pension & benefits committee friday 8 december 2017 9:30 … · 2017-12-01 · pension &...

Board of Governors PENSION & BENEFITS COMMITTEE

Friday 8 December 2017 9:30 a.m. to 12:00 noon

NH 3318

OPEN SESSION ACTION

9:30

9:35

Decision

Information

Information

Information

9:45

10:15

10:25

10:35

10:50

Discussion

Information

Discussion

Decision

Discussion and/or Decision

1. Approval of the 10 November 2017 Minutes (Open Session)* and BusinessArising

a. Communication to retirees re: Stage 2 Solvency Funding relief

2. Execution Against the Work Plan*

3. Update on Government Pension Plan Initiatives [Shapira]

4. Quarterly Risk Management Dashboard – 30 September 2017* [Byron]

5. Investment Fund Performance Reports from Aon* [Huber]

6. Indexation of Pension Benefit and Contribution Limits* [Sue McGrath]

7. Recommendation re: Comparators for Benefits Index Analysis* [Hornberger]

8. 2015-17 Report to the Community (Draft)*

9. Other Business

10. Proceed into Confidential Session

CONFIDENTIAL SESSION

11. Approval of the 10 November 2017 (Confidential)+ and Business Arising

12. Draft Proposal for Revision to Governance of University Pension Plan Assets+

Decision

Discussion and/or Decision

Next Meeting: Friday 19 January 2018 from 9:30 a.m. – 12:00 noon in NH 3318

Note: the annual committee lunch will follow the January meeting. Please send any dietary restrictions to Melissa Holst (as below) by Friday 5 January 2018.

*attached** to be distributed

+ distributed separately

1 December 2017 Mike Grivicic Associate University Secretary

Please convey regrets to Melissa Holst at 519-888-4567 x36125 or [email protected]

Future Agenda Items a. Pension Contribution for Members of LTDb. Level of LTD coverage vs. practical requirementsc. Discussion of $3,400 cap appropriateness, and potential RPP/PPP combination

PB 8 December 2017, page 1 of 37

mailto:[email protected]

University of Waterloo

Board of Governors PENSION & BENEFITS COMMITTEE

Minutes of the 10 November 2017 Meeting [in agenda order]

Present: Kathy Bardswick, Ted Bleaney, Monika Bothwell, George Dixon, Mike Grivicic (secretary), Dennis Huber, Ranjini Jha, David Kibble, Alan Macnaughton, Michael Steinmann, Mary Thompson Regrets: Stewart Forrest, Mary Hardy, Marilyn Thompson Consultants: Linda Byron, Allan Shapira (by phone) Administration: Lee Hornberger Guests: Truzaar Dordi, Scott Palmer (Aon Hewitt), Doug Turnbull Organization of Meeting: George Dixon took the chair and Mike Grivicic acted as secretary. The secretary advised that a quorum was present. The agenda was approved without a formal motion. 1. APPROVAL OF THE 6 OCTOBER 2017 MINUTES (OPEN SESSION) AND BUSINESS ARISING A motion was heard to approve the minutes as distributed. Bothwell and Bleaney. Carried. a. Approvals Given at Board of Governors for Actuarial valuation and for Statement of Investment Policies and Procedures. This item was received for information. 2. EXECUTION AGAINST THE WORK PLAN This item was received for information. 3. UPDATE ON GOVERNMENT PENSION PLAN INITIATIVES Shapira observed: hope that details on the revised regulations will be available by the December meeting, and Huber noted that this will have budgeting implications; depending on the revised regulations, the new regime may shorten amortization of deficit, and higher potential contributions may be helpful if the rules ease by the next required filing in 2020; advocacy is being done via the Council of Ontario Universities to ensure the new rules will not be punitive to universities; any changes proposed will be subject to a comment period, where further advocacy can occur. 4. HOLISTIC BENEFITS REVIEW, PROPOSED APPROACH AND COSTING Scott Palmer of Aon Hewitt spoke to the document: step-by-step overview of how a benefits index study would be carried out, with similarity to studies conducted in 2005 and 2012; list of comparators is important to the outcome of the study. Members discussed: difficult to compare on post-retirement benefits, and this would likely be covered by a comment in the study; study is conducted with a lens to what talent is to be attracted/retained; able to split out comparisons by sector, and by local vs. non-local; it is not in the standard methodology to split out current vs. deferred benefits; university draws talent from different markets based on the job; some comparators will have hybrid offerings. In order to review comparators, the committee entered into confidential session and the room was cleared of non-members except for Palmer and Hornberger. Upon resumption of the open session, a motion was heard to proceed with the recommended plan for the benefits review, with a subgroup to bring forward a recommended list of competitors at the December meeting. Macnaughton and Bardswick. Carried. Items (a) and (b) were received for information. 5. REMOVAL OF CURRENCY OVERLAY Huber discussed and members clarified: discussion at Finance & Investment Committee, and decision to remove hedge for non-pension assets, and decision to remove hedge from pension assets is subject to concurrence of this committee; literature is mixed on the effectiveness of hedging CAD; fees are nominal and no spread is paid on transactions; difficulty in executing at the right time; can resume hedging anytime; risk management is part of RPPI mandate, and there are other tools to manage risk. A motion was heard to approve the unwinding of the currency overlay currently in place for the registered pension plan. Huber and Bardswick. Carried.


Pension & Benefits Committee 10 November 2017 page 2 of 3 6. INDEXATION OF PLAN MAXIMA – HEALTH, DENTAL, RETIREE LIFE Hornberger noted a typo where the first paragraph ought to reference January 1, 2018, and provided an overview of indices used to generate the proposed changes. Members discussed: change of $50,000 on $15 million total plan for health and dental benefits; some benefits may be examined in the holistic review as to whether sufficient return is provided for the suite of offerings; practice to index retiree life annually; members are able to defer their pension, though this is not a popular option; retiree life coverage is a taxable benefit. A motion was heard to approve the indexation of health, dental and retiree life coverage as described. Kibble and Bothwell. Carried. 7. PRESCRIPTION DRUG COVERAGE – GENERIC AND BRAND NAME DRUGS Macnaughton related an article in the New York Times where it was reported that some US insurance companies accept payments to encourage the utilization of branded pharmaceuticals as opposed to generics. Hornberger observed: this practice is not known to be prevalent in Canada; university plan with GWL accentuates generics, and GWL confirmed no rebates are paid to drug companies though they do negotiate rates in certain areas e.g. biologics; able to implement enhanced generic program. This would be a point for inclusion in the holistic benefits review. Members requested that information be brought to a future meeting on (1) the experience of the university re: number of “no generic substitute” on prescriptions and (2) prospective costs of no generic substitution vs. coverage via generic drugs. 8. EMPLOYEE AND FAMILY ASSISTANCE PROGRAM – ANNUAL UTILIZATION REPORT Hornberger spoke to the document: program started September 2016; utilization of five different services, and detail on offerings; EAP committee is responsible, and this cover the AFIW institutions as well; price of $2.50 per employee per month is locked in for three years; utilization appears to be on par with university sector; this is not a taxable benefit. 9. UPDATE ON REGISTERED PENSION PLAN INVESTMENT SUBCOMMITTEE Jha indicated that the group has a draft for a potential new committee, and that the group has sought comment on the draft from the president and provost. Any recommendation would be brought to the committee, once ready. 10. OTHER BUSINESS There was no other business. 11. PROCEED INTO CONFIDENTIAL SESSION With no additional business in open session, the committee proceeded into confidential session. NEXT MEETING The next meeting is on Friday 8 December 2017 from 9:30 a.m. – 12:00 p.m. in Needles Hall Room 3318.

30 November 2017 Mike Grivicic Associate University Secretary


D = deferred

Execution against Work Plan

Pension & Benefits Committee, Board of Governors, University of Waterloo

The below represents the annual responsibilities of the P&B Committee and has been prepared as an aid to planning only. The committee’s activities are much broader, however, and include: legislative changes, plan changes and improvements; selection of managers and service providers; and requests from the UW community regarding pension and benefits plans.

