Municipal Pension Plan Report on Pension and Other Benefits Vancouver, Victoria, Kamloops, Nelson, Prince George November 8, 2003 Overview 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 your basic entitlement under the Plan Commuted Values 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 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 Supplemental Benefit Account Provided on a “funding available” basis No guarantees Retirees share in the costs Pension Plan Rules 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. Group benefits for retired members 2. Special Agreements 3. Other Benefit Changes 1. Post Retirement Group Benefits How Are They Funded? 1.0% of plan members salaries Employee Contributions paid by Employers are used to pay Employer Contributions Group Benefit costs, with the 6.5% of balance to pensionable 1.0% of 5% to 13% of plan Inflation salary pensionable salary members salaries Adjustment Basic Inflation Supplemental Adjustment Benefits Account Account Account Basic Pension 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 Coverage to retired members living in Canada, outside of BC No out-of-country coverage must purchase separate coverage if traveling Increased lifetime limit to $100,000 up from current $40,000 Partial premiums to be paid by plan members for EHB and dental coverage amount depends on pensionable service Changes in deductibles and co-insurance on EHB and/or dental 2. Special Agreements Special arrangements between employers and employees for additional payments for pension purposes payments made into an RRSP like account funds available to purchase additional pension at retirement Funds held outside of the Basic Account not a basic pension benefit Most commonly used by Fire and Police approximately 6,000 members have special agreements 2. Special Agreements Basic Pension Special Agreement Pension Based on a fixed Based on amount of formula that contributions and considers years of actuarial factors that service and highest determine cost of pension average salary Basic Pension= SA Pension= Service X HAS X 2% 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 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 Regulators (CCRA or PBSA) Plan Actuary Plan members Plan employers Pension Corporation Benefit Decision Making Process Issues identified by Benefit Issue Regulators, Actuary, Plan Identified Members, Plan Employers or Plan Administrator Issue Paper Prepared by Plan Benefits Committee Administrator reviews topic, gets legal or actuarial advice as necessary recommendation Board Review Full Board makes final decision Review by referral Benefits Committee Board Decision Pension Plan Benefits Questions?