significant before the 5-year average would be less than the 4.5% threshold and prevent an increase in January 2017.

The audited financial statements for the year ended June 30, 2015 and other information related to the Salaried Pension Plan can be found at HR's McMaster Pension Plans Documents page.

When will my pension end?

Have you ever asked yourself that question? The McMaster pension plan for salaried employees is a defined benefit plan. Under such a plan, employees contribute to the pension fund while they are working and receive a pension calculated on their years of service and best- 5-year average salary, for their lifetime after they retire.

At the time you retired, you chose the form of pension payments you will receive.

If you were single when you retired, you will receive the full amount of your pension during your lifetime. Your full pension is guaranteed for a minimum of 84 months. If you die before receiving 84 monthly payments (7 years), your pension will be paid to your beneficiary or to your estate until 84 payments have been made.

The normal pension choice for a member who has a spouse when he/she retires pays the full amount of the pension to the member for his/her lifetime, with the spouse, if still living when the member dies, receiving 50% of the pension for his/her remaining lifetime. As explained above, the full pension is guaranteed for a minimum of 84 months. If the member dies before receiving 84 monthly payments (7 years), the full pension will be paid to the spouse, if still living, or to your estate, until 84 payments have been made. After this period the 50% pension would be paid to the surviving spouse for the remainder of his/her lifetime. It’s important to note, however, that as a member with a spouse, you may have chosen an optional form of payment when you retired which could have increased or decreased the amount of your pension, the “guarantee period” and the amount your spouse will receive on your death. These options are found in Section 6.04 of the pension plan text.

R. A. West
MURA representative, Pension Trust Committee

Hourly pension report, Winter 2016

Mon, 01 Feb 2016 21:42:29 GMT

In the new year of 2016, the Pension Committee of the Hourly Pension Plan is able to announce the increase that you may have noticed on your first pension cheques of the year. The increases were approved by the Board of Governors as its final step.

The increase will be a maximum of 1.49% related to the Consumer Price Index (CPI) assessed rate of inflation for the past year, plus a supplementary pension increase for the many years that the plan did not keep up. This supplementary increase will be to a maximum of 1.013%, giving a maximum total increase of 2.518%. This is the amount that retirees with a pension as of July 2011 will receive. If you retired after July 2011, there is a table giving a month by month reduction, down to retirement in June 2015 at which point an increase of 0.124 will apply (see McMaster Hourly Pension Plan - Supplementary Increase Calculated for 2014/2015 Plan Year or call HR at 905-525- 9140 ext. 22247 for more information). While increases may seem small they are limited by the Plan’s Governance and the interest rates earned by investments, which at this time are less than stellar. Your Pension Plan Committee works hard to obtain the best results possible. Thus we must give them thanks for their efforts.

While hopefully having the attention of hourly retirees, I/we would like to invite your participation, as retirees, in the activities of MURA, amongst which will be the upcoming AGM in early June. Notice for booking for this event will be included in the Spring issue of MURAnews.

Yours, Cliff Andrews

Hourly pension plan increase, Winter 2015

Sun, 01 Feb 2015 22:21:22 GMT

The essence of this brief report is that following a fairly good year of investments (to June 30, 2014) of 16.79%, our 5-year average rate of return reached 9.79%. This being 3.79% above our 6% assumption, allowed for all retirees within the Plan to receive the maximum CPI increase of 1.41%. There is also a supplemental increase of 2.347% totalling 3.79%. This amount of supplemental increase is for all who retired prior to July 1, 2010. For those who retired after this date up until June 1, 2013, there is a calibrated scale that reduces the supplement down to 0.081%. This is due to the 3-year average calculation of this benefit.

This is the first increase since 2008 and we must continue to hope for a continued improvement in the stock markets going forward.

From your pension reporter, Cliff Andrews, I take this opportunity to wish all a wonderful 2015.

Salaried pension plan increase, Winter 2015

Sun, 01 Feb 2015 22:13:55 GMT

It was certainly a “Merry Christmas” for retirees of the Salaried Pension Plan when the Board of Governors approved an increase of 6.39% in pension payments starting in January 2015. The full increase applies to those who retired on or before June 30, 2010, with lower increases for those retiring July 2010 and later. The total is made up of a 1.41% regular increase equivalent to the 2013/14 average increase in CPI plus a 4.98% supplementary “catch-up” increase for CPI not paid in the previous 3 years. The rate of return on pension assets for the year ended June 30, 2014 was 18.40% and, when added to the rates of return for the previous 4 years, gives a 5-year average rate of return of 10.89%. The pension plan provides that the average rate of return above 4.5% can be paid to retirees as a pension increase.

The rates of return on pension assets for the years 2011 to 2014 are 14.95%, 3.85%, 10.79% and 18.40% (average 12.00%). While it is not possible to predict the rate of return for 2015, it is likely that the 5-year average rate of return will be sufficient for a January 2016 pension increase equivalent to the increase in CPI. The current year’s investment return has gotten off to a modest start with a gross (before investment management fees and administrative expenses) rate of return of 0.8% for the first 3 months of 2014/15. Investment markets continue to be volatile and month-to-month variations in investment returns can be expected.

The audited fund financial statements for the year ended June 30, 2014 and other information related to the Salaried Pension Plan can be found on the on the HR Pension Plans Documents page.

We are still awaiting a decision by the Ontario government on the creation of a “Super Fund” to manage the pension fund investments of Ontario Universities. Some direction is expected in the Spring 2015 Provincial Budget. In the meantime, the Pension Trust Committee continues to monitor investment performance and makes recommendations for changes when appropriate.

The June 30, 2014 Actuarial Valuation of the Salaried Pension Plan will be completed soon, which will set the University contribution requirements for the next 3 years. The valuation will reflect any changes to the Pension Plan since the last valuation, including changes in employee contributions and benefits, projected salary increases and retirement dates and projected investment returns. The mortality rates will also be adjusted to reflect the longer lives (and thus longer period of pension payments) enjoyed by McMaster retirees. While other employers have moved to group RRSP or other forms of retirement plan, we should be grateful that McMaster has maintained a defined benefit pension plan for the majority of its salaried employees.