Task Frequency (Target month)

9 Dec 2016

20 Jan 2017

24 Feb 2017

10 Mar 2017

19 May 2017

16 June 2017

8 Sept 2017

6 Oct 2017

10 Nov 2017

8 Dec 2017

Approval of Actuarial Valuation Assumptions Annual (Jan)

Investment Status of PPP Annual (Jan)

Preliminary Valuation Results (RPP and PPP) Annual (Feb)

Cost-of-living Increase for Pensioners Annual (Feb)

Pensions for Deferred Members Annual (Feb)

Salaries for Pension Purposes for Individuals on Long-term Disability

Annual (Feb)

Actuarial Valuations (RPP and PPP) Annual (Mar)

Benefits Plan Premium Renewals Annual (Mar)

Indexing of Long-term Disability Plan Benefits and Maxima

Annual (Mar)

Review of Contribution and Protocol Caps (RPP and PPP)

Annual (Mar)

Annual Committee Self-Assessment Annual (Mar)

Budget Overview Annual (May) D

Previous Years’ Fees and Expenses Annual (May)

Annual Audit of the Pension Plan Fund Financial Statements

Annual (May)


Pension & Benefits Committee – Execution Against Work Plan

1 Most recent report was published in September 2015 for the 2014-15 year

Task Frequency 9 Dec 2016

20 Jan 2016

24 Feb 2017

10 Mar 2017

19 May 2017

16 June 2017

8 Sept 2017

6 Oct 2017

10 Nov 2017

8 Dec 2017

Benefits/Financial Analysis Report Annual (June) D

Indexing of Health and Dental Plan Maxima Annual (Nov)

Cost-of-living adjustment to payroll pension plan limit

Annual (Dec)

Indexation of Retiree Life Insurance Annual (Dec)

Total Fund Overview (provided under reports from RPPI)

Quarterly

Investment Manager Review (provided under reports from RPPI)

Semi-annually

Approval of the Statement of Investment Policies and Procedures (SIPP)

Annual

Annual Report to the Community1 Annual

Actuarial Filing Minimum every three years Most recent filing in 2017


University of Waterloo As of September 30, 2017

To protect the confidential and proprietary information included in this material, it may not be disclosed or provided to any third parties without the approval of Aon Hewitt.

Pension Risk Management Dashboard

AON Empower Results• PB 8 December 2017, page 6 of 37

2

About This Material This dashboard was prepared for the University of Waterloo to track changes in funded status of the Pension Plan over successive reporting periods, as well as quantify the amount of risk to which the Pension Plan is exposed. The report presents the funded status and performs the analysis on three bases: Risk-Free Benchmark Basis – This liability is calculated using best estimate assumptions for retirement, termination and other demographic experience, and a discount rate and inflation assumption determined with reference to the risk-free environment. For this report, the liability has been determined at the real return bond yield plus a 40 basis point credit spread to reflect additional yield that can be achieved with relatively little additional risk. This liability differs from the solvency calculation in that the demographic assumptions are best estimate and statutory “grow-in” provisions are not included. Going Concern Basis – This liability is calculated using the going concern assumptions at the most recent valuation. The analysis is performed using the market value of assets without regard to the Funding Reserve established in the most recent valuation. This Funding Reserve was established to reflect gains from the sale of the real return bonds. A separate line item showing the funded ratio reflecting the funding reserve is included on page 3. Solvency Basis – This liability is calculated using assumptions determined in accordance with the Canadian Institute of Actuaries Annuity Purchase guidance and Commuted Value standards in effect at each measurement date shown in this report. A summary of these assumptions is included on page 13. This dashboard also contains a reconciliation that compares the going concern liability with the liability calculated using the risk-free benchmark. The difference between the two liabilities represents the amount of return expected to be provided by taking on risk in the investment portfolio. Over successive quarters the tool helps quantify how that risk changes as the underlying interest rates change. On both bases the following information is shown:

■ Current Funded Status and Historical Asset Liability Performance

— How well funded is the plan?

— What has been the return on plan assets and liabilities?

■ Detailed Asset and Liability Performance Attribution

— What factors drove the performance of assets and liabilities over the prior period?

— What is the relative impact of these factors on the assets and liabilities in isolation and in combination?

For the Risk-Free Benchmark Basis, the following information is also shown:

■ Scenario Testing

— What risk exposures does the plan face?

— What would be the impact of a downside event for each risk factor?



3

Executive Summary – Going Concern Funded Status

Asset-Liability Return

Asset Liability Return for Quarter-Ending 9/30/2017 Assets returned 0.9% during the quarter while liabilities returned 1.4%, resulting in a funded status decrease of 0.3%.

Values in $1,000,000 (CAD)

9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 Market Value of Assets $ 1,499.0 $ 1,519.2 $ 1,582.7 $ 1,604.4 $ 1,622.7 Going Concern Liability 1,526.1 1,549.5 1,609.1 1,629.6 1,652.6 Surplus/(Deficit) $ (27.1) $ (30.3) $ (26.4) $ (25.2) $ (29.9)

Periodic Contributions $ 19.5 $ 19.6 $ 19.8 $ 20.2 $ 20.7 Effective Interest Rate 5.70% 5.70% 5.50% 5.50% 5.50%

Funded Ratio (Market): 98.2% 98.0% 98.4% 98.5% 98.2%

Funded Ratio (Actuarial)1: 95.3% 95.2% 95.6% 95.7% 95.5%

Asset Duration: 2.1 2.0 2.0 2.0 2.0 Going Concern Liability Duration: 14.0 14.0 14.1 14.1 14.1

Periodic Return/Change Cumulative 12/31/16 3/31/17 6/30/17 9/30/17

Market Value of Assets Return 7.2% 1.0% 3.8% 1.3% 0.9%

Going Concern Liability:

Return 8.0% 1.4% 3.7% 1.3% 1.4%

Funded Ratio Change 0.0% -0.2% 0.4% 0.1% -0.3%


Highlights for the Quarter-Ending 9/30/2017 The plan's funded ratio decreased to 98.2% at 9/30/2017. This result was primarily due to the combined effects of:

■ Asset performance lower than expected,

■ Contributions of $20.7 million, and

■ An increase in liabilities primarily due to interest growth.

1Reflects funding reserve of $44.4 million due to sale of Real Return Bonds

------------------$2,000 ~----------------------------~

$1,800 +--------------------------------1

98.2% 98.0% 98.4% 98.5% 98.2%

9/30/16 12/31 /1 6 3/31 /17 6/30/17 9/30/1 7

---------------------

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%

-1% +0.0%

TTM* 2016 Q4

2017 Q1

2017 Q2


4

Executive Summary – Risk-Free Benchmark Funded Status


Asset Liability Return for Quarter-Ending 9/30/2017 Assets returned 0.9% during the quarter while liabilities returned -4.0%, resulting in a funded status increase of 2.9%.


9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 Market Value of Assets $ 1,499.0 $ 1,519.2 $ 1,582.7 $ 1,604.4 $ 1,622.7 Risk-Free Liability 2,627.9 2,497.3 2,460.5 2,527.9 2,442.7 Surplus/(Deficit) $ (1,128.9) $ (978.1) $ (877.8) $ (923.5) $ (820.0)

Periodic Contributions $ 19.5 $ 19.6 $ 19.8 $ 20.2 $ 20.7 Discount Rate 0.59% 0.91% 1.08% 0.98% 1.22%

Funded Ratio:

Assets/Risk-Free Liability 57.0% 60.8% 64.3% 63.5% 66.4%

Asset Duration: 2.1 2.0 2.0 2.0 2.0 Risk-Free Liability Duration: 19.1 18.6 18.3 18.4 18.3



Risk-Free Liability: Return -9.6% -5.7% -2.2% 2.1% -4.0%

Funded Ratio Change 9.4% 3.8% 3.5% -0.8% 2.9%


Highlights for the Quarter-Ending 9/30/2017 The plan's funded ratio increased to 66.4% at 9/30/2017. This result was primarily due to the combined effects of:

■ A decrease in liabilities due to an increase in risk free rates,


■Asset performance lower than expected.

------------------$3,500 ~------------------------ 6:4%

64.3% 63.5°/,

$3,000

$2,500

$2,000

$1,500

$1,000

$500

$0 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17

---------------------15%

10%

5%

0%

-5%

-10%

-15%

e +9.4%

TTM'

• +3.8'.4

2016 Q4

+3.5%

2017 Q1

2017 Q2

•

2017 Q3


5

Reconciliation of Risk-Free Benchmark and Going Concern Funded Status

*Going Concern The difference between the Risk-Free Liability and the Going Concern Liability is a measure of the amount of risk premium on which the Pension Plan funding is based.


9/30/16 12/31/16 3/31/17 630/17 930/17 Market Value of Assets $ 1,499.0 $ 1,519.2 $ 1,582.7 $ 1,604.4 $ 1,622.7

Going Concern Liability $ 1,526.1 $ 1,549.5 $ 1,609.1 $ 1,629.6 $ 1,652.6 Risk Premium 1,101.8 947.8 851.4 898.3 790.1

Risk-Free Liability $ 2,627.9 $ 2,497.3 $ 2,460.5 $ 2,527.9 $ 2,442.7


$3,000 ~------------------------~

$2,500 +-----I

$2,000 +--------1

$1,000

$500

9/30/2016 12/31 /2016 3/31 /2017 6/30/2017 9/30/2017


6

Executive Summary – Solvency Funded Status


Asset Liability Return for Quarter-Ending 9/30/2017 Assets returned 0.9% during the quarter while liabilities returned -3.7%, resulting in a funded status increase of 3.8%.


