nova scotia annua pension services corporation report l€¦ · nova scotia pension services...

NOVA SCOTIAPENSION SERVICES CORPORATION

2013-14 annual report

July 25, 2014

Dear Shareholders,

We are pleased to provide you with our first Annual Report of the Nova Scotia Pension Services Corporation.

We are proud to have completed our first year as a jointly-owned, non-profit corporation. It has been a busy and successful year.

We thank the Public Service Superannuation Plan Trustee Inc. and the Teachers’ Pension Plan Trustee Inc. for the trust that you have placed in our Board. We also thank the staff of Pension Services Corp. for their hard work and commitment.

Yours respectfully,

John B. Carter, FCA, ICD.D. Douglas J. MoodieCo-Chair Co-Chair

2013-14 Nova Scotia Pension Services Corporation Annual Report 1

About Us 3

Our Goals 5

Our First Year - In Review 5

Compensation 8

The Year Ahead 9

Audited Financial Statements 10

Mission stateMentTo deliver high quality pension, investment

performance, communication, and educational services to Plan Members, Plan Trustees,

Beneficiaries, and Employers through careful planning, effective management, and strong

collaborative efforts.

strategic VisionTo become the leading institutional investor

and public pension plan administrator in Atlantic Canada by strengthening our team,

our corporate culture, our business processes and our technology.

content

2013-14 NOVA SCOTIA PENSION SERVICES CORPORATION ANNuAl REPORT


aBoUt Us The Nova Scotia Pension Services Corporation (Pension Services Corp.) is a non-profit corporation that administers the pension benefits and investment assets of the Public Service Superannuation Plan, the Teachers’ Pension Plan, the Members’ Retiring Allowance, and the former Sydney Steel pension plans.

On April 1, 2013, Pension Services Corp. was established by the Nova Scotia Pension Services Corporation Act and replaced the former Nova Scotia Pension Agency.

Pension Services Corp. is jointly owned by the Public Service Superannuation Plan Trustee Inc. (PSSPTI) and the Teachers’ Pension Plan Trustee Inc. (TPPTI).

Four directors from each of these Trustees form the Board of Directors of Pension Services Corp. (Board). The Board oversees the overall operations and management of Pension Services Corp.

Public Service

Superannuation Plan

We administer the pension benefits and investment assets of the:

We are jointly owned by the:

Teachers’ Pension Plan Trustee Inc.

Public Service Superannuation Plan Trustee Inc.

+

BoarD oF Directors The Board sets the strategic direction of Pension Services Corp., approves its operational budget, and makes key administrative decisions.

The Board consists of four members appointed by each of the PSSPTI and the TPPTI. One director is appointed by the Nova Scotia Teachers’ Union and one is appointed by the Nova Scotia Government Employees Union. The Board is chaired by two directors acting as Co-chairs who alternate for six month periods. The Co-chairs in 2013-14 were John B. Carter and Douglas J. Moodie. The Board held five meetings during the fiscal year ending March 31, 2014.

(l to R): Peter Urbanc (TPPTI), William Redden (TPPTI), Douglas J. Moodie (PSSPTI, Co-chair), Ian Johnson (PSSPTI), John B. Carter (TPPTI, Co-chair), Byron Rafuse (PSSPTI), Keiren Tompkins (PSSPTI) Absent: Frank Dunn (TPPTI)

Teachers’ Pension

Plan

Members’ Retiring

Allowance

former Sydney Steel

pension plans


Pension serVices corP. Corporate struCturePension Services Corp. reports to the Board and has 59 staff. The Corporation’s senior management team creates annual priorities including budgeting, an enterprise risk plan, performance objectives, and a resource plan. The outcomes of these annual priorities are measured in the corporate scorecard. The organizational structure of Pension Services Corp. is as follows:

Communications and Board Officer

Investment Associate

Manager. Risk and Research

Web Analyst

System Administrator

Technical Support Analyst

Coordinator of Employer Services Client Service

Associates

Client Service

Consultants

Employer Services

Consultants Employer Services Analysts

Manager. Investment Operations

Senior Investment

Analytics Officer

Investment Associate

Manager External Service Providers

Manager of Client Services

Corporate Services,

Team lead

INVESTMENT DIVISION

Portfolio Manager. Real Estate Manager.