R.A. West
MURA representative, Pension Trust Committee

Are our pensions keeping up with inflation? Summer 2014

Tue, 01 Jul 2014 21:27:09 GMT

Les Robb (Pension & Benefits Committee)

The Fall 2008 MURAnews contained an article on this topic, detailing the extent to which Pensioner increases were keeping up with Inflation. To summarize, over the 10 years ending in June 2007 inflation was 23.5%. Salaried pension plan members received increases of 16.08%. Hourly plan members received 5.64%. Salaried plan members thus had about 2/3 of their purchasing power restored through indexing, while hourly plan members had just under 1/4 of their purchasing power restored. (The difference between the two plans arises because of different indexing provisions — ones that were put in place years ago.)

None of the poor market performance from the recent recession had happened in time to influence the results published in 2008, but it certainly influences the latest decade — the 10 years ending in June 2013 — on which we are now providing information. The major stock market correction that came with the recession, with the corresponding reduction in the rate of return in the plans, has meant that the indexing formulas provided much less increase in our purchasing power in recent years.

The tables below on indexing performance for the most recent decade (June 2004 to June 2013) show that cumulative inflation was about 20% over the period. The cumulative pension increase for Salaried Plan members was 9.5%. The increase for Hourly Plan members was 2.9%. Thus, during this period Salaried Plan members recaptured just under half of the cost increases due to inflation (47% of the 20%) from the indexing provisions, while the Hourly Plan members recaptured only about a seventh of the cost increases (14% of the 20%). Many of us thought the indexing provisions of the earlier period were inadequate, but the recent period makes it even clearer just how bad the provisions can turn out to be.

The following two tables, one for the Salaried Pension Plan and one for the Hourly Pension Plan, provide the details of the recent experience. The tables are courtesy of Michele Leroux of Human Resources.

Please note:

The increase payable on January 1, 2008, represents a combination of the Annual Pension Increase (1.72%) and the Supplementary Pension Increase (2.271%).
The increase payable on January 1, 2009, represents a combination of the Annual Pension Increase (2.18%) and the Supplementary Pension Increase (1.537%).
The above information is intended to summarize the 5 Year Annual Average Return and Pensioner Increase Percentage History. As it is a summary only, this document is not intended to have legal effect. In the event of any discrepancy or inconsistency, the original documents (audited financial statements) will govern.

Please note:

The above information is intended to summarize the 5 Year Annual Average Return and Pensioner Increase Percentage History. As it is a summary only, this document is not intended to have legal effect. In the event of any discrepancy or inconsistency, the original documents (audited financial statements) will govern.

Another way of looking at these results is shown in the third table, below, which shows how purchasing power changed over the two different time periods. To make things easy to understand, we look at what happens to the value of $10,000 of pension at the start of each period. Consider first the salaried plan in the earlier period -- after ten years, the $10,000 eroded in value to just under $9,400. In the more recent period, $10,000 eroded to about $9,100. The hourly plan, on the other hand, shows that $10,000 eroded to $8,550 in the first period and to about $8,570 in the second period.

Given the current indexing provisions of our pension plans, what might we expect in the future? Most analysts agree that the “great recession”, which in combination with continuing inflation gave rise to the recent poor indexing performance, was a rare event and unlikely to be repeated frequently. So, in my optimistic mode, I think we might expect indexing in the next decade to be more like the earlier decade than the more recent one, although only time will tell. It would be naïve, however, to think that a negative market correction of the size of the recent one will never happen again.

Hourly pension plan report, Spring 2014

Fri, 02 May 2014 01:51:24 GMT

End Of Year Report to the Members of the Hourly Pension Plan

Hello to all hourly staff retirees. Your pension plan investments are starting to keep pace with our escalating living costs. After a number of years of dismal returns, this year the plan did make an extremely good return of 12.9%. However, due to the 5-year formula, this still leaves us with a 5 year annualized result of 5.08%. This is below the threshold of 6% at which some indexing would occur. This lack is still due to the disastrous returns of the 2008-2009 period. The better news is that our plan is still being maintained by the University’s input of approximately 2.8 times the members' contributions. This includes an additional $20,000.00 per month top up by the University. At present the committee is looking at possible ways to enhance the pension in the future, which we look forward to.

I wish everyone a good year following this harsh winter. I hope to meet many of you at the upcoming AGM. It offers a free lunch and generally an interesting talk.

There are a number of avenues to become active in MURA, the retirees association for all McMaster University retirees. During the course of the year trips and outings are organized and available to all who would like to join in. There is also an annual Christmas lunch, which is a little less formal than the AGM.

Your pension and benefits representative,

Cliff Andrews

Salaried pension plan report, Winter 2014

Sun, 02 Feb 2014 03:00:07 GMT

You have by now received your January 2014 pension payment, which included an increase of 0.37% (prorated if you started receiving your pension in 2013). While this is a very small increase, it is better than the zero increase for the past 4 years. The rate of return on pension assets for the year ended June 30, 2013 was 10.79% and, combined with the rates of return for the previous 4 years, provided a 5-year average of 4.87%, 0.37% greater than the 4.5% threshold necessary before pensions are increased. This is the last year in which the 5-year average rate of return will include the negative 11.69% return in 2009, which has kept the average rate low. Thus, we can look forward to higher increases in the future. While the pension increase each year is restricted to the 5-year average increase in the Consumer Price Index (CPI), if the average investment rate of return exceeds the average CPI, the plan provides for a supplementary increase to capture some of the shortfall of previous years. It is thus possible that any increase in January 2015 may exceed CPI.

The current year’s investment return has gotten off to a good start with a gross (before investment management fees and administrative expenses) rate of return of 3.9% for the first 3 months of 2013-2014.

The audited fund financial statements can be found on HR's McMaster Pension Plans Documents page.

The implementation of decisions to diversify a portion of fund investments into long-term bonds, real estate and infrastructure has been further deferred as the current unusually low interest rates persist. We are also awaiting a decision by the Ontario government on the creation of a “Super Fund” to manage the pension fund investments of Ontario Universities. A technical working group of experts is to advise the government on this issue in 2014.

The pension plan text restatement was completed in 2013 and has included plan amendments since 2008, changes in pension plan legislation, and improved the wording to make the plan easier to understand and administer. The restated pension plan text will be available on the Working At McMaster web site soon.

R. A. West
MURA representative, Pension Trust Committee

Hourly pension plan update, Summer 2013

Tue, 02 Jul 2013 02:36:29 GMT

Cliff Andrews reported at the Annual General Meeting that the Hourly Pension Plan continues in a struggling condition, but he feels that it is on the cusp of receiving indexing. This year the plan earnings were +12.1%. Such good results could mean that the hourly pensioners will see an increase in the next few years.