9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 Market Value of Assets $ 1,499.0 $ 1,519.2 $ 1,582.7 $ 1,604.4 $ 1,622.7 Solvency Liability 1,855.0 1,747.7 1,764.4 1,854.6 1,796.7 Surplus/(Deficit) $ (356.0) $ (228.5) $ (181.7) $ (250.2) $ (174.0)

Periodic Contributions $ 19.5 $ 19.6 $ 19.8 $ 20.2 $ 20.7 Effective Interest Rate 2.69% 3.13% 3.16% 2.89% 3.17%

Funded Ratio:

Assets/Solvency Liability 80.8% 86.9% 89.7% 86.5% 90.3%

Assets Duration: 2.1 2.0 2.0 2.0 2.0 Solvency Liability Duration: 15.0 14.4 14.2 14.5 14.2



Solvency Liability: Return -5.4% -6.4% 0.3% 4.6% -3.7%

Funded Ratio Change 9.5% 6.1% 2.8% -3.2% 3.8%


Highlights for the Quarter-Ending 9/30/2017 The plan's funded ratio increased to 90.3% at 9/30/2017. This result was primarily due to the combined effects of:

■ A decrease in liabilities primarily due to an increase in risk-free rates and accruals,


■ Asset performance lower than expected.

------------------$2,500

89.7% 90.3% 86.9% - 86.5% ---

$2,000 80~ - -- - -- -- - -

$1 ,500 - - ~ -

$1 ,000 ~ - ~ ~ ~ -

$500 ~ - ~ ~ ~ -

$0 9/30/16 12/31 /16 3/31/17 6/30/1 7 9/30/17

---------------------12%

10% ~ +9.5%

• 8% -6% ~

4% ~

2% ~

0%

-2% f---

-4% f-----6%

-8% TTM*

-+6.1%

r7

-2016 Q4

n +2-f¾

2017 Q1

-

r,

e -3.2%

2017 Q2

-

. +3.8%

r,

-

2017 Q3

-


7

Appendix



8

Actuarial Attestation This document is intended to provide to the University of Waterloo a summary of the performance of the Pension Plan as of September 30, 2017. This analysis is intended to assist University of Waterloo with a review of the associated issues and options, and its use may not be appropriate for other purposes. This analysis has been prepared solely for the benefit of University of Waterloo. Any further dissemination of this report is not allowed without the written consent of Aon Hewitt. In conducting the analysis, we have relied on plan design, demographic and financial information provided by other parties, including the plan sponsor. While we cannot verify the accuracy of all the information, the supplied information was reviewed for consistency and reasonableness. As a result of this review, we have no reason to doubt the substantial accuracy or completeness of the information and believe that it has produced appropriate results. Experience different than anticipated could have a material impact on the ultimate costs of the benefits. In addition, changes in plan provisions or applicable laws could have a substantial impact on cost. Actual experience may differ from our modeling assumptions. November 2017

Actuarial Methods & Assumptions Our analysis of the estimated financial position of the Pension Plan is based on the following:

Plan Provisions & Membership Data Same as in the Actuarial Valuation Results as of January 1, 2017 presentation to the Pension and Benefits Committee Meeting dated March 10, 2017

9/30/16 12/31/16 3/31/17 6/30//17 9/30//17 Going Concern Discount Rate 5.70% 5.70% 5.50% 5.50% 5.50% Inflation 2.00% 2.00% 2.00% 2.00% 2.00%

Risk-Free Benchmark Discount Rate 0.59% 0.91% 1.08% 0.98% 1.22%

Solvency Annuity Purchase Interest Rate 2.76% 3.12% 3.18% 2.88% 3.17% Effective Date of Annuity Purchase Guidance Used 6/30/16 12/31/16 3/31/17 6/30/17 9/30/17

Lump Sum Value Interest Rate (Years 1-10)1 1.60% 2.30% 2.20% 2.30% 2.90% Lump Sum Value Interest Rate (Years 10+)1 3.00% 3.70% 3.70% 3.30% 3.70% Mortality CPM2014 CPM2014 CPM2014 CPM2014 CPM2014

Underlying Canadian Reference Data CANSIM v39054 (7 Year) 0.76% 1.40% 1.31% 1.56% 1.96% CANSIM v39056 (30 Year Long Term) 1.66% 2.31% 2.31% 2.13% 2.49% CANSIM v39057 (30 Year Real Return) 0.19% 0.51% 0.68% 0.58% 0.83% CANSIM v39062 (Over 10 Years) 1.55% 2.21% 2.17% 2.07% 2.42%

All other assumptions and methods are the same as those shown in the Actuarial Valuation Results as of January 1, 2017 presentation to the Pension and Benefits Committee Meeting dated March 10, 2017. For the Risk-Free Benchmark basis, all other assumptions and methods are the same as those used for the Going Concern basis.

1 Lump Sum Value Interest Rates are based on rates in effective on the first day of the month following quarter end (i.e. January 1st, April 1st, July 1st and October 1st).



9

Liabilities

Assets

Asset-Liability Performance Attribution – Going Concern

■ Overall, assets returned 0.9% during this quarter, as opposed to an expected growth assumption of about 1.3% per quarter.

■ The fixed income assets lost value due to an increase in the underlying risk-free rates, partially offset by shrinking credit spreads.

■ The plan's return-seeking assets performed lower than expected during the quarter.

■$20.7 million in contributions were made during the quarter and the trust paid $15.9 million in benefits to the participants.

■ “Other” includes the impact of active management, and differences between policy and actual investment allocations.

■ Liabilities as of 9/30/2017 are based on 5.50%.

■ Liabilities were expected to grow by $22.1 million due to interest cost during the quarter.

■ New benefit accruals increased the liability by $16.9 million during the quarter.

■ Plan liabilities decreased by $15.9 million during the quarter as benefits were paid.


Funded Ratio

■Overall, assets returned 0.9% during this quarter, as opposed to an expected growth assumption of about 1.3% per quarter, resulting in a funded status decrease of 0.4%.

■Contributions exceeded benefit accruals during the quarter, resulting in a net increase of 0.3% in the funded status.


---i------------------Sl,640

Sl,620

Sl,600

S 1,580

$1 ,604.4 at6 30 2017

Expected Growth

Conrribs Benefit Payments

(Sl.1)

Expenses Other $1,622.7 at 9 30 2017

---i------------------

Sl,660

Sl,640

Sl,620

Sl ,600

$1 ,6 2 9 .6 at6 30 2017

S22.1 Expected Growth

S 16.9 Accruals

(S 15.9) Benefit

Payments

so.o Expenses

(SO.I )

Other S 1 ,6 52.6 at 9 30 2017

---i------------------98.696

98.496

98.296

9896

97.896 98.596

at 6 30 '2017

-0.296 Expected Growth

0.396 Contribs And

Accruals

0.096 Benefit

Payments Expenses Other 98 .296

at 9 30.•2017


10

Liabilities

Assets

Asset-Liability Performance Attribution – Risk-Free Benchmark




■ $20.7 million in contributions were made during the quarter and the trust paid $15.9 million in benefits to the participants.



■ Risk-free rates increased, resulting in an $134.3 million decrease in liabilities.

■ Inflation expectations increased, resulting in a $18.5 million increase in the liability.




Funded Ratio

■ Overall, the difference in exposure to risk-free rates between assets and liabilities combined with changes in risk-free rates resulted in an increase in funded status of 2.7%.

■ Changes in inflation resulted in a decrease in funded status of 0.5%.

■ Return-seeking assets did not perform as well as expected during the quarter, deducting 0.1% from the plan's funded status during the period.


$2,527.9 $2,442.7at 6/30/17 at 9/30/17

$6.9 $18.5 $0.0 $0.0 $32.5 $7.1 ($134.3) ($15.9) $0.0 $2,200

$2,300

$2,400

$2,500

$2,600

$2,700

ExpectedGrowth

Risk-FreeRates

Inflation CreditSpreads

ExcessReturnSeekingAssets

Accruals BenefitPayments

Expenses Other

63.5% 66.4%at 6/30/17 at 9/30/17

+3.3% -0.5% +0.0% -0.1% +0.0% +0.5%+2.7% -0.3% +0.0%54%56%58%60%62%64%66%68%

ExpectedGrowth

Risk-FreeRates



Contributionsand

Accruals

BenefitPayments

Expenses Other

$1,604.4 $1,622.7at 6/30/17 at 9/30/17

$19.9 $0.0 $1.7 ($3.7) $20.7 $17.7 ($21.0) ($15.9) ($1.1)$1,200

$1,300

$1,400

$1,500

$1,600

$1,700

ExpectedGrowth

Risk-FreeRates



Contributions BenefitPayments

Expenses Other

---~--------------

---~--------------

•..... ., ............. , .... ,, ................................................................ .

