Transcript Municipal Pension Plan

Municipal Pension Plan
Report on Pension
and Other Benefits
Vancouver, Victoria, Kamloops,
Nelson, Prince George
November 8, 2003
Overview
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
Pension and non-pension benefits
Major Benefit Issues in 2003
How changes are made to plan rules and
benefits
What Are Pension Benefits?

Pension Benefit on Retirement
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
Commuted Values

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your basic entitlement under the Plan
taking contributions out of the Plan
Pre-retirement death benefit
Disability pension benefit
Service accrual while on approved long term
disability
Enhancing Your Basic Pension

Purchase of past service


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payment for arrears
purchase of past leaves of absence or
probationary periods
rules simplified beginning in 2002
Transfer of service

there may be an advantage to consolidating
service in other plans in the Municipal Plan
What Are Non-Pension Benefits?

Medical Service Plan of BC (MSP)
Extended health benefits plan
Dental plan

Provided outside the Basic Account
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
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Provided on a “funding available” basis

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Supplemental Benefit Account
No guarantees
Retirees share in the costs
Pension Plan Rules

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Detail the contribution requirements and
benefit rules
Existed prior to joint trusteeship in the
Pension (Municipal) Act
Adopted by the Board of Trustees at
beginning of Joint Trusteeship
Provincial Legislation and Joint Trust
Agreement requires that “vested” rights be
maintained
Changing a Non-vested Benefit
Who Has the Power to Change?

Trustees can change benefits


If no increase in contributions is required
Plan partners can change benefits

If contribution increase is required
Significant Benefit Changes in 2003
1.
2.
3.
Group benefits for retired members
Special Agreements
Other Benefit Changes
1. Post Retirement Group Benefits
How Are They Funded?
Employee Contributions
Employer Contributions
6.5% of
pensionable
salary
5% to 13% of plan
members salaries
Basic
Account
Basic Pension
1.0% of
pensionable salary
1.0% of plan
members salaries
paid by Employers
are used to pay
Group Benefit
costs, with the
balance to
Inflation
Adjustment
Inflation
Supplemental
Adjustment
Benefits
Account
Account
Future Indexing
Group Benefits
Non-Pension Benefits
1. Post Retirement Group Benefits
Why Were Changes Made?
 Not
enough money to pay for benefits as
currently designed:




demographic changes result in greater usage
MSP changes increase premium costs
Pharmacare changes shift costs to health plans
drug costs and usage soars
Costs increase $20 million (65%) in three years
 Available funding not growing to match cost
increases
 90% of funding used to pay 2002 costs
 Cost projections indicate further increases

1. Post Retirement Group Benefits
Constraints on Funding

Benefits for current retirees paid from limited
employer contributions




current contributions fund retiree benefits
Pension contributions and fund investments
cannot be diverted to fund group benefits
Only Plan Partners can increase the funding
available for benefits
Projections show insufficient funds to pay for
current benefit package in 2004

all benefit payments cease once funding exceeded
1. Post Retirement Group Benefits
Benefit Change Principles
1.
Long term horizon

find benefit package that can be sustained in the
longer term
2.
Concentrate program on protection against
“catastrophic events”
3.
Extend coverage for retired members living in
Canada, outside of BC
1. Post Retirement Group Benefits
Changes Effective January 1, 2004
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
Coverage to retired members living in Canada,
outside of BC
No out-of-country coverage

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Increased lifetime limit to $100,000

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up from current $40,000
Partial premiums to be paid by plan members for
EHB and dental coverage


must purchase separate coverage if traveling
amount depends on pensionable service
Changes in deductibles and co-insurance on EHB
and/or dental
2. Special Agreements
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Special arrangements between employers and
employees for additional payments for pension
purposes
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
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Funds held outside of the Basic Account


payments made into an RRSP like account
funds available to purchase additional pension
at retirement
not a basic pension benefit
Most commonly used by Fire and Police

approximately 6,000 members have special
agreements
2. Special Agreements

Basic Pension
 Based on a fixed
formula that considers
years of service and
highest average salary
Basic Pension=
Service X HAS X 2%

Special Agreement Pension
 Based on amount of
contributions and actuarial
factors that determine cost
of pension
SA Pension=
Contributions plus interest X
actuarial factor
Total Retirement Pension
2. Special Agreements

Actuary indicated tables used to calculate
Special Agreement pensions did not reflect
current actuarial experience and assumptions



Mortality rates too low – resulting pension
should cost more
Inadequate provision for indexing of SA pension
– other plan members subsidizing non-basic SA
pension benefits
New conversion tables result in smaller – but
more appropriate - pension benefit

Changes being implemented over three years
Other Benefit Issues
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Criteria for approved LTD plan
Definition of full time employment
Co-habitation rule
Contributions on rehabilitative employment
earnings
How Benefit Issues Come
to the Board
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Regulators (CCRA or PBSA)
Plan Actuary
Plan members
Plan employers
Pension Corporation
Benefit Decision Making Process
Benefit Issue
Identified
Issue Paper
Prepared by Plan
Administrator
Full Board makes
final decision
Board Review
referral
Board Decision
Issues identified by Regulators,
Actuary, Plan Members, Plan
Employers or Plan
Administrator
Benefits Committee reviews
topic, gets legal or actuarial
advice as necessary
recommendation
Review by
Benefits Committee
Pension Plan Benefits
Questions?