Salaried pension plan report, Summer 2013

Tue, 02 Jul 2013 02:06:29 GMT

Salaried Pension Plan Report, MURA Annual General Meeting
by Bob West

What is the financial condition of our pension plan?

The last actuarial valuation of the pension plan on July 1, 2011 showed a deficiency of approximately $168 million. This is a large amount, but not out of line with many other pension plans. There are several reasons for the deficiency, among them:

the fallout from the 2008/2009 world financial crisis, which saw negative investment, returns of 11.6% in 2008 and 3.98% in 2009
the artificially low interest rates (which still prevail today) that were used to calculate the plan liabilities (lower rates equates to higher liabilities) and thus the higher assets needed by the plan
the good news, retirees are living and collecting pensions for a longer time -- how is this being dealt with?
the University is required to, and has been making substantial additional contributions to the plan; because of the unusual situation, the province has allowed these payments to be spread over a longer periods
the University has negotiated changes to the early retirement “Rule of 80” up to a new “Rule of 90” for faculty
The province has proposed consolidating the assets of Ontario university pension plans to reduce costs and provide access to a wider range of investments to improve investment returns. The plan was outlined in the “Morneau” report in the fall of 2012 but no legislation to enact its recommendations has yet been introduced

The success of these measures will be determined by the next actuarial valuation due July 1, 2014. To its credit, the University is attempting to keep a defined benefit pension plan when other employers have converted to a group RRSP plan which has much less certainty for employees.

Will we ever see another increase in our pension?

The January increase (if any) each year is calculated as the excess of the average investment returns for the 5 years ended the previous June, over 4.5%. The last increase received was in January 2009. No increases have been given from 2010 to 2013 as the 5-year average includes the negative returns in 2008 and 2009. Any increase is restricted to the average increase in the Consumer Price Index over the same 5-year period.

In order to receive an increase in January 2014, it would be necessary to earn investment returns of at least 9% for the year ended June 30, 2013. Investment returns for the first 9 months of this period have been good and I am cautiously optimistic that a modest increase in January 2014 is possible. Increases beyond 2014 are more likely as the large 11.69% negative return of 2008 will drop out of the 5-year average.

Pooled asset management for Ontario’s public-sector institutions, Winter 2013

Sat, 02 Feb 2013 03:51:55 GMT

How might this affect McMasterʼs pension funds? As Administrator of the McMaster pension plans, the University is responsible for the investment of pension plan assets. A report being considered by the Ontario government may change how university pension plan assets are handled in the future. Itʼs too early in the process to know how or when, or indeed if, these changes will be made, but we want to make MURA members aware of the issues.

In May 2012, the provincial budget proposed the pooling of pension plan assets of the broader public service, which includes universities, and appointed William Morneau as Pension Investment Advisor. The Morneau Report was issued in October 2012. The report recommends the establishment of a new independent asset management corporation, and legislation requiring pension funds with less than $40 billion of assets to place these funds with the new corporation for investment. Universities may also voluntarily place endowment, trust and reserve funds with the new investment corporation.

The creation of this new investment management vehicle is intended to reduce asset management costs and increase investment returns. These benefits would result from economies of scale, reduced administrative costs, access to a broader range of asset classes and greater risk control. Pooling of pension assets across universities could provide opportunities to make advantageous investments that would not be feasible for an individual university pension plan.

What does this mean for active and retired members of the McMaster pension funds?

For active members, better investment returns would enhance the sustainability of pension plans and potentially reduce, or limit increases to, employer and employee contributions to the plans in the future.

For retired members, better investment returns would increase the likelihood that annual pension indexing would keep pace with inflation.

Shortly after the Morneau Report was issued, the Premier resigned and provincial parliament was prorogued until a new Liberal leader is chosen. Whether and when the proposals will be implemented is yet to be determined.

Stay tuned!

Cliff Andrews,
Observer, Hourly Pension Plan Committee

Bob West,
MURA representative, Salaried Pension Trust Committee

Salaried pension plan report, Winter 2013

Sat, 02 Feb 2013 03:39:55 GMT

There will be no increase in pensions in January 2013 for McMaster retirees covered by the Salaried Pension Plan. This makes the fourth consecutive year without an increase in pensions, which translates to a decline in the real value of our pensions of approximately 7.5% over that period.

The annual January pension increase (if any) is based on the amount that the 5-year average rate of return on the pension fund, as of the previous June 30th, exceeds 4.5%. In addition, any increase in pensions is limited to the increase in the Consumer Price Index for the previous year (July 1 to June 30).

The investment return for 2011-2012 was 3.85%, giving a 1.92% average for the 5-year period ending June 30, 2012, far short of the 4.5% threshold. The average rate of return for the past 3 years was 8.42% but this was more than offset by negative rates of return during the world financial crisis in 2007-2009 (-3.98% in 2007-2008 and -11.89% in 2008-2009).

Looking forward to January 2014, a rate of return greater than 8.99% would be required for the year ending June 30, 2013 before a pension increase would be possible. Since the required rate of return is greater than the average rate of return in past years, it is very likely there will also be no pension increase in January 2014. The gross (before investment management fees and administrative expenses) rate of return for the first 3 months of 2012-2013 (July – September) was 3.6% and a positive rate of return for the October – December period is also expected, a good start to the year.

The implementation of previous decisions to diversify a portion of fund investments into long-term bonds, real estate and infrastructure has been deferred until interest rates return to normal from the unusually low current rates. Also complicating future investment decisions is a proposal by the Ontario government to create a “Super Fund” to manage the pension fund investments of Ontario universities in the future.

Robert West
MURA representative, Salaried Pension Trust Committee

Salaried pension plan report, Summer 2012

Mon, 02 Jul 2012 02:55:42 GMT

Notes from the presentation to the 2012 AGM
by Leslie Robb, Salaried Pension Trust Committee Representative

After representing MURA on the Pension Trust Committee for the last eight years, Les felt that it has generally worked quite well. In this his last report to MURA members, he decided to talk generally about the state of the Salaried Pension Plan and how he views the current deficits.

Before addressing the deficit issue, he pointed out that due to poor market performance, there were no increases in pensions in the current year and unlikely to be any in the upcoming year either. Les emphasized, however, that in the current economic climate, we are fortunate to have defined benefit pension plans.