---~--------------


11

Liabilities

Assets

Asset-Liability Performance Attribution – Solvency




■ $20.7 million in contributions were made during the quarter and the trust paid $15.9 million in benefits to the participants.



■ Risk-free rates increased, and the annuity purchase spreads narrowed, resulting in a net decrease of $82.7 million ($98.7 million - $16.0 million).




Funded Ratio

■ Overall, the difference in exposure to risk-free rates between assets and liabilities combined with changes in risk-free rates resulted in an increase in funded status of 3.7%.

■Changes in credit spreads and the annuity purchase spreads resulted in a decrease in funded status of 0.7%.

■Return-seeking assets did not perform as well as expected during the quarter, deducting 0.2% from the plan's funded status during the period.

■ Benefit accruals exceeded contributions during the quarter, resulting in a net decrease of 0.2% in the funded status.


---Sl,600

Sl ,550

Sl,500

S 1,450 Sl 9.9 ($21.0) S 1.7 ($3.7)

Sl ,604.4 Expected Risk- Free Credit Excess Contr ibs Benefit Expenses Other Sl,622.7 at Growth Rates Spreads Return Payments at

6 30 2017 Seeki ng 9 30 201 7 Assets

---Sl ,850

Sl,800

Sl ,750

Sl ,700

so.a S0.2 Sl ,854.6 Expected Risk-Free Credit Excess Accruals Benefit Expenses Other S 1,796.7

at Growth Rates Spreads Return Paym ents at 6 30 2017 Seeki ng 9 30 12017

Assets

---90%

87.596

8596

82.596

80% -0.296 -0.296 -0.196 -0.196

86. 596 Expected Risk- Free Credit Excess Contr ibs Benefit Expenses Other 90.396 at Growth Rates Spreads Return And Payments at

6 30 2017 See king Accruals 9 30 '2017 Assets


12

Asset Allocation and Benchmarking

Asset Class 9/30/2017 Alternatives

■ MSCI USA REIT Index 2.9%

■ MSCI USA Infrastructure Index 7.9%

Fixed Income

■ FTSE TMX Universe Bond Index 48.7%

Equities

■ MSCI World Index 36.6%

■ S&P TSX 3.8%

Total 100.0%



13

Glossary of Terms ■ Funded Status and Asset-Liability Return

— Liability Return reflects the growth in liability due solely to interest rate movements and excludes the impact of Accruals and Benefit Payments.

■ Asset Liability Performance Attribution

— Expected Growth reflects assets growing at the expected annual return and liabilities increasing at the interest rate1.

— Risk-Free Rates splits out the expected movement in assets and liabilities based on movements in federal bond yields.

— Inflation splits out the expected movement in assets and liabilities based on movements in implied inflation, determined based on real and nominal federal bond yields.

— Credit Spreads splits out the expected movements in corporate and provincial bond yields in excess of federal bond yields.

— Excess Return-Seeking Assets defines the movement in the Return-Seeking assets based on benchmark returns in excess of expectations. The expectations are defined by the long-term capital market assumptions of the plan and are reflected in "expected growth".

— Benefit Payments displays the expected decrease in assets and liabilities due to benefit payments during the period.

— Contributions/Accruals displays the expected increase in assets and liabilities due to employer contributions and new benefit accruals, respectively.

— Other includes fixed income returns due to coupons and other active management effects, from the asset perspective. From a liability perspective, this bucket includes all liability changes not explained by financial movements during the period.


1 On the Risk Free basis, the expected growth of liabilities is based on the net interest rate, and the expected growth due to inflation is included in the benefit accrual.


Executive Summary

Page 1


Manager OverviewExecutive Summary

As of 30 September 2017

Manager Mandate Annual Fee (%) Aon Hewitt Rating Comments

Sionna Canadian Equity 0.365 Buy No comments.

TDAM U.S. Equity Index

0.035

Buy

No comments.

TDAM International Equity Index Buy

TDAM Universe Bond Index Buy

TDAM Active Short Term Corporate Bond

0.102 Not Rated

Oldfield Global Equity 0.750 Qualified No comments.

Trilogy Global Equity 0.526 Qualified No comments.

Walter Scott Global Equity 0.713 Buy Donald J. Heberte, currently CEO of BNY Mellon Wealth Management, was appointed to the Board of Walter Scott & Partners Limited in August 2017.

Brookfield Infrastructure - Not Rated No comments.

iShares S&P/TSX REIT - Not Rated No comments.

Total Fund ex. Currency Overlay 0.275 - Continue to monitor.

Page 2


AllocationMarketValue($000)

%

Performance (%)

1Quarter

YearTo

Date

1Year

2Years

3Years

4Years

5Years

10Years

Total Fund ex. Currency Overlay 1,607,744 100.0 0.35 (84) 5.40 (37) 6.25 (40) 7.75 (51) 7.95 (11) 8.77 (73) 8.41 (85) 5.62 (79)CPI + 3.5% - Moving 1.17 (31) 4.53 (59) 5.16 (71) 5.13 (99) 5.03 (97) 5.24 (100) 5.18 (100) 5.42 (89)Value Added -0.82 0.87 1.09 2.62 2.92 3.53 3.23 0.20Balanced Funds Median 0.87 4.66 6.07 7.77 7.03 9.16 9.81 6.22

Sionna 62,245 3.9 4.05 (32) 5.15 (32) 13.20 (13) 16.00 (6) 6.33 (33) 9.01 (58) 9.50 (69) 5.59 (54)S&P/TSX Composite 3.68 (39) 4.45 (47) 9.18 (50) 11.67 (49) 4.54 (72) 8.29 (68) 8.06 (91) 4.06 (82)Value Added 0.37 0.70 4.02 4.33 1.79 0.72 1.44 1.53Canadian Equity Median 3.37 4.36 9.16 11.62 5.54 9.44 10.26 5.72Oldfield 143,129 8.9 1.65 (44) 4.64 (92) 18.43 (14) 14.19 (16) 12.38 (54) 12.67 (85) 15.33 (82) 6.95 (71)MSCI World Index (Net) (CAD) 0.96 (62) 8.19 (64) 12.45 (64) 10.79 (58) 11.81 (65) 14.27 (60) 16.45 (65) 6.64 (78)Value Added 0.69 -3.55 5.98 3.40 0.57 -1.60 -1.12 0.31Global Equity Median 1.40 9.71 13.81 11.27 12.61 14.82 17.14 8.00Trilogy 193,470 12.0 1.45 (49) 11.22 (40) 17.68 (18) 12.18 (36) 12.50 (52) 14.14 (63) 16.49 (64) 7.35 (64)MSCI World Index (Net) (CAD) 0.96 (62) 8.19 (64) 12.45 (64) 10.79 (58) 11.81 (65) 14.27 (60) 16.45 (65) 6.64 (78)Value Added 0.49 3.03 5.23 1.39 0.69 -0.13 0.04 0.71Global Equity Median 1.40 9.71 13.81 11.27 12.61 14.82 17.14 8.00Walter Scott 233,254 14.5 0.61 (68) 10.65 (45) 11.59 (69) 11.80 (42) 13.29 (37) 14.48 (57) 16.45 (65) 9.51 (17)MSCI World Index (Net) (CAD) 0.96 (62) 8.19 (64) 12.45 (64) 10.79 (58) 11.81 (65) 14.27 (60) 16.45 (65) 6.64 (78)Value Added -0.35 2.46 -0.86 1.01 1.48 0.21 0.00 2.87Global Equity Median 1.40 9.71 13.81 11.27 12.61 14.82 17.14 8.00Global Equities 569,854 35.4 1.16 (56) 9.26 (53) 15.29 (36) 12.52 (30) 12.76 (48) 13.82 (68) 16.11 (72) 4.93 (94)MSCI World Index (Net) (CAD) 0.96 (62) 8.19 (64) 12.45 (64) 10.79 (58) 11.81 (65) 14.27 (60) 16.45 (65) 6.64 (78)Value Added 0.20 1.07 2.84 1.73 0.95 -0.45 -0.34 -1.71Global Equity Median 1.40 9.71 13.81 11.27 12.61 14.82 17.14 8.00

Executive Summary

Performance SummaryAs of 30 September 2017

Parentheses contain percentile rankings. (1st percentile is the best performing). All returns are reported gross of fees.There was no exposure to Canadian Equities from January 2012 to April 2012. *In November 2016, TD Emerald U.S. pooled and International Index funds were added. Returns prior to these arerepresentative only. CPI+3.5% benchmark has been implemented retrospectively since 1 January 2017. Prior to that, CPI+3.7% benchmark was implemented since 1 January 2016, CPI+3.75%benchmark was implemented since 1 January 2014 and CPI+3.85% prior to that.Returns for Sionna before May 2012, Oldfield before July 2011, Trilogy before April 2008 and Walter Scott beforeJuly 2009 are based on composite returns.