Real Asset Fund

Portfolio Manager. Portfolio Solutions

Controller

Financial Service Officers

Assistant to DHR

Director of Informational

Management & Technology

Director ofFinancial Services

Manager of Compliance

Director of Human Resources PENSION

DIVISION

Manager of Actuarial &

legislative Services

Service Associates

Business Analysts

Kim Blinn Chief Pensions Officer

Elizabeth Vandenberg, CFA Chief Investment Officer

Steven R. WolffChief Executive Officer

Investment ClerkExecutive

Assistant to CEO Assistant to CPO


oUr goaLsPension Services Corp.’s strategic goals are:

• Deliver outstanding service, accessible communication, and practical education to assist Plan Members as they prepare for retirement, in support of Plan Trustees in their promotion of public pension plans

• Enable Plan Trustees to achieve targeted investment performance by supporting them with expert resources, robust processes, reliable technical advice, and timely information

• Deliver excellent value for Plan Trustees and shareholders by providing cost effective, strongly resourced and well-managed processes and services

• Ensure services and processes embed strong risk controls and industry best practice while providing for scalability and flexible design

• Strive to implement sustainable and thoughtful corporate and investment strategies that provide economic and cultural benefits through environmental responsibility and stewardship

oUr First Year In revIew During 2013-14, the Board:

• Approved the 2013-14 Strategic Plan

• Adopted a new mission statement: “To deliver high quality pension, investment performance, communication, and educational services to Plan Members, Plan Trustees, Beneficiaries and Employers through careful planning, effective management, and strong collaborative efforts.”

• Approved the Master Service Contract with Bell Aliant and authorized the CEO to sign Supplementary Agreements. Bell Aliant provides information technology and communications infrastructure to Pension Services Corp.

• Approved the Corporate budget for 2014-15

• Appointed KPMG to conduct the audit of the financial statements of Pension Services Corp. for the year ending March 31, 2014

• Approved the 2012-13 bonuses for investment professionals

• Approved a new Short Term Incentive Plan (STIP) for investment and pension senior leaders

• Approved the Communications and Disclosure Policy for the Board

During 2013-14, Pension Services Corp. staff completed a successful transition from the Nova Scotia Pension Agency and continued to make improvements to processes, systems, and services. Other key developments included:

• Completed the technology infrastructure transition ahead of the target date with minimal impact on operations

• Made substantial progress on the development of our new pension system

• Developed and implemented new corporate policies and enhanced the Business Continuity Plan

• Developed Key Performance Indicators in conjunction with Plan Trustees

• Implemented a new (proprietary) investment trading system

• Completed the implementation of a new investment risk system and began delivering detailed risk reporting to Plan Trustees

• Continued to improve the quality of communication materials for the Public Service Superannuation Plan and the Teachers’ Pension Plan

• Developed an Enterprise Risk Management framework that incorporates ISO 31000 standards

• Developed new performance management tools for managers, contributors, and non-union staff and completed the 2013-14 performance evaluation and related processes 2013-14 Nova Scotia Pension Services Corporation Annual Report 5

Progress on oUr strategic goaLsPension Services Corp.’s Strategic Plan encompasses five strategic goals. The Board is responsible for setting our strategic goals, monitoring our progress, and our performance in achieving them. The Board uses the Corporate Scorecard to measure and assess our progress and performance.

Below is the summary for our Corporate Scorecard for the year-ended March 31, 2014:

Customer Service 3 Member & Employer Communication 3 Member Education 3 Trustee & Board Reporting 3

Deliver outstanding service, accessiblecommunication, and practical educationto assist Plan Members as they prepare for retirement, in support of Plan Trustees in their promotion of public pension plans

Enable Plan Trustees to achieve targeted investment performance by supporting them with expert resources, robust processes, reliable technical advice and timely information

Investment Returns 3 Asset Mix 3

Deliver excellent value for Plan Trustees and shareholders by providing cost effective, strongly resourced and well-managed processes and services

Cost Effective 3 Operational Performance 3 Reporting 3 Technology Resources 2

Services and processes embed strong risk controls and industry best practice while providing for scalability and flexible design

Enterprise Risk Management Framework 2 Audit Reviews * 2 Protection of Information ** 2 Business Continuity Plan 3 Internal Procedures 3

Strive to implement sustainable and thoughtful corporate and investment strategies that provide economic and cultural benefits through environmental responsibility and stewardship

Human Resource Metrics 3 Communications 3 Workforce Planning 3 Environmental Best Practices 3 Environmental Investment 2 Training 2

3 Meeting and Exceeding Targets2 Missing Targets But Within Tolerance1 Missing Targets and Not Within Tolerance n/a Data Not Currently Available

OVERAll MEASuREMENT

MEASuREMENT

INDICATORS

STRATEGIC GOAl

*Targets expected to be met as of Dec. 2014 ** Targets met as of June 2014

RATING SCALE:

3

3

3

2

3

This is the first year that the Corporation has published a Corporate Scorecard, which provides a detailed assessment of progress on our strategic goals.