Since the financial crisis began five years ago, the plan has been doing badly and those still working have been asked to increase their contributions to help make up the shortfall. The University as ‘contributor of last resort’ has made major increases in its contributions and will continue to do so. However, the plan is still not in good shape and it will be some years until deficits are eliminated.

Les listed a number of reasons why the large deficit came about. The stock market crash in 2007/8 is one of the reasons. Also of major importance is that, in recent years, liabilities have grown substantially. This arose because the expected interest rates on investments needed to fund the liabilities (such as pensions) have been much lower than anticipated from historical performance. The lower the interest rate, the more money that must be set aside to cover the pensions. In Les’ words ‘defined benefit plans have been hit by the double whammy of low market returns and low bond interest rates’. He elaborated on the nature of the problem in more technical terms and noted that for those interested the discussion can be followed up on by reading the Actuarial Valuation reports on the ‘Working at McMaster’ website. He concluded that the liabilities of the Plan are a big part of the problem and that it will not be until interest rates rise again that the deficits can be escaped.

Under rules established by the provincial government, employers are required to make up deficits fairly quickly to avoid long-term risk to the employees. Universities have argued that these rules are designed out of a concern for the bankruptcy of private companies and are inappropriate for quasipublic employers. The lobbying worked and the rules were relaxed early last year to allow such organizations to make up their deficits more slowly. McMaster chose to switch to this new regime in the fall of 2012. Under the new legislation McMaster University will put less into the plan to restore financial health than they otherwise would have for at least the next three years.

Les concluded by saying that, in the extremely unlikely event that McMaster should declare bankruptcy, its assets are very large and he expects would be more than sufficient to pay off the debts to pensioners and others.

Hourly pension plan update, Winter 2012

Sun, 15 Jan 2012 19:34:23 GMT

As 2011 passes we look forward to 2012, as always with hopeful expectations that our pension might become a little fatter. The past few years have certainly seen a roller coaster ride on the stock market, causing the members of your pension committee to be cautiously optimistic, hoping to see some improvements. Whilst this year’s investment yields improved considerably, they were unfortunately still far short of giving us any indexing improvements. The pension committee, however, continues to investigate ways in which the pension may improve for us all; we look forward to another year with hope.

As retirees, our pensions are a vitally important aspect of our lives, but retirement brings other rewards such as time for hobbies and travel. With this in mind, MURA, your retirement association, engages in many activities such as trips to a variety of interesting events and places both near and far. You can find out about these from MURAnews or by joining us at the Annual General Meeting or the Christmas lunch, which are also identified in your quarterly newsletters. Other benefits of MURA membership include access to group insurance for home, auto, and travel.

Another important aspect of becoming involved with MURA is to get reacquainted with some of your old co-workers. Come catch up with the gossip! and be engaged.

Hope to see you soon. Remember we all belong to MURA.

Cliff Andrews
Your pension & benefits reporter
(whether you were from food services, custodial or trades)

Salaried pension plan update, Winter 2012

Sun, 15 Jan 2012 19:01:23 GMT

It seems to be becoming a refrain from me – no pension increase this year and don’t expect any next year. Although the July 2010 to June 2011 return on investments was quite good (just under 15%), it did not reach the over 17 percent needed to qualify for an indexing increase. Looking forward to next year, I again think it is unlikely we will receive any indexing increase. The Plan would still need to earn almost 17% to achieve the indexing target and given the poor stock markets of the last half of 2011 (the first half of our Plan year), that seems most unlikely.

The Pension Trust Committee (PTC) is continuing to work on revising our Plan’s asset mix. As a result of an extensive Asset/Liability study we decided to move to a greater degree into Canadian equities (from non-Canadian equities) and into longer-term bonds (from our current mixed term bond investments). We have not yet moved the bonds into longer terms because of the particularly low interest rates on long bonds. Moving into longer-term bonds, nevertheless, remains the long-term strategy and we will regularly revisit the question of when to make this move so that it is advantageous to the Plan. Salaried pensioners recently received a letter from the Administration (Mark Haley) about the state of McMaster’s Salaried Pension Plan and the University’s application for solvency relief because of the Plan’s deficit situation. The letter states that this application process does not impact your pension, which may be all that many of you will want to know, but I thought it might be useful for me to provide my perspective on this letter. The short version of my comments on the deficit situation is given in point form here. A longer version is available at:

Comments from Les Robb on the December 2011 Letter from the Administration (Mark Haley) about McMaster’s application for solvency relief for the Salaried Pension Plan

...for those of you who want more detail.

The Plan’s deficit is mainly due to the historically low interest rates that have increased the value of the Plan liabilities.
With or without the solvency relief, the University’s contributions are going to be a major drain on the McMaster budget.
Although there are no immediate risks to our pension payments, we need to be alert to the potential impact of any changes to the legislation governing the Plan in the more distant future.
In my view the University’s application should have been discussed at the Pension Trust Committee and with other groups that represent active and retired Plan members before the application was submitted.

Les Robb
MURA representative - Pension Trust Committee

Salaried pension plan update, Winter 2011

Sat, 15 Jan 2011 19:45:20 GMT

Les Robb
MURA representative - Pension Trust Committee

Last January I reported that no pension increase would be forthcoming in the Salaried Pension Plan in January 2010 and that it was unlikely one would be forthcoming in January 2011. I reported that the plan would need to earn 18% or more to generate an increase – an earning rate very rare in the history of our Plan. I am sorry to report that I was correct, as the Plan earned only 6.47% for the year ending June 30th, 2010.

I have again done a calculation looking ahead and calculate that the plan would need to earn 17.25% or more to generate an increase next January 1st (2012). Things do not look good for indexing beyond that date either. As readers of this column will recall, the formula is based on the 5-year average return. Both the 2008 and 2009 returns were negative (-3.98% and -11.69%). Until these negative returns work their way through the formula and are replaced by decent positive returns, we can expect our pensions to remain fixed at the current level.

Hourly pension plan update, Fall 2010

Fri, 01 Oct 2010 18:49:08 GMT

Following the most recent pension committee meeting, held on September 15th, 2010, we would like to report to members that the Hourly Pension Plan, like most others, continues to struggle on the financial market with many ups and downs. Even though the Hourly Plan is performing ahead of many other pension plans, the university is contributing to the Plan at a considerably higher level than usual to keep the Plan well funded, and it may have to go higher yet.