Page 4


Executive Summary

Performance SummaryAs of 30 September 2017

AllocationMarketValue($000)

%

Performance (%)

1Quarter

YearTo

Date

1Year

2Years

3Years

4Years

5Years

10Years

TD Emerald U.S. Pooled Fund* 9,768 0.6 0.61 (56) 6.44 (55) 12.76 (59) 12.91 (32) 14.98 (42) - - -S&P 500 (CAD) 0.61 (56) 6.54 (54) 12.87 (57) 13.01 (31) 15.05 (40) 18.66 (34) 19.84 (52) 9.94 (66)Value Added 0.00 -0.10 -0.11 -0.10 -0.07 - - -U.S. Equity Median 0.86 6.99 13.45 11.87 14.50 17.82 19.87 10.48TD Emerald International Equity Index* 6,954 0.4 1.49 (64) 11.89 (74) 13.35 (60) 8.79 (69) 9.11 (79) 10.19 (84) 13.79 (74) 3.82 (90)MSCI EAFE (Net) (CAD) 1.50 (63) 11.87 (74) 13.34 (61) 8.79 (69) 9.05 (81) 10.11 (85) 13.70 (76) 3.70 (91)Value Added -0.01 0.02 0.01 0.00 0.06 0.08 0.09 0.12International Equity Median 1.94 13.39 14.10 9.83 10.63 11.67 15.01 5.30TDAM Universe Bond Index 304,223 18.9 -1.87 (93) 0.41 (86) -3.09 (94) 1.46 (96) 2.71 (82) 3.59 (87) 2.56 (87) 4.65 (94)FTSE TMX Universe Bond -1.84 (91) 0.48 (78) -2.97 (90) 1.56 (93) 2.79 (75) 3.66 (68) 2.66 (77) 4.74 (87)Value Added -0.03 -0.07 -0.12 -0.10 -0.08 -0.07 -0.10 -0.09Canadian Bonds Median -1.68 0.72 -2.33 1.98 2.95 3.84 2.95 5.03TDAM Active Short Term Corporate 316,773 19.7 -0.34 0.48 0.32 1.80 - - - -FTSE TMX Canada Short Term Corporate Bond -0.27 0.54 0.41 1.72 2.16 2.53 2.43 4.17Value Added -0.07 -0.06 -0.09 0.08 - - - -

Real Estate 47,852 3.0 0.07 3.78 4.10 8.16 5.35 6.91 3.40 -

Brookfield 127,874 8.0 2.52 23.64 23.60 35.33 29.81 25.65 23.74 -

Operating Account 162,185 10.1Real Return Bonds 139,818 8.7 0.22 0.67 0.84 0.72 0.72 0.75 1.01 -Operating Account 22,367 1.4 0.28 0.30 0.31 0.06 0.09 0.10 0.18 0.56Currency Overlay EffectTotal Fund & CO 1,615,766 100.5 0.47 5.20 6.39 7.95 7.57 8.36 8.07 4.91Total Fund ex CO 0.35 5.40 6.25 7.75 7.95 8.77 8.41 5.62Value Added 0.12 -0.20 0.14 0.20 -0.38 -0.41 -0.34 -0.71Real Return Bonds - 0.0 - - - - - - - -

Parentheses contain percentile rankings. (1st percentile is the best performing). All returns are reported gross of fees.There was no exposure to Canadian Equities from January 2012 to April 2012. *In November 2016, TD Emerald U.S. pooled and International Index funds were added. Returns prior to these arerepresentative only. CPI+3.5% benchmark has been implemented retrospectively since 1 January 2017. Prior to that, CPI+3.7% benchmark was implemented since 1 January 2016, CPI+3.75%benchmark was implemented since 1 January 2014 and CPI+3.85% prior to that.Returns for Sionna before May 2012, Oldfield before July 2011, Trilogy before April 2008 and Walter Scott beforeJuly 2009 are based on composite returns.

Page 5


2017 2016 2015 2014 2013 2012 2011 2010 2009 2008Total Fund ex. Currency Overlay 6.25 (40) 9.29 (59) 8.35 (9) 11.25 (100) 7.00 (95) 8.78 (86) 6.11 (3) 7.60 (53) 2.83 (87) -9.71 (65)CPI + 3.5% - Moving 5.16 (71) 5.10 (99) 4.82 (59) 5.88 (100) 4.96 (98) 5.06 (99) 7.14 (3) 5.84 (87) 2.95 (86) 7.38 (1)Value Added 1.09 4.19 3.53 5.37 2.04 3.72 -1.03 1.76 -0.12 -17.09Balanced Funds Median 6.07 9.62 5.33 15.55 12.19 10.47 0.28 7.81 5.90 -8.97

Sionna 13.20 (13) 18.87 (7) -10.65 (83) 17.46 (91) 11.45 (65) 11.76 (45) -1.62 (32) 11.31 (51) -0.16 (71) -10.44 (12)S&P/TSX Composite 9.18 (50) 14.21 (48) -8.38 (71) 20.38 (57) 7.12 (94) 9.17 (87) -3.55 (48) 11.60 (47) 0.51 (65) -14.40 (43)Value Added 4.02 4.66 -2.27 -2.92 4.33 2.59 1.93 -0.29 -0.67 3.96Canadian Equity Median 9.16 13.99 -4.92 20.66 13.29 11.39 -3.79 11.39 2.13 -15.11Canadian Equities 13.20 (13) 18.87 (7) -10.65 (83) 17.46 (91) 11.45 (65) - - - - -S&P/TSX Composite 9.18 (50) 14.21 (48) -8.38 (71) 20.38 (57) 7.12 (94) 9.17 (87) -3.55 (48) 11.60 (47) 0.51 (65) -14.40 (43)Value Added 4.02 4.66 -2.27 -2.92 4.33 - - - - -Canadian Equity Median 9.16 13.99 -4.92 20.66 13.29 11.39 -3.79 11.39 2.13 -15.11Oldfield 18.43 (14) 10.10 (43) 8.83 (84) 13.57 (97) 26.60 (51) 4.85 (98) 4.68 (10) 11.35 (12) -11.36 (99) -11.38 (11)MSCI World Index (Net) (CAD) 12.45 (64) 9.16 (52) 13.86 (62) 21.98 (40) 25.58 (56) 14.81 (54) -2.84 (58) 2.04 (79) -1.36 (72) -20.87 (60)Value Added 5.98 0.94 -5.03 -8.41 1.02 -9.96 7.52 9.31 -10.00 9.49Global Equity Median 13.81 9.32 15.11 21.16 26.60 15.25 -2.23 4.69 1.73 -20.00Trilogy 17.68 (18) 6.93 (71) 13.14 (67) 19.22 (72) 26.38 (51) 18.09 (21) -2.15 (50) 4.73 (50) 0.31 (61) -21.96 (70)MSCI World Index (Net) (CAD) 12.45 (64) 9.16 (52) 13.86 (62) 21.98 (40) 25.58 (56) 14.81 (54) -2.84 (58) 2.04 (79) -1.36 (72) -20.87 (60)Value Added 5.23 -2.23 -0.72 -2.76 0.80 3.28 0.69 2.69 1.67 -1.09Global Equity Median 13.81 9.32 15.11 21.16 26.60 15.25 -2.23 4.69 1.73 -20.00Walter Scott 11.59 (69) 12.02 (24) 16.33 (39) 18.09 (81) 24.68 (63) 14.84 (54) -0.16 (31) 4.76 (50) 7.58 (20) -10.40 (10)MSCI World Index (Net) (CAD) 12.45 (64) 9.16 (52) 13.86 (62) 21.98 (40) 25.58 (56) 14.81 (54) -2.84 (58) 2.04 (79) -1.36 (72) -20.87 (60)Value Added -0.86 2.86 2.47 -3.89 -0.90 0.03 2.68 2.72 8.94 10.47Global Equity Median 13.81 9.32 15.11 21.16 26.60 15.25 -2.23 4.69 1.73 -20.00Global Equities 15.29 (36) 9.81 (4) 13.25 (66) 17.07 (88) 25.75 (56) 13.21 (70) -0.70 (35) 4.21 (54) -6.25 (92) -30.20 (96)MSCI World Index (Net) (CAD) 12.45 (64) 9.16 (6) 13.86 (62) 21.98 (40) 25.58 (56) 14.81 (54) -2.84 (58) 2.04 (79) -1.36 (72) -20.87 (60)Value Added 2.84 0.65 -0.61 -4.91 0.17 -1.60 2.14 2.17 -4.89 -9.33Global Equity Median 13.81 -3.16 15.11 21.16 26.60 15.25 -2.23 4.69 1.73 -20.00