The Corporation received a rating of “2” under a few initiatives. In most instances, these relate to current initiatives that are under way but have not yet been completed.


PerForMance oF corPoration

Value Add of Investment

Performance

TPPTI 4 4 3 3 4

PSSPTI 4 3 3 3 3

CorporateBoard 3 3

Recommendations and Analysis

Service Metrics

Other Qualitative Measures

Pension Services Corp. has been appointed by the PSSPTI and the TPPTI to provide pension administration and investment management services for them. These services are fully described in detailed service agreements between each of the Trustees and Pension Services Corp.

The Trustees have developed Key Performance Indicators (KPI) with Pension Service Corp. as a means to monitor the Corporation’s performance with respect to its responsibilities as detailed in their service agreements. The Trustees review these KPIs each quarter.

At the end of the fiscal year, the Trustees and the Board assess the annual performance of Pension Services Corp. The KPIs and other measurements form the basis of the annual assessment.

Pension Services Corp.’s performance for the fiscal year ended March 31, 2014, as determined by the Trustees and the Board, is summarized below:

1 Did not achieve results - Did not meet expectations2 Partially achieved - Results meet some, but not all expectations3 Fully achieved - Results met all expectations4 Exceeded - Results exceeded most performance expectations5 Exceptional achievement - Results exceeded all performance expectations

RATING SCALE:

Assessment of Pension Division

Assessment of Investment Division

Trustee Support

Progress on Strategic Vision & Goals

Corporate Administration Functions & Deliverables


coMPensationThe goal of the compensation philosophy and framework is to attract, motivate, and reward a high-performing team. The framework is designed to promote a pay-for-performance culture by focusing employee efforts on the achievement of the mission, vision, core values, and critical business performance targets of Pension Services Corp.

The Board consulted with an external compensation expert who is conversant with best practices within the Canadian pension industry to develop the philosophy and framework. The Board is committed to reviewing compensation practices on a regular basis and to implementing improvements as necessary.

The compensation framework is designed to be fair and reasonable to stakeholders and set with regards to similar positions in comparable organizations. Compensation is benchmarked to the 25th percentile of Canadian pension funds of similar size and complexity and to the 50th percentile of general industries within Nova Scotia.

Elements of the framework include base salary, short-term incentive plan (STIP), and benefits. The STIP component of total compensation is ‘at-risk’ and linked to the performance of corporate, division, and individual objectives. The weightings for each of the three objectives vary by position to reflect roles and job responsibilities.

The Board approved STIP awards totalling $400,000 for 12 employees based upon performance in the fiscal year ended March 31, 2014. The awards were paid shortly after the year end. The Communications and Disclosure Policyfor the Board requires that the compensation of the Chief Executive Officer, Chief Investment Officer, and the Chief Pensions Officer be disclosed. The details are provided below:

STEVEN WOlFFChief Executive Officer $332,520 $117,213 $449,733

ElIZABETH VANDENBERGChief Investment Officer $160,000 $58,000 $218,000

KIM BlINNChief Pensions Officer $120,000 $28,200 $148,200

totaL coMPensation (excluding benefits) Base incentiVe

naMe PaY aWarD for the fiscal year


THE YEAR AHEAD

Our priorities for the coming year are aligned with our strategic goals. These priorities are:

SERVICE• Deliver outstanding service to Plan Trustees, Plan Members, Beneficiaries, and Employers• Leverage new technologies to enhance the information we provide to Plan Members and Employers

COMMuNICATION AND EDuCATION• Continue to improve and reposition communications materials to provide timely, transparent, and readily understood information about the Plans that we administer• Support Plan Members and Employers as they transition to online web tools in 2015

TECHNOlOGy PROjECT• Achieve all major milestones and budget targets for the 4th year of the technology project• Ensure successful deployment of our new pension system• Use new technologies to support improvements to our operating model and obtain efficiencies

INVESTMENTS• Coordinate asset liability studies for each of the Public Service Superannuation Plan and the Teachers’ Pension Plan with the objective of further de-risking these Plans• Utilize the risk system and enhanced risk reporting and analysis to establish a risk framework to improve investment decisions

HuMAN RESOuRCES• Negotiate our first collective agreement with the Nova Scotia Government and General Employees Union Local 48 for an effective date of April 1, 2015• Provide learning and career development opportunities through exposure to new technology and business process improvement