McMaster University assures the members of the Hourly Pension Plan, and the other pension plans within the university, of its commitment to keep the plans solvent, thus guaranteeing pensioners will continue to receive their earned entitlements.

It is regrettable that, in these stressed times, we do not foresee any plan improvements but we do look forward to better times ahead.

With this in mind, MURA looks forward to seeing all pensioners at the Christmas Lunch on December 6th (booking form on the last page of this newsletter) or at one of the other events announced in your copy of MURAnews.

I look forward to meeting my colleagues at these events.

Sincerely
Cliff Andrews,
MURA Observer on the Hourly Pension Plan
Retirement Committee

Salaried pension plan report, Summer 2010

Thu, 01 Jul 2010 19:13:21 GMT

by Les Robb, your Representative to the Pension Trust Committee for the Salaried Pension Plan

Notes from the presentation to the 2010 AGM

Today I thought I would talk about some big picture items concerning our Plan. However, I know a number of you are most interested in the finances of the Plan and, in particular, whether the earnings are such that we can look forward to indexing next January. I wrote in an earlier article that the earnings would need to be more than 18% to give rise to indexing next January. The first three quarters of the year (to the end of March) have earned about 12%. Given the turmoil recently in the markets, I think we can agree it is highly unlikely we will make the 18% and so I think we will have our pensions held constant next year. I suspect those of you who had read my earlier estimate of 18% had already reached this conclusion.

Now to the big picture items!

First, things are changing in our salaried pension plan more rapidly than ever.

Not many years ago we all (in the salaried Plan) had the same benefits and because the University wanted to keep it that way it was hard to make changes by any one group. Groups were told – if we did that for you we would have to get agreement from all the others. The status quo consequently prevailed.

More recently, we are in the mode of “different strokes for different folks". This may be associated with the unionization of staff but I can say from my past life that MUFA at times wanted to go its own way. In any case, we now have some folks with rule of 80 and some transitioning to the rule of 85. We have some folks paying one set of contribution rates and some with another set. We have some salaried employees now excluded from joining the plan upon being hired. We have some new salaried employees paying the same as longer serving employees and getting a fraction of the benefits. In short, our Plan is becoming more and more fragmented.

In addition to contribution and benefit differences, there are also different agreements between the Administration and various groups about what will happen should a surplus ever arise again (though don’t hold your breath!). The CAW has an agreement that if a surplus arises, that portion of the surplus attributable to their members would be the subject of negotiations as to how it would be used. MUFA also has an agreement about surplus: if the University takes certain sized pension holidays due to a surplus, MUFA members would also get specified holidays. It is unlikely we will ever run up a big surplus in the future.

If the Administration and the employees divvy up any surplus as soon as it arises, it is pretty obvious that there won’t be much room for retirees. The kind of dealing that has been going on is not a bad thing in itself but it is important for us to remind the players not to forget about retirees.

I also hear talk in some circles that perhaps it is time to set up separate plans for different employee groups with a common investment pool. I don’t see this idea as having much traction at the moment, but it might have more traction if more fragmentation of benefits and costs continues. This might not be a bad thing – with the separate deals already in in place it is almost the case that we have quite different plans informally in any event. Formalizing the structure would force the parties to keep track of the benefits and contributions of the various groups separately. One group might be in surplus while another was in deficit, for example.

The other big picture item is the state of the deficit in the Plan. The market collapse following 2008 put our plan into a serious deficit position and this has been requiring a larger part of the University budget to be devoted to the Pension Plan. This is a very serious concern for the budget committee and is a major focus of the Administration in its thinking about pensions. While this serious deficit state continues, there can be no hope of improvements in our indexing formula, in my view.

Related to this deficit position is the investment strategy for the pension plan. The Administration has indicated that once the deficit in the plan is eliminated they may want to go to a more conservative investment strategy – more bonds, fewer stocks, less variance and lower returns. The thinking is that it would be better to pay a bit more over time from the operating budget in order to avoid being “whipsawed" as we are at the moment when the stock market goes awry.

The implications are not pleasant for our indexing. Lower average returns that would be associated with a conservative investment strategy would lead to us more frequently failing to get any indexing (let alone full indexing). So this is another issue for us in the future. Perhaps when the Administration becomes aware of the increased average cost of this strategy in the long run, they may reconsider.

These are two big picture issues that I thought it useful to bring to you today.

Salaried pension plan matters, Spring 2010

Sat, 01 May 2010 19:16:34 GMT

by Helen Barton and Les Robb

In the Fall 2009 issue of MURAnews we wrote about the impasse that had been reached in collective bargaining between the University and the Canadian Auto Workers Union Local 555 (CAW555).

As you may recall, the University wanted to exclude newly hired employees from the salaried pension plan, offering them a much inferior group RRSP plan. CAW555 wanted to preserve the status quo and keep pensions the same for their newly hired members as for existing employees. The issue was sent to binding arbitration.

The result of the binding arbitration is that CAW555 employees hired after May 1, 2010 will continue to enter the salaried pension plan and will pay the same contributions as everyone else, but pension benefits for this group of employees have been reduced.

What does this mean for current McMaster pensioners receiving pensions from the salaried pension plan?

We think not a lot. Pensioners’ benefits will not be affected. McMaster is obligated to fund our pensions as long as the University keeps operating, and there is no reason to believe that the University will ever go bankrupt. The reduced benefits for the new CAW555 members will make the University’s payments slightly smaller, but this will be a trivial difference for many years and could amount to nothing if the union successfully bargains to have the reductions restored in future contracts.

In fact this arbitration decision is good news for retirees since all employees will continue to have a vested interest in keeping the pension plan healthy.

The major reduction in pension benefits for newly hired CAW555 employees is that the benefit rate for those hired after May 1, 2010 has been reduced from 1.4% per year of service to 1% per year of service for final earnings below the Canada Pension Plan maximum income (currently about $47,000). For earnings above that level the drop will be from 2% to 1.6%.

There have been several other reductions in pension benefits for this group as well. For example, a new hire must be at least 60 years old to retire under “the Rule of 80”. Also the annual potential increase calculation for this group will be based on minimum 5-year average Fund earnings of 5 percent. This is an increase from the 4.5% threshold for existing employees and retirees.