Executive Summary

Rolling Year PerformanceAs of 30 September 2017

Parentheses contain percentile rankings. (1st percentile is the best performing). All returns are reported gross of fees.There was no exposure to Canadian Equities from January 2012 to April 2012. *In November 2016, TD Emerald U.S. pooled and International Index funds were added. Returns prior to these arerepresentative only.CPI+3.5% benchmark has been implemented retrospectively since 1 January 2017. Prior to that, CPI+3.7% benchmark was implemented since 1 January 2016, CPI+3.75%benchmark was implemented since 1 January 2014 and CPI+3.85% prior to that..Returns for Sionna before May 2012, Oldfield before July 2011, Trilogy before April 2008 and Walter Scott beforeJuly 2009 are based on composite returns.

Page 6


Executive Summary

Rolling Year PerformanceAs of 30 September 2017

2017 2016 2015 2014 2013 2012 2011 2010 2009 2008TD Emerald U.S. Pooled Fund* 12.76 (59) 13.06 (22) 19.23 (59) - - - - - - -S&P 500 (CAD) 12.87 (57) 13.15 (21) 19.23 (59) 30.18 (28) 24.67 (75) 22.94 (33) 2.74 (47) 5.29 (54) -6.02 (71) -16.52 (67)Value Added -0.11 -0.09 0.00 - - - - - - -U.S. Equity Median 13.45 10.09 20.54 28.16 27.46 20.92 2.42 5.45 -3.47 -14.49TD Emerald International Equity Index* 13.35 (60) 4.42 (62) 9.75 (75) 13.50 (69) 29.39 (48) 7.61 (81) -7.77 (62) -1.23 (83) 4.44 (48) -25.49 (62)MSCI EAFE (Net) (CAD) 13.34 (61) 4.42 (62) 9.58 (76) 13.34 (71) 29.30 (49) 7.41 (82) -7.92 (63) -1.30 (83) 4.21 (49) -25.64 (63)Value Added 0.01 0.00 0.17 0.16 0.09 0.20 0.15 0.07 0.23 0.15International Equity Median 14.10 5.43 12.52 15.00 29.13 10.58 -7.03 1.63 4.04 -24.08TDAM Universe Bond Index -3.09 (94) 6.22 (78) 5.27 (40) 6.25 (69) -1.44 (89) 5.31 (89) 6.80 (19) 7.13 (88) 9.99 (83) 4.74 (27)FTSE TMX Canada Bond Universe -2.97 (90) 6.31 (76) 5.29 (39) 6.34 (66) -1.28 (79) 5.45 (87) 6.66 (27) 7.33 (86) 10.34 (74) 4.62 (35)Value Added -0.12 -0.09 -0.02 -0.09 -0.16 -0.14 0.14 -0.20 -0.35 0.12Canadian Bonds Median -2.33 6.63 5.07 6.56 -0.73 6.21 6.37 8.03 11.65 4.29TDAM Active Short Term Corporate 0.32 3.30 - - - - - - - -FTSE TMX Canada Short Term Corporate Bond 0.41 3.06 3.03 3.68 2.01 4.02 3.87 5.65 11.68 4.70Value Added -0.09 0.24 - - - - - - - -

Real Estate 4.10 12.38 -0.07 11.76 -9.52 - - - - -

Brookfield 23.60 48.17 19.43 13.98 16.37 - - - - -

Parentheses contain percentile rankings. (1st percentile is the best performing). All returns are reported gross of fees.There was no exposure to Canadian Equities from January 2012 to April 2012. *In November 2016, TD Emerald U.S. pooled and International Index funds were added. Returns prior to these arerepresentative only.CPI+3.5% benchmark has been implemented retrospectively since 1 January 2017. Prior to that, CPI+3.7% benchmark was implemented since 1 January 2016, CPI+3.75%benchmark was implemented since 1 January 2014 and CPI+3.85% prior to that..Returns for Sionna before May 2012, Oldfield before July 2011, Trilogy before April 2008 and Walter Scott beforeJuly 2009 are based on composite returns.

Page 7


Performance (%)1

Quarter1

Year2

Years3

Years4

Years5

Years10

YearsTotal Fund ex. Currency Overlay 0.28 (85) 5.91 (56) 7.44 (70) 7.65 (23) 8.47 (84) 8.11 (90) 5.34 (93)CPI + 3.5% - Moving 1.17 (31) 5.16 (71) 5.13 (99) 5.03 (97) 5.24 (100) 5.18 (100) 5.42 (89)Value Added -0.89 0.75 2.31 2.62 3.23 2.93 -0.08Balanced Funds Median 0.87 6.07 7.77 7.03 9.16 9.81 6.22

Sionna 3.96 (34) 12.79 (15) 15.58 (8) 5.94 (43) 8.61 (66) 9.09 (77) 5.14 (60)S&P/TSX Composite 3.68 (39) 9.18 (50) 11.67 (49) 4.54 (72) 8.29 (68) 8.06 (91) 4.06 (82)Value Added 0.28 3.61 3.91 1.40 0.32 1.03 1.08Canadian Equity Median 3.37 9.16 11.62 5.54 9.44 10.26 5.72Oldfield 1.46 (49) 17.56 (19) 13.42 (20) 11.60 (68) 11.88 (89) 14.51 (87) 6.17 (85)MSCI World Index (Net) (CAD) 0.96 (62) 12.45 (64) 10.79 (58) 11.81 (65) 14.27 (60) 16.45 (65) 6.64 (78)Value Added 0.50 5.11 2.63 -0.21 -2.39 -1.94 -0.47Global Equity Median 1.40 13.81 11.27 12.61 14.82 17.14 8.00Trilogy 1.32 (52) 17.07 (21) 11.55 (45) 11.88 (64) 13.53 (73) 15.87 (74) 6.77 (74)MSCI World Index (Net) (CAD) 0.96 (62) 12.45 (64) 10.79 (58) 11.81 (65) 14.27 (60) 16.45 (65) 6.64 (78)Value Added 0.36 4.62 0.76 0.07 -0.74 -0.58 0.13Global Equity Median 1.40 13.81 11.27 12.61 14.82 17.14 8.00Walter Scott 0.43 (72) 10.80 (72) 11.01 (55) 12.48 (53) 13.64 (71) 15.60 (78) 8.68 (31)MSCI World Index (Net) (CAD) 0.96 (62) 12.45 (64) 10.79 (58) 11.81 (65) 14.27 (60) 16.45 (65) 6.64 (78)Value Added -0.53 -1.65 0.22 0.67 -0.63 -0.85 2.04Global Equity Median 1.40 13.81 11.27 12.61 14.82 17.14 8.00Global Equities 0.99 (61) 14.54 (43) 11.79 (42) 12.07 (61) 13.12 (80) 15.39 (81) 4.24 (97)MSCI World Index (Net) (CAD) 0.96 (62) 12.45 (64) 10.79 (58) 11.81 (65) 14.27 (60) 16.45 (65) 6.64 (78)Value Added 0.03 2.09 1.00 0.26 -1.15 -1.06 -2.40Global Equity Median 1.40 13.81 11.27 12.61 14.82 17.14 8.00

Executive Summary

Performance Summary (Net of Fees)As of 30 September 2017

Parentheses contain percentile rankings. (1st percentile is the best performing).There was no exposure to Canadian Equities from January 2012 to April 2012. *In November 2016, TD Emerald U.S. pooled and International Index funds were added. Returns prior to these arerepresentative only.CPI+3.5% benchmark has been implemented retrospectively since 1 January 2017. Prior to that, CPI+3.7% benchmark was implemented since 1 January 2016, CPI+3.75%benchmark was implemented since 1 January 2014 and CPI+3.85% prior to that.Returns for Sionna before May 2012, Oldfield before July 2011, Trilogy before April 2008 and Walter Scott before July2009 are based on composite returns.