RISK FRAMEWORK• Strengthen risk frameworks in support of our strategic plan and our 2013 response to the Report of the Office of the Auditor General

TRuSTEES• Support the Teachers’ Pension Plan Trustee Inc. as it brings forward recommendations to improve the long-term health of its Plan• Work closely with the Public Service Superannuation Plan Trustee Inc. to prepare for the five-year review of benefits, contribution rates, and funded health of its Plan in 2015 and support the Trustee as it explores possible ways to increase active Plan membership • Provide Plan Trustees with enhanced benchmarking tools to better measure our service delivery and cost effectiveness


Financial Statements of

NOVA SCOTIA PENSIONSERVICES CORPORATION

Year ended March 31, 2014


11

taylorgd

Typewritten Text

taylorgd

Typewritten Text

NOVA SCOTIA PENSION SERVICES CORPORATIONFinancial Statements


Financial Statements

Balance Sheet 1

Statement of Earnings and Retained Earnings 2

Statement of Cash Flows 3

Notes to Financial Statements 4


NOVA SCOTIA PENSION SERVICES CORPORATIONBalance Sheet

March 31, 2014

2014

AssetsCurrent assets:

Cash $ 2,442,066Accounts receivable (note 3) 370,159Short-term investment (note 4) 1,244,900Prepaid expenses 65,147

4,122,272

Fixed assets (note 5) 183,141

Intangible assets (note 6) 2,797,494

$ 7,102,907

Liabilities and Shareholders' EquityCurrent liabilities:

Accounts payable and accrued liabilities (note 7) $ 2,917,3062,917,306

Loans payable (note 8) 2,765,228Future benefits liability (note 10) 1,420,374

4,185,602

Shareholders' equity:Common shares (note 12) -

Commitments (note 14)

$ 7,102,907

See accompanying notes to financial statements.

On behalf of the Board:

Original signed by John B. Carter Co-Chair, Board of Directors

Original signed by Doug L. Moodie Co-Chair, Board of Directors


NOVA SCOTIA PENSION SERVICES CORPORATIONStatement of Earnings and Retained Earnings


2014

Revenue $ 7,036,347Interest income 10,648

7,046,995

Expenses: Salaries and benefits 5,044,212 Professional services 1,032,128 Office administration 573,011 Property rental 387,040 Amortization 10,604

7,046,995 Net earnings, being retained earnings, end of year $ -



NOVA SCOTIA PENSION SERVICES CORPORATIONStatement of Cash Flows


2014

Cash flows from operating activities:Net earnings $ -Item not involving cash:

Amortization 10,604Transfer of cash from the Province of Nova Scotia (note 10) 1,263,900Change in non-cash operating working capital:

Increase in accounts receivable (328,595)Increase in prepaid expenses (65,147)Increase in accounts payable and accrued liabilities 2,917,306Increase in future benefits liability 114,910

Net cash provided by operating activities 3,912,978

Cash flows from financing activities:Proceeds from loans payable 2,468,169Net cash provided by financing activities 2,468,169

Cash flows from investing activities:Purchase of fixed assets (184,620)Purchase of intangible assets (2,509,561)Purchase of short-term investment (1,244,900)Net cash used in investing activities (3,939,081)

Increase in cash 2,442,066

Cash, beginning of year -

Cash, end of year $ 2,442,066



taylorgd

Typewritten Text

taylorgd

Typewritten Text

NOVA SCOTIA PENSION SERVICES CORPORATIONNotes to Financial Statements


Nova Scotia Pension Services Corporation (“the Corporation”) is a private enterprise, incorporated onApril 1, 2013 under the laws of Nova Scotia under Bill No. 17 (Financial Measures Act (2012) datedApril 12, 2012).

Under the Nova Scotia Pension Services Corporation Act (the "Act"), the Corporation was devolvedfrom the Nova Scotia Pension Agency, a government agency of the Province of Nova Scotia. TheCorporation has issued an equal number of shares to Teachers’ Pension Plan Trustee Inc. and PublicService Superannuation Plan Trustee Inc. All assets, liabilities and obligations of the Nova ScotiaPension Agency as at March 31, 2013 were transferred to the Corporation on April 1, 2013.

The purpose of the Corporation is to provide pension administration and pension investment servicesfor the Teachers’ Pension Plan and Public Service Superannuation Plan, Ancillary Plans of theProvince of Nova Scotia (Sydney Steel Corporation Superannuation Fund, Members’ RetiringAllowances Plan and Members’ Supplementary Retiring Allowances Plan established under theMembers’ Retiring Allowances Act) and any other pension plan or arrangement that retains theservices of the Corporation and is approved by the Board of Directors (“the clients”).