Report on the salaried pension plan, Winter 2010

Fri, 15 Jan 2010 21:15:33 GMT

by Les Robb, MURA representative on the Pension Trust Committee

For the last few years I have reported at this time of year with good news of pension increases. However given the stock market collapse I warned in the Summer 2009 newsletter not to expect an increase in January 2010, and I can now report that the annual rate of pension increase this year (January 1, 2010) is ZERO. The rate of return in the pension fund for 2009 was -11.69%. Combining this return with the previous 4 years of return gave rise to a five-year annual average rate of return of 2.94%. This rate falls short of the 4.5% required for indexing so there will be no indexing this year.

I did a quick calculation to see what would be required to achieve indexing in 2011. The fund would need to earn 18 per cent or more in the year ending on June 30, 2010 to bring the calculation back into the range that would lead to positive indexing. Such a rate of return is a very rare event in a plan such as ours, so my best guess is that we will have zero indexing for at least 2 years.

A note regarding the pensions and benefits of salaried employees, Fall 2009

Fri, 02 Oct 2009 01:05:11 GMT

by Helen Barton and Les Robb

The recent contract negotiated between the University and the Canadian Auto Workers Union Local 555 (CAW 555), which represents most non-management salaried staff and technicians at McMaster, includes clauses which change dramatically the post-retirement benefits for employees hired into this group in the future and likely will change their pension arrangements as well.

The cost of post retirement health benefits will be increased for all new employees. Retirees with less than 20 years service will pay 100% of the monthly cost of contributions for the McMaster retiree benefit plan, if they opt to stay in the plan. Those with longer service will pay a fraction of the contribution costs on a sliding scale (ranging from 25% for service longer than 30 years to 75% for service between 20 and 25 years).

The pension arrangements for new hires have been sent to arbitration and the outcome won’t be known for some time. The University had proposed that future hires into positions represented by CAW 555 would participate in a group RRSP plan rather than the salaried pension plan. In this, the University would match employee contributions (as compared to paying about twice the employee contributions for current service in the Salaried Pension Plan). The Union wanted to keep the current arrangements for new hires. The two sides will now make proposals to an arbitrator who will make the final decision. This is not final offer arbitration of the sort faculty have recourse to in contract negotiations, but one that allows the arbitrator to pick one side or the other, or to ‘split the difference’ and decide on something between the two positions. The parties will make proposals to the arbitrator, which may or may not be the same as the positions they held at the end of negotiations.

Although it is not yet a matter that is decided, it is worth a thought or two about the arrangement the University has suggested and, in fact, already imposed on employees in The Management Group (TMG). A group RRSP is similar to a defined contribution plan but would not be registered with the Financial Services Commission of Ontario and as a consequence would not have the requirements of transparency and the protections of that body. The pension risk would be entirely shifted from the University to the individual employee. After the University makes its matching contribution to the RRSP it has no further obligation to the employee. Contrast that with the pension we receive where the monthly payment is guaranteed and we can even look forward to some inflation increases when markets do well. It is a huge change in the employee-employer relationship.

The direction the University is taking here is not new. The hourly rated employees and TMG have already been pressured to accept differential treatment of new hires and the University seems to want to move down this path with all of its employee groups.

Should those of us in the Salaried Pension Plan and, more particularly, those of us who are retired be concerned about these changes? We think there is no serious reason for concern in the near term but do have some concerns about the longer term.

The University guarantees our pensions and the University is required by law to continue to make payments (including payments to eliminate the deficit) as long as the University keeps operating. There is no reason to expect the University is headed for bankruptcy, and the University has made statements that it has no intention of winding up the plan (see the Your Pension is Safe FAQ at the McMaster Daily News web site.

For the longer term, it is hard to be so confident. There is a concern that the employer might change its mind about winding up the Salaried Pension Plan and pay out a lump sum to all the retirees, and as time passes there will be fewer active members in the Salaried Plan to defend it. For some, this might be a good thing, but for most it would likely bring a host of headaches. Recall that all of us who are on pensions had the option of taking a cash equivalent at the time of retirement and chose not to do so. Presumably we prefer the pension payments and not having to worry about investing those funds. Moreover, anyone who looked carefully at the cash option knows that it was not possible to buy an annuity on the market for anything like the amount you would get for the “cash equivalent” of your pension. These concerns are probably decades off, but we would be putting our head in the sand to ignore these prospects.

In response to the directions the University was taking on pensions and benefits during negotiations, MURA Council wrote to Peter George, McMaster’s President, and to Matthew Root, President of CAW 555, on behalf of retirees to express our concerns about the breakdown of the sense of community that will undoubtedly be caused by a two-tier system and the ever-increasing number of new employees with inferior benefits. MURA urged both sides to work toward a solution that would keep all salaried employees in the defined benefit pension plan, and provide an equitable health benefits package to new employees.

Salaried pension plan report, Summer 2009

Thu, 02 Jul 2009 00:49:36 GMT

by Les Robb, your Representative to the Pension Trust Committee for the Salaried Pension Plan

Notes from the presentation to the 2009 AGM

This is a very brief report to update members. I want to talk about indexing and about pension security, the two questions I am asked about most often. First, a reminder of the good news: As you all know, we received a pension increase in January 2009 - in fact, an increase above the inflation rate. We received this increase, even when financial markets were tumbling, because of the backward looking nature of our indexing formula.

Second, the bad news. As you all know markets have been terrible since last summer. The big loss by our plan will surely mean no increase next January (the history of the previous years was simply not good enough to compensate for this year), and it is unlikely we will receive an increase for a few more years.

I have written on the indexing formula in past issues of MURAnews and if you want more details, check the Summer 2008 and Winter 2009 issues of MURAnews.

The other issue I want to mention is the issue of threats of lost or reduced pensions because of the difficulties in the financial markets. There has been much discussion of such matters in the press and it is not surprising that individuals have concerns about their pensions. These threats to pensions are mainly in the private sector and in particular in companies that have gone or are about to go into bankruptcy and will not be around to make up any funding deficit of the plans (if the plans were fully funded there would be no problem even with bankruptcy). As well, there are individuals in money purchase plans which have taken a big hit in the market. Individuals who have not yet taken an annuity will be concerned that they will end up with substantially less than they had planned on in retirement.

However, our defined benefit McMaster pensions are, in fact, very secure, and unless you think there is a chance McMaster will be pushed into bankruptcy you should not worry about the security of your pension.