Page 8


Executive Summary

Performance Summary (Net of Fees)As of 30 September 2017

Performance (%)1

Quarter1

Year2

Years3

Years4

Years5

Years10

YearsTD Emerald Pooled U.S. Fund* 0.60 (56) 12.70 (59) 12.86 (32) 14.93 (42) - - -S&P 500 (CAD) 0.61 (56) 12.87 (57) 13.01 (31) 15.05 (40) 18.66 (34) 19.84 (52) 9.94 (66)Value Added -0.01 -0.17 -0.15 -0.12 - - -U.S. Equity Median 0.86 13.45 11.87 14.50 17.82 19.87 10.48TD Emerald International Equity Index* 1.48 (65) 13.32 (61) 8.76 (69) 9.08 (80) 10.16 (85) 13.75 (74) 3.79 (90)MSCI EAFE (Net) (CAD) 1.50 (63) 13.34 (61) 8.79 (69) 9.05 (81) 10.11 (85) 13.70 (76) 3.70 (91)Value Added -0.02 -0.02 -0.03 0.03 0.05 0.05 0.09International Equity Median 1.94 14.10 9.83 10.63 11.67 15.01 5.30TDAM Universe Bond Index -1.90 (96) -3.16 (96) 1.41 (96) 2.67 (84) 3.54 (88) 2.52 (92) 4.61 (96)FTSE TMX Universe Bond -1.84 (91) -2.97 (90) 1.56 (93) 2.79 (75) 3.66 (68) 2.66 (77) 4.74 (87)Value Added -0.06 -0.19 -0.15 -0.12 -0.12 -0.14 -0.13Canadian Bonds Median -1.68 -2.33 1.98 2.95 3.84 2.95 5.03TDAM Active Short Term Corporate -0.36 0.22 1.69 - - - -FTSE TMX Canada Short Term Corporate Bond -0.27 0.41 1.72 2.16 2.53 2.43 4.17Value Added -0.09 -0.19 -0.03 - - - -

Parentheses contain percentile rankings. (1st percentile is the best performing).There was no exposure to Canadian Equities from January 2012 to April 2012. *In November 2016, TD Emerald U.S. pooled and International Index funds were added. Returns prior to these arerepresentative only.CPI+3.5% benchmark has been implemented retrospectively since 1 January 2017. Prior to that, CPI+3.7% benchmark was implemented since 1 January 2016, CPI+3.75%benchmark was implemented since 1 January 2014 and CPI+3.85% prior to that.Returns for Sionna before May 2012, Oldfield before July 2011, Trilogy before April 2008 and Walter Scott before July2009 are based on composite returns.

Page 9


2017 2016 2015 2014 2013 2012 2011 2010 2009 2008Total Fund ex. Currency Overlay 5.91 (56) 9.00 (68) 8.07 (12) 10.95 (100) 6.70 (96) 8.51 (87) 5.86 (3) 7.34 (60) 2.58 (87) -9.93 (67)CPI + 3.5% - Moving 5.16 (71) 5.10 (99) 4.82 (59) 5.88 (100) 4.96 (98) 5.06 (99) 7.14 (3) 5.84 (87) 2.95 (86) 7.38 (1)Value Added 0.75 3.90 3.25 5.07 1.74 3.45 -1.28 1.50 -0.37 -17.31Balanced Funds Median 6.07 9.62 5.33 15.55 12.19 10.47 0.28 7.81 5.90 -8.97

Sionna 12.79 (15) 18.44 (11) -10.99 (84) 17.03 (92) 11.04 (70) 11.27 (52) -2.11 (36) 10.77 (56) -0.65 (74) -10.88 (14)S&P/TSX Composite 9.18 (50) 14.21 (48) -8.38 (71) 20.38 (57) 7.12 (94) 9.17 (87) -3.55 (48) 11.60 (47) 0.51 (65) -14.40 (43)Value Added 3.61 4.23 -2.61 -3.35 3.92 2.10 1.44 -0.83 -1.16 3.52Canadian Equity Median 9.16 13.99 -4.92 20.66 13.29 11.39 -3.79 11.39 2.13 -15.11Canadian Equities 12.99 (15) 18.44 (11) -10.99 (84) 17.03 (92) 11.04 (70) - - - - -S&P/TSX Composite 9.18 (50) 14.21 (48) -8.38 (71) 20.38 (57) 7.12 (94) 9.17 (87) -3.55 (48) 11.60 (47) 0.51 (65) -14.40 (43)Value Added 3.81 4.23 -2.61 -3.35 3.92 - - - - -Canadian Equity Median 9.16 13.99 -4.92 20.66 13.29 11.39 -3.79 11.39 2.13 -15.11Oldfield 17.56 (19) 9.43 (49) 8.03 (87) 12.73 (98) 25.67 (56) 4.07 (98) 3.90 (13) 10.53 (14) -12.03 (100) -12.05 (11)MSCI World Index (Net) (CAD) 12.45 (64) 9.16 (52) 13.86 (62) 21.98 (40) 25.58 (56) 14.81 (54) -2.84 (58) 2.04 (79) -1.36 (72) -20.87 (60)Value Added 5.11 0.27 -5.83 -9.25 0.09 -10.74 6.74 8.49 -10.67 8.82Global Equity Median 13.81 9.32 15.11 21.16 26.60 15.25 -2.23 4.69 1.73 -20.00Trilogy 17.07 (21) 6.30 (79) 12.54 (69) 18.61 (78) 25.72 (56) 17.46 (27) -2.68 (56) 4.17 (54) -0.23 (64) -22.39 (73)MSCI World Index (Net) (CAD) 12.45 (64) 9.16 (52) 13.86 (62) 21.98 (40) 25.58 (56) 14.81 (54) -2.84 (58) 2.04 (79) -1.36 (72) -20.87 (60)Value Added 4.62 -2.86 -1.32 -3.37 0.14 2.65 0.16 2.13 1.13 -1.52Global Equity Median 13.81 9.32 15.11 21.16 26.60 15.25 -2.23 4.69 1.73 -20.00Walter Scott 10.80 (72) 11.21 (30) 15.48 (48) 17.21 (86) 23.75 (71) 13.98 (64) -0.92 (38) 3.97 (57) 6.73 (24) -11.13 (11)MSCI World Index (Net) (CAD) 12.45 (64) 9.16 (52) 13.86 (62) 21.98 (40) 25.58 (56) 14.81 (54) -2.84 (58) 2.04 (79) -1.36 (72) -20.87 (60)Value Added -1.65 2.05 1.62 -4.77 -1.83 -0.83 1.92 1.93 8.09 9.74Global Equity Median 13.81 9.32 15.11 21.16 26.60 15.25 -2.23 4.69 1.73 -20.00Global Equities 14.54 (43) 9.10 (53) 12.64 (68) 16.35 (90) 24.91 (62) 12.45 (75) -1.38 (42) 3.50 (66) -6.89 (94) -30.69 (97)MSCI World Index (Net) (CAD) 12.45 (64) 9.16 (52) 13.86 (62) 21.98 (40) 25.58 (56) 14.81 (54) -2.84 (58) 2.04 (79) -1.36 (72) -20.87 (60)Value Added 2.09 -0.06 -1.22 -5.63 -0.67 -2.36 1.46 1.46 -5.53 -9.82Global Equity Median 13.81 9.32 15.11 21.16 26.60 15.25 -2.23 4.69 1.73 -20.00

Executive Summary

Rolling Year Performance (Net of Fees)As of 30 September 2017

Parentheses contain percentile rankings. (1st percentile is the best performing).There was no exposure to Canadian Equities from January 2012 to April 2012. *In November 2016, TD Emerald U.S. pooled and International Index funds were added. Returns prior to these arerepresentative only. CPI+3.5% benchmark has been implemented retrospectively since 1 January 2017. Prior to that, CPI+3.7% benchmark was implemented since 1 January 2016, CPI+3.75%benchmark was implemented since 1 January 2014 and CPI+3.85% prior to that.Returns for Sionna before May 2012, Oldfield before July 2011, Trilogy before April 2008 and Walter Scott before July2009 are based on composite returns.