The Corporation operates on a cost recovery basis as provided for in the Act. The Corporation is anot-for-profit organization and, as such, is exempt from income taxes, provided certain requirementsof the Income Tax Act are met.

1. Significant accounting policies:

(a) Basis of presentation:

The Corporation's financial statements are prepared in accordance with Canadianaccounting standards for private enterprises in Part II of the CPA Canada Handbook.

(b) Investments:

Investments in equity instruments that are quoted in an active market are accounted for atfair value, with changes in fair value recorded in net income. Transaction costs areaccounted for in the original cost of the investments, except for equity investments that arequoted in an active market, the transaction costs are expensed as incurred.


NOVA SCOTIA PENSION SERVICES CORPORATIONNotes to Financial Statements (continued)


1. Significant accounting policies (continued):

(c) Fixed assets:

Fixed assets are stated at cost, less accumulated amortization. Amortization is providedusing the following methods and annual rates:

Asset Basis Rate

Computer hardware Straight-line 4-5 yearsFurniture and fixtures Straight-line 5 years

The carrying amount of an item of fixed assets is tested for recoverability whenever eventsor changes in circumstances indicate that the carrying amount may not be recoverable. Animpairment loss is recognized when the asset’s carrying amount is not recoverable andexceeds its fair value.

(d) Intangible assets:

Intangible assets represent deferred development costs related to pension system,electronic filing system and investment trading system projects. Development activities arerecognized as an asset provided they meet the capitalization criteria, which include theCorporation's ability to demonstrate: technical feasibility of completing the intangible assetso that it will be available for use or sale; the Corporation's intention to complete the assetfor use; the Corporation's ability to use the asset; the adequacy of the Corporation'sresources to complete the development; the Corporation's ability to measure reliably theexpenditures during the development; and the Corporation's ability to demonstrate that theasset will generate future economic benefits. Development expenditures that do not meetthe capitalization criteria and expenditures for research activities are expensed as incurred.Intangible assets are measured at cost less accumulated amortization and will be amortizedon a straight-line basis over their useful lives of 5 years.

(e) Employee future benefits:

The Corporation has an obligation to provide future benefits to its employees in respect ofpost-retirement health benefits, public service awards and a supplemental employeeretirement plan. The benefits are based on years of service and final average salary.

Post-retirement health benefits are available to all retirees whereas the public service awardis only available to bargaining unit employees. The supplemental employee retirement planbenefits are based on years of service and salary level – being available only to employeesabove a defined salary. The Corporation accrues its obligations under the benefit plans asthe employees render the services necessary to earn the benefits on an annual basis.





The obligation at the end of the year is determined based on the most recent actuarialvaluation report prepared for accounting purposes. The measurement date of the obligationcoincides with the Corporation’s fiscal year-end. The date of the most recent actuarialvaluation of the obligation prepared for accounting purposes is April 1, 2013. The report wasreceived on June 25, 2013 and has been extrapolated to March 31, 2014.

(f) Revenue recognition:

Revenue is recognized when services are provided and the customer assumes risk of loss,collection of the relevant receivable is probable, persuasive evidence of an arrangementexists and the sales price is fixed or determinable.

(g) Expense allocation:

The net of operating costs, amortization and income are charged to clients based on theclients’ usage rate of the services provided by the Corporation. Wherever practical, thesecosts are matched to the client based on their use of specific services.

(h) Financial instruments:

Financial instruments are recorded at fair value on initial recognition. Freestanding derivativeinstruments that are not in a qualifying hedging relationship and equity instruments that arequoted in an active market are subsequently measured at fair value. All other financialinstruments are subsequently measured at cost or amortized cost, unless management haselected to carry the instruments at fair value. The Corporation has not elected to carry anysuch financial instruments at fair value.

Transaction costs incurred on the acquisition of financial instruments measuredsubsequently at fair value are expensed as incurred. All other financial instruments areadjusted by transaction costs incurred on acquisition and financing costs. These costs areamortized using the straight-line method.





Financial assets are assessed for impairment on an annual basis at the end of the fiscalyear if there are indicators of impairment. If there is an indicator of impairment, theCorporation determines if there is a significant adverse change in the expected amount ortiming of future cash flows from the financial asset. If there is a significant adverse change inthe expected cash flows, the carrying value of the financial asset is reduced to the highest ofthe present value of the expected cash flows, the amount that could be realized from sellingthe financial asset or the amount the Corporation expects to realize by exercising its right toany collateral. If events and circumstances reverse in a future period, an impairment loss willbe reversed to the extent of the improvement, not exceeding the initial impairment charge.