It is the case, however, that the poor market performance creates difficult times for McMaster University. The Salaried Pension Plan is in deficit and McMaster has to make up the deficiencies. That puts considerable strain on an already tight budget. Your colleagues who continue to work are in for difficult times over the next few years, I suspect.

January 2009 pension increase for the salaried pension plan, Winter 2009

Mon, 02 Feb 2009 01:24:36 GMT

Contributed by Les Robb
MURA representative on the Pension Trust Committee

Your Current Year Increase

You should have received a letter from Retirement Support Services letting you know that the basic pension increase for the current year (starting payment on January 2009) will be the same as the reference rate of inflation, 2.18%. This note explains the calculation of this increase. The note following explains how there will also be a supplementary increase as well in January. If you have been reading my regular reports, you know that these increases are based on performance of the investment fund for the 5 years prior to last July 1. Needless to say, with the recent disastrous performance of stock markets (and hence our investment fund), these are likely to be the last increases we receive for some time.

The current year pension increase calculation is based on the difference between the 5-year average rate of return (net of investment costs) and 4.5%. The calculation for the 2008 increase is as follows:

Calculation of Five Year Average (for 01/01/09 increase)	%
2008 Rate of Return (ending June 30, 2008)	(3.98)
2007 Rate of Return (ending June 30, 2007)	14.45
2006 Rate of Return (ending June 30, 2006)	5.93
2005 Rate of Return (ending June 30, 2005)	10.00
2004 Rate of Return (ending June 30, 2004)	14.84

Total Return for Last Five Years	41.24%

Five Year Annual Average Return (Total Return / 5)	= 8.25%
(A) Rate of Return in Excess of 4.5% (8.25% - 4.5%)	= 3.75%
(B) Average Consumer Price Index to June 30, 2008	= 2.18%
Increase to Pensions (the lesser of A and B)	= 2.18%

Supplementary Increase

3.75% is available for indexing but only 2.18% is needed to provide the increase to cover inflation. That leaves another 1.537% for indexing to cover shortfalls in indexing over the last three years for those eligible for the increases. (Note that the 1.537% compounded with the 2.18% yields 3.75%.) Although there were no shortfalls in last year’s increase, there were shortfalls in the two years before that of about 3½ %. A member retiring on or before July 1, 2005 will be eligible for the 1.537% catch up, bringing the total increase to 3.75% for such individuals. Those retiring between July 1, 2005 and June 1, 2007 will be eligible for a partial catch up. Retirees on or after July 1, 2007 have not had a shortfall as there was full CPI indexing last year. And, of course, those retiring on July 1, 2008 or later are not eligible for any pension increase until January 1, 2010.

Information on the hourly pension plan, Winter 2009

Mon, 02 Feb 2009 01:08:04 GMT

Provided by Jeff Chuchman
Benefits and Pensions Specialist, Human Resources Services

The Hourly Pension Plan utilizes a 5-year average rate of return to determine whether pensions paid from the Plan will be increased. The formula in the Hourly Plan requires that the 5-year average rate of return on the Fund exceed 6.0%.

The Hourly Pension Fund investments earned negative 1.05% for the benefit year ending June 30, 2008 resulting in a five-year average of 7.62%. Therefore there will be an increase of 1.62% to pensions paid from the Hourly Plan on January 1, 2009, in respect of Hourly retirees who were in receipt of a pension on June 30, 2008. The increase will be pro-rated for anyone who retired between August 1, 2007, and June 1, 2008.

The 5-year calculation is as follows:

Additional information about the Hourly Pension Plan can be found at www.workingatmcmaster.ca/pensions/ or by contacting pension@mcmaster.ca.

Impact of the current economic market decline on pensioners in the McMaster registered pension plans, Winter 2009

Mon, 02 Feb 2009 00:57:34 GMT

Provided by Michele Leroux, Manager,
Benefits and Pensions, Human Resource Services

The current economic market decline has provoked many questions and media coverage concerning the status of Registered Pension Plans in Canada. MURA has asked the Benefits and Pension Unit of Human Resources Services for a brief explanation of how these events impact pension payments from the registered plans.

The impact of the markets on the McMaster Pension Plan funds was recently addressed in the McMaster Update, December 2008 (Volume 1, Issue 1). The following are excerpts from the article:

“The pension plans are designed to provide benefits over the long term, and fluctuations in the markets are anticipated and taken into account in the portfolio’s investment strategy.”

“The amount of the pension a McMaster plan member receives does not fluctuate with the status of the plan and payments come out of a pool of funds separate from the University’s operating budget.”

Defined Benefit Plans

Both the Salaried and Hourly McMaster Pension Plans are defined benefits plans. In general, a defined benefit plan structure has the following key elements:

Employee Contribution formula is defined (as outlined in the plan text).
Your base Pension Benefit at the time of retirement can be estimated in advance according to the formula defined in the plan text. Investment returns do not impact your base monthly pension payment. The only impact is on potential annual pension increases in the future.
Employer (University) Contributions are not predictable and are dependent on the plan’s investment returns, assumptions and experience (assumptions are governed by Actuarial Standards).

Additional Information

To learn more about the governance structure, investment policies and procedures, or quarterly investment returns for the pension funds please visit the HR Pension page.

Pensioners are encouraged to visit the website provided above and review documentation provided by Human Resources Services.

Wishing you all the best in 2009.
- Michele

Are our pensions keeping up with inflation? Fall 2008

Wed, 01 Oct 2008 23:45:11 GMT

In the Spring 2008 MURAnews, we published a letter from a retiree, Malcolm Horsnell, who suggested it would be helpful if MURA could publish a graph/chart in the newsletter to show how McMaster pensions have kept up with inflation over the years. "We would then be able to see more clearly whether we should plan for reduced buying power in our personal pensions as time goes by or not", he said.

Those charts, thanks to the work and cooperation of the Benefits and Pensions Unit of Human Resources, are shown on the next page.

None of our pensions has kept up with inflation during the ten years in question although retirees in the Salaried Plan fared much better than those in the Hourly plan. Those in the Salaried Plan have had increases that covered about 2/3rds of the inflation increases while those in the Hourly Plan have had only about 1/4 of the inflationary increases covered by indexing.