Page 10


Executive Summary

Rolling Year Performance (Net of Fees)As of 30 September 2017

2017 2016 2015 2014 2013 2012 2011 2010 2009 2008TD Emerald Pooled U.S. Fund* 12.70 (59) 13.02 (22) 19.19 (59) - - - - - - -S&P 500 (CAD) 12.87 (57) 13.15 (21) 19.23 (59) 30.18 (28) 24.67 (75) 22.94 (33) 2.74 (47) 5.29 (54) -6.02 (71) -16.52 (67)Value Added -0.17 -0.13 -0.04 - - - - - - -U.S. Equity Median 13.45 10.09 20.54 28.16 27.46 20.92 2.42 5.45 -3.47 -14.49TD Emerald International Equity Index* 13.32 (61) 4.38 (62) 9.71 (75) 13.46 (69) 29.34 (48) 7.57 (81) -7.80 (62) -1.27 (83) 4.40 (49) -25.51 (62)MSCI EAFE (Net) (CAD) 13.34 (61) 4.42 (62) 9.58 (76) 13.34 (71) 29.30 (49) 7.41 (82) -7.92 (63) -1.30 (83) 4.21 (49) -25.64 (63)Value Added -0.02 -0.04 0.13 0.12 0.04 0.16 0.12 0.03 0.19 0.13International Equity Median 14.10 5.43 12.52 15.00 29.13 10.58 -7.03 1.63 4.04 -24.08TDAM Universe Bond Index -3.16 (96) 6.19 (79) 5.24 (45) 6.22 (70) -1.47 (90) 5.27 (91) 6.77 (20) 7.09 (89) 9.95 (83) 4.70 (32)FTSE TMX Canada Universe Bond Index - C$ -2.97 (90) 6.30 (76) 5.29 (39) 6.34 (66) -1.28 (79) 5.45 (87) 6.66 (27) 7.33 (86) 10.34 (74) 4.62 (34)Value Added -0.19 -0.11 -0.05 -0.12 -0.19 -0.18 0.11 -0.24 -0.39 0.08Canadian Bonds Median -2.33 6.63 5.07 6.56 -0.73 6.21 6.37 8.03 11.65 4.29TDAM Active Short Term Corporate 0.22 3.18 - - - - - - - -FTSE TMX Canada Short Term Corporate Bond 0.41 3.06 3.03 3.68 2.01 4.02 3.87 5.65 11.68 4.70Value Added -0.19 0.12 - - - - - - - -

Parentheses contain percentile rankings. (1st percentile is the best performing).There was no exposure to Canadian Equities from January 2012 to April 2012. *In November 2016, TD Emerald U.S. pooled and International Index funds were added. Returns prior to these arerepresentative only. CPI+3.5% benchmark has been implemented retrospectively since 1 January 2017. Prior to that, CPI+3.7% benchmark was implemented since 1 January 2016, CPI+3.75%benchmark was implemented since 1 January 2014 and CPI+3.85% prior to that.Returns for Sionna before May 2012, Oldfield before July 2011, Trilogy before April 2008 and Walter Scott before July2009 are based on composite returns.

Page 11


Performance Relative to Investment Policy Objectives

ManagerManager Return Market Index

4-Year Index Return

4-Year Value Added

Target Value Added

Performance Objective Achieved IMF4

Passive Mandates:TDAM - Universe Bond Index 3.59% FTSE TMX Canada Bond Universe 3.66% -0.07% +/-0.06% 3.6% to 3.72% No 0.035%TD Emerald U.S. Pooled Fund1 na S&P 500 (CAD) 19.22% na +/-0.08% 19.14% to 19.3% na 0.035%TD Emerald International Equity Index1 na MSCI EAFE (Net) (CAD) 12.01% na +/-0.20% 11.81% to 12.21% na 0.035%

Active Mandates: Sionna - Canadian Equities 9.01% S&P/TSX Composite (CAD) 8.29% 0.72% +1.0% 9.29% No 0.365%Oldfield - Global Equities 12.67% MSCI World (CAD) (Net) 14.27% -1.60% +2.0% 16.27% No 0.750%Trilogy - Global Equities 14.14% MSCI World (CAD) (Net) 14.27% -0.13% +2.0% 16.27% No 0.526%Walter Scott - Global Equities 14.48% MSCI World (CAD) (Net) 14.27% 0.21% +2.0% 16.27% No 0.713%TDAM Short Term Corporate Bonds2 na FTSE TMX Canada Short Term Corporate 2.80% na +0.5% 3.30% na 0.102%

Total Fund ex. Currency Overlay 8.77% CPI + 3.5%3 5.24% 3.53% Yes 0.275%

1 Invested on 18 November 20162 Invested on 17 December 2014

4 IMF: Investment management fees

4-Year Performance vs. Market Index BenchmarkAs at 30 September 2017

3 CPI + 3.5% benchmark has been implemented retrospectively since 1 January 2017. Prior to that, CPI + 3.7% benchmark was implemented since 1 January 2016, CPI + 3.75% benchmark was implemented since 1 January 2014 and CPI + 3.85% prior to that.

Page 12


P&B Committee December 8, 2017

Pension Benefit Limits and CAPs Registered Pension Plan (RPP) and Payroll Pension Plan (PPP)

The maximum pension benefits payable through the Registered Pension Plan (RPP) is governed by the Income Tax Act (ITA). Each year, the limit is adjusted based on the Average Industrial Wage (AIW) increase. The plan text for the Payroll Pension Plan (PPP) states that the maximum benefit payable through the PPP is also adjusted each year by the AIW increase.

The following table provides a summary of the benefit limit changes that are effective January 1, 2018:

Pension Plan

2017 Benefit Limits 2018 Benefit Limits Maximum annual

pension per year of pensionable service

Final Average Earnings at Threshold

Maximum annual pension per year of pensionable service

Final Average Earnings at Threshold

RPP $2,914.44 $161,766 $2,944.44 $163,554 PPP $3,337 $182,894 $3,371 $184,882

*AIW increase is 1.03% which is derived from the difference in the RPP limits between 2017 and 2018 (difference between 2016 and 2017 was 0.85%).

In addition to the RPP and PPP benefit limits, both plans include caps that are set at the discretion of the Pension & Benefits Committee, as follows:

Pension

Plan

Current Caps Maximum annual pension per

year of pensionable service Final Average Earnings at

Threshold (estimate) RPP $3,200 $175,000 PPP $3,400 $185,000

These caps have an impact on the valuation of the liability associated with each plan but since they are in excess of the maximum benefit limit, the caps do not have an impact on members currently.

Projection of When Limit Will Reach CAP

AIW Year

0.85% 1.10% 1.35%

RPP PPP RPP PPP RPP PPP 2018 $ 2,944.44 $ 3,371.00 $ 2,944.44 $ 3,371.00 $ 2,944.44 $ 3,371.00 2019 $ 2,969.47 $ 3,399.65 $ 2,976.83 $ 3,400.00 $ 2,984.19 $ 3,400.00 2020 $ 2,994.71 $ 3,400.00 $ 3,009.57 $ 3,024.48 2021 $ 3,020.16 $ 3,042.68 $ 3,065.31 2022 $ 3,045.83 $ 3,076.15 $ 3,106.69 2023 $ 3,071.72 $ 3,109.99 $ 3,148.63 2024 $ 3,097.83 $ 3,144.20 $ 3,191.14 2025 $ 3,124.17 $ 3,178.78 $ 3,200.00 2026 $ 3,150.72

$ 3,200.00

2027 $ 3,177.50

2028 $ 3,200.00

Action Required: CAP Discussion

~


P&B Committee December 8, 2017

Contribution Limit

Registered Pension Plan (RPP)

The ITA also limits annual member contributions, and this limit adjusts annually based on the AIW increase. The following table highlights the member contribution limit change effective January 1, 2018:

2017 Contribution Limit 2018 Contribution Limit

Maximum annual contribution

Annual earnings at threshold

Maximum annual contribution

Annual earnings at threshold

$18,941 $216,483 $19,130 $218,666

Fairness Protocol

When a member retires, the pension team determines the amount of contributions that were made on pensionable earnings in each year of employment leading up to their retirement that exceeded the maximum contribution based on the FAE at which the PPP limit was reached (will be $184,882 for 2018). Interest is credited on each year’s over-contribution amount to the member’s retirement date. Members have the option to receive as a cash refund less tax, or non-indexed pension.

Example: December 1, 2018 Retirement

Year

Annualized Pensionable

Earnings

Contributions

Made

Maximum

Contribution^

Over Contribution

for the year

Over Contributions plus interest (cumulative)

2016 $183,336 $15,662 $15,815 $0.00 $0.00 2017 $188,332 $16,159 $15,796 $363 $364 2018 $193,332 $15,211* $14,454** $757 $1,129

^ Based on pensionable earnings equal to FAE at which the PPP limit was reached ($184,882 in this example), YMPE and contribution rates in effect for year of retirement. * Contributions made in 2018 are based on 11 month’s actual earnings of $177,082.

** 2018 maximum contribution of $15,768 has been pro-rated for 11 months (i.e. 11/12 x 15,768 = 14,545) due to member retiring on December 1, 2018.

Action Required: None


1 | P a g e P & B C o m m i t t e e D e c e m b e r 8 , 2 0 1 7

Comparators for Aon Hewitt’s Benefits Index Recommendation from