(i) Related party transactions:

Monetary related party transactions and non-monetary related party transactions that havecommercial substance are measured at the exchange amount when they are in the normalcourse of business, except when the transaction is an exchange of a product or propertyheld for sale in the normal course of operations. Where the transaction is not in the normalcourse of operations, it is measured at the exchange amount when there is a substantivechange in the ownership of the item transferred and there is independent evidence of theexchange amount.

All other related party transactions are measured at the carrying amount.

(j) Use of estimates:

The preparation of the Corporation’s financial statements requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities at thedate of the financial statements and the reported amounts of revenues and expenses duringthe year. Significant items subject to such estimates and assumptions include theassumptions used in measuring the future benefits liability. Actual results could differ fromthose estimates made.




2. Transfer of assets and liabilities:

On April 1, 2013, Nova Scotia Pension Agency transferred to the Corporation, all assets andliabilities as follows:

Public ServiceTeachers' Superannuation

Pension Plan Plan Other Total

Assets:Accounts receivable $ 6,884,668 $ 6,559,689 $ 1,014 $13,445,371Intangible assets 148,529 148,530 - 297,059

Liabilities:Accounts payable and

accrued liabilities 6,722,685 6,722,686 - 13,445,371Loans payable 148,529 148,530 - 297,059

In addition to the foregoing, the Province of Nova Scotia transferred $1,263,900 in cash to offsetthe future benefits liability outstanding as at March 31, 2013 (note 10).

3. Accounts receivable:

Accounts receivable include amounts owed to the Corporation from its clients for servicesprovided, expenses incurred in order to service those clients or paid on behalf of those clients.

The following amounts were due to the Corporation from its clients as at March 31, 2014:

2014

Teachers Pension Plan $ 165,229Public Service Superannuation Fund 159,119Province of Nova Scotia:

Sydney Steel Corporation Superannuation Fund 18,700Members' Retirement Allowances Act Plans 12,897Department of Finance 3,535

Accrued interest 10,649Other 30

$ 370,159




4. Short-term investment:

The short-term investment consists of a guaranteed investment certificate with a maturity date ofAugust 20, 2014.

5. Fixed assets:

Accumulated Net book2014 Cost amortization value

Computer hardware $ 174,645 $ (705) $ 173,940Furniture and fixtures 9,975 (774) 9,201

$ 184,620 $ (1,479) $ 183,141

6. Intangible assets:

2014 Accumulated Net book

Cost amortization value

Intangible assets subject to amortization:Systems project costs $ 2,806,619 $ (9,125) $ 2,797,494

$ 2,806,619 $ (9,125) $ 2,797,494

The costs of $297,059 in intangible assets (note 2), transferred from the Province of Nova Scotiaon April 1, 2013, were related to the construction and development of a new pension systemwhich were capitalized and will be amortized upon completion of the project.

The amortization of project costs commences upon completion of the project. Three projectshave been capitalized as at March 31, 2014. They are the pension system project which involvesthe creation of a new computerized pension system, the electronic filing project to create a robustfile transfer and control system and the investment trading system project to move away from theProvince of Nova Scotia’s trading system and onto a network controlled by the Corporation. Asthe assets are amortized, an amount equal to the amortization will be charged back to Teachers’Pension Plan, Public Service Superannuation Plan and other clients using this technology,offsetting loans from the related entities.




6. Intangible assets (continued):

The pension system and electronic filing projects are considered to be intangible assets whichwill not be subject to amortization until the projects are completed. The investment trading systemproject was completed during the year. Amortization expense will commence when projects havebeen completed. Amortization will be charged over 5 years using the straight-line method. Thebasis to account for internally generated intangible asset costs is the aggregation of all intangiblecosts that can be directly identified as being part of the production of the asset. These costsinclude the salary costs of specific employees based on their time spent while working on project-related tasks.

7. Accounts payable and accrued liabilities:

2014

Accounts payable $ 2,262,926Harmonized sales tax payable 51,066Due to Teachers' Pension Plan 297,526Due to Public Service Superannuation Plan 305,788

$ 2,917,306

8. Loans payable:

As capital costs are incurred, the Corporation calls for a loan from the Teachers’ Pension Planand Public Service Superannuation Plan. The amount required to cover capitalized costs isfunded equally by each plan unless agreed otherwise by the plan making the loan to theCorporation. Loans are long-term in nature and do not bear interest.