There are many variations between the two plans, which makes it difficult to fully explain the reason for different results. One factor is the difference in the formulae between the two Plans. Both Plans use a 5-year average rate of return to determine whether an increase will be paid each year, but the Hourly Plan requires that the average return, after expenses, must be at least 6.0% before any excess earnings are available to be used toward an increase, while the Salaried Plan has a 4.5% threshold.

The relatively small size of the Hourly Plan compared to the Salaried Plan is another factor. It makes the expenses of the Hourly Plan proportionally much higher. The small size also prevents the Hourly Plan from using as wide a range of investment styles and asset types.

Finally, the Hourly Plan has a relatively lower rate of return on investments, for a variety of reasons, which can be seen by comparing the "5 Year Annual Average Return" columns in the two charts. The investment decisions of the Plans are monitored by different committees although both investment strategies must be approved by the Finance Committee of the Board of Governors.

Salaried pension plan indexing update, Fall 2008

Wed, 01 Oct 2008 23:31:08 GMT

Given the poor performance in investment markets recently, you might be thinking that this January will be another one of those without any pension increase. You would be wrong! A few years ago, the 5 year 'memory' in our indexing formula hurt us as losing years from early in this century entered the formula. Now, the strong performance in the last few years will help us in spite of the bad performance this year. My expectation is that for the year 2007/08 the return, after expenses, will be on the order of -4.0%. That is, a 4% loss. However when we couple this with the previous 4 positive years of returns, and calculate the excess returns (over 4.5%) there should be about 3.6% available for indexing. Inflation over the relevant period will be less than this so, in fact, there will be some catch up come January 1. Those of you who have lost out on pension increases in the past few years will make up some of those losses. I will provide more detail on this after the mid-November meeting of the Pension Trust Committee at which we will receive the audited calculations of the rate of return after expenses.

Les Robb
MURA Representative on the Pension Trust Committee

Pension plans - 10-year summary of results, Fall 2008

Wed, 01 Oct 2008 23:23:06 GMT

Salaried pension report, Summer 2008

Tue, 01 Jul 2008 23:16:50 GMT

Notes for presentation to the 2008 AGM by your Pension Trust Committee Representative for the Salaried Pension Plan, Les Robb

There are 3 items I want to report on:

Inflation and indexing
Restatement of the Plan
The latest Actuarial Valuation

First, the plan indexing:
Many of you will have been pleasantly surprised to have received increases in excess of inflation last January 1. Those retired for some time received a 4.03% increase while inflation was only at 1.72%. Those who were retired for shorter periods had lost less to past inflation and correspondingly received smaller increases. I have written in more detail about this on the MURA web site.

Our returns for the 9 month period to March 31, 2008 showed a loss (before expenses) of close to 4%. However, since March 31 markets have been strong, particularly the Canadian market where the TSX has rebounded by about 13% since the end of March. There is still a reasonable prospect of a non-negative return for the year, though volatility is high and the market could lose 10% or more between now and July.

What I want to report here, however, is that in spite of weak markets since last July we are still well poised to get all of the inflation indexed next January and some further catch up as well (for those who lost in the past). How can this be? Well, our indexing formula is backward looking and the past 4 years have had returns well in excess of the 4.5% which is what we need to achieve before getting any indexing. These past good returns mean that even with a 0% increase in the fund for the current year, the 5 year average would be about 9% and all of that increase that is in excess of 4.5% would be available for indexing. Even a loss of 10% would still likely cover all our inflation.

Second, Restatement of the Plan:
Our Plan last appeared in a single document as ‘Plan 2000’ at the time of the surplus distribution. Since then there have been a number of amendments to the plan. Some of these have been required by legislation of regulation (for example the removal of mandatory retirement) while others have been changed through the negotiations (for example the changes to contribution levels and to the early retirement date). As these amendments are made, the legal text of the plan consists of the original text plus the amendments. Every once in a while the plan is restated. That is, a new version of the plan is created incorporating all the amendments while checking to see if other parts of the plan need to be changed in light of the amendments. Also, any changes that have been identified which do not require negotiations between the University and its employee groups can also be incorporated. We spent a good part of the Pension Trust meetings this year reviewing a new text that is to be in place by July 1, 2008. Contact the Benefits and Pensions office for a copy of the restated text or view it online.

Third, the Actuarial Valuation as of July 1 2007:
Ontario Pension Plans are required to have an actuarial valuation every three years. Our plan’s last one was dated July 1 2006. As some of you may remember, that valuation showed some sizeable deficits and required the University to make contributions substantially greater than employee contributions. Because of the good performance of the market in the 2006-2007 year and the falling off in performance last summer and fall, the University considered doing an evaluation now (dated to last July) rather than waiting. This valuation has now been done and the Board will decide shortly whether to file the valuation to take advantage of lower contributions. Our role as Pension Trust Committee is to approve the actuarial assumptions used in the valuation and this we did at our last meeting. The reduction in the deficits will leave the University free to put about a million dollars a year less into our plan (it can still choose to put more in). The upside of doing a valuation at such an opportune time is that the University will have more flexibility in its budgeting at a time when budgets are very tight. And, if our returns in the longer run continue to be, on average, above the 6.5% that the Plan assumes, there will never be a need for these extra funds. The downside is that if our asset values continue to fall, then when we do a valuation in the future we could be in even worse shape than we are today and the University will need to ante up even more. Although there was discussion of these issues at Pension Trust and some PTC members raised concerns for the future funding of the plan, it was made clear to us that this is a Board decision.

Hourly pension plan report, Summer 2008

Tue, 01 Jul 2008 22:55:09 GMT

At the beginning of the year, C. Andrews reported that the hourly pension plan had not produced the results seen by the salaried plan, though it had produced a small 1.24 per cent increase in pensions. The fund, being much smaller, and having a somewhat different structure to the salaried plan, still sees small positive gains in a very volatile economic market. Currently, the university is required to contribute at a much higher level of funding at 390 per cent, largely due to the timing of an actuarial report. The higher contributions should result in a better funded plan in the future though technically the plan is currently in good standing and causes no concern to the plan members. The actuarial report which occurs approximately every three years has necessitated this additional funding to meet legislated requirements. In the long term we must hope for improved investment results that will allow the plan to be able to provide added indexing to our pensions. Your pension committee representatives continue to work hard, meeting at least four times per year reviewing the market trends, legislations and conditions under which the plan must abide. - by Cliff Andrews