As at March 31, 2014, the loans payable are as follows:

2014

Teachers' Pension Plan $ 1,382,614Public Service Superannuation Plan 1,382,614

$ 2,765,228




9. Related party transactions:

a) Teachers’ Pension Plan Trustee Inc. as trustee of Teachers’ Pension Plan:

The Corporation entered into an agreement with the Teachers’ Pension Plan Trustee Inc. onApril 1, 2013 to provide pension and investment services to the Teachers’ Pension Plan. Theamount charged to Teachers’ Pension Plan for the year was $3,473,583 (note 13). As atMarch 31, 2014, the Corporation has a receivable of $165,229 from Teachers’ Pension Plan(note 3).

During the year, Teachers’ Pension Plan advanced cash to the Corporation to fund itsproportionate share of upcoming expenses as required. As at March 31, 2014 the cashadvance due to Teachers’ Pension Plan was $297,526 (note 7).

During the year, the Teachers’ Pension Plan loaned the Corporation funds to fund capitalassets for the betterment of servicing the clients of the Corporation. As at March 31, 2014,the loan payable due to Teachers’ Pension Plan was $1,382,614 (note 8).

b) Public Service Superannuation Plan Trustee Inc. as trustee of Public ServiceSuperannuation Plan:

The Corporation entered into an agreement with Public Service Superannuation PlanTrustee Inc. on April 1, 2013 to provide pension and investment services to Public ServiceSuperannuation Plan. The amount charged to Public Service Superannuation Plan for theyear was $3,414,029 (note 13). As at March 31, 2014, the Corporation has a receivable of$159,119 from Public Service Superannuation Plan (note 3).

During the year, Public Service Superannuation Plan advanced cash to the Corporation tofund its proportionate share of upcoming expenses as required. As at March 31, 2014 thecash advance due to Public Service Superannuation Plan was $305,788 (note 7).

During the year, Public Service Superannuation Plan loaned the Corporation funds to fundcapital assets for the betterment of servicing the clients of the Corporation. As at March 31,2014, the loan payable due to Public Service Superannuation Plan was $1,382,614 (note 8).

Employees of the Corporation are members of Public Service Superannuation Plan. Duringthe year, the Corporation made $348,041 in contributions to the plan (note 11).




9. Related party transactions (continued):

c) Premises:

The Corporation bases its operations in Purdy’s Wharf, a building jointly owned by both TPPInvestments I Inc. a wholly owned subsidiary of Teachers’ Pension Plan and PSSInvestments I Inc. a wholly owned subsidiary of Public Service Superannuation Plan. TheCorporation serves as directors of both TPP Investments I Inc. and PSS Investments I Inc.The rent paid to the landlord for the year was $387,040.

d) Province of Nova Scotia:

During the year, the Province of Nova Scotia provided services to the Corporation and itsclients. The significant related party purchases from the Province of Nova Scotia were asfollows:

2014

Payroll services $ 330,100Telecommunications 83,223Stationary and postage 5,109Other 1,674

$ 420,106

The Corporation entered into an agreement with the Province of Nova Scotia on April 1,2013 to provide pension services to Sydney Steel Corporation Superannuation Fund and theMembers Retiring Allowances Act Plans. For the year, the Corporation charged the Provinceof Nova Scotia for services related to Sydney Steel Corporation Superannuation Fund($94,543) and Members Retiring Allowances Act Plans ($49,742) (note 13).

During the year, the Province of Nova Scotia advanced cash to the Corporation to fund itsproportionate share of upcoming expenses relating to Sydney Steel CorporationSuperannuation Fund and Members Retiring Allowances Act Plans as required. As at March31, 2014, the Corporation has a receivable from the Province of Nova Scotia for servicesrelated to Sydney Steel Corporation Superannuation Fund ($18,700) and Members RetiringAllowances Act Plans ($12,897) (note 3).

Pension services were provided to the Department of Finance during the year. The amountcharged to the Province of Nova Scotia was $4,450 (note 13). As at March 31, 2014, theCorporation has a receivable of $3,535 from the Department of Finance (note 3).




9. Related party transactions (continued):

In all cases the measurement basis of related party transactions has been the value of cashreceived or paid between parties and the value of invoices raised for services betweenparties.

10. Future benefits liability:

On April 1, 2013, the Province of Nova Scotia transferred the future benefit obligation related tothe staff of the Nova Scotia Pension Agency as at March 31, 2013 to the Corporation. Anactuarial valuation was provided to the Province of Nova Scotia by Mercer (Canada) Limited onJune 12, 2013 with respect to the estimated obligations as of March 31, 2013 of benefits providedunder the post-retirement health benefits, the public service awards and supplementaryemployee retirement plan to Nova Scotia Pension Agency employees.

The opinion provided by Mercer to the Province of Nova Scotia was based on the Province’s costof borrowing under the generally accepted accounting principles for governments asrecommended by the Public Sector Accounting Board (“PSAB”). The Corporation had anactuarial valuation prepared by Eckler Limited under CICA on June 25, 2013.

The following table shows the difference in opinions and accounting standards.

CICA PSAB Variance

Post-retirement Health Benefits $ 562,698 $ 526,900 $ 35,798Public Service Award 478,619 485,000 (6,381)Supplemental Employee Retirement Plan 264,147 252,000 12,147

$ 1,305,464 $ 1,263,900 $ 41,564

On August 8, 2013, the Province of Nova Scotia paid $1,263,900 to the Corporation to cover theobligations as at March 31, 2013. Under CICA accounting standards, there was a shortfall of$41,564 to the net obligation of the Corporation.

The future benefit obligation of the Corporation at March 31, 2014 was calculated under Section3463 of Part III of the CPA Canada Handbook – Accounting by Eckler Limited based oninformation supplied by the Corporation. In determining liabilities under CPA 3463, the methodrequired is the projected unit credit method prorated on services (i.e. benefits are projected withsalary increases to retirement and then prorated based on service).




10. Future benefits liability (continued):

The significant assumptions used are as follows:

March 31, 2014

Discount rate 4.0% per annum for the 2013/14 post retirementbenefit cost

Compensation increase 2.25% per annum for employees over 50 years ofage, rising to 4.75% per annum for employees under30 years of age

Retirement age 35% at Rule of 80 (minimum age 55), remainder atage 60 with 2 years of service, age 65 or 35 years ofservice

Mortality UP-94 with future mortality improvements inaccordance with Scale AA for the 2013/14 postretirement benefit cost

Income Tax Act maximum pension $2,697 per year of service in 2013, increasing 2.25%per annum after 2013

The future benefits obligation as at March 31, 2014 is calculated as follows:

March 31, 2014

Post-retirement Health Benefits $ 642,496Public Service Award 454,883Supplemental Employee Retirement Plan 322,995

$ 1,420,374

11. Employee pension plan:

Permanent employees of the Corporation participate in the Public Service Superannuation Plan(the "Plan"), a contributory defined benefit pension plan, which provides pension benefits basedon length of service and earnings.

Contributions to the Plan are required by both the employees and the employer. TheCorporation’s contributions range from 8.4% to 10.9% of an employee's salary. Total employercontributions for 2014 were $348,041 and are recognized in salaries and benefits expense in thefinancial statements.

The Corporation is not responsible for any under-funded liability, nor does the Corporation haveaccess to any surplus that may arise in this Plan.




12. Issued share capital:

The Share Capital of the Corporation is 100,000 common shares of one class without par value.The shares do not carry a dividend; they are not redeemable and are not convertible. During theyear ended March 31, 2014, 100 shares were issued, 50 to the Teachers’ Pension Plan TrusteeInc. and 50 to Public Service Superannuation Plan Trustee Inc. at nil value and no shares wereresold. At the end of the year, there were no existing commitments to issue or re-sell shares.

13. Revenue:

Revenue by client is as follows:

2014

Teachers' Pension Plan $ 3,473,583Public Service Superannuation Plan 3,414,029Province of Nova Scotia:

Sydney Steel Corporation Superannuation Fund 94,543Members' Retiring Allowances Act Plans 49,742Department of Finance 4,450

$ 7,036,347

14. Commitments:

As at March 31, 2014, the Corporation was contractually obligated under various operating andoccupancy leases. Future minimum annual lease payments over the next five years are asfollows.

2015 $ 1,247,2822016 1,240,1542017 1,119,8422018 882,2082019 903,224

$ 5,392,710


1-800-774-5070 (toll free in NS) Purdy’s Landing, Suite 400, 902-424-5070 (outside NS) 1949 Upper Water Street, 902-424-0662 (Fax) Halifax, NS B3J 3N3

[email protected] 8:00 AM to 5:00 PM, Monday to Friday

novascotiapension.ca

NEW


nova scotia annua pension services corporation report l€¦ · nova scotia pension services...

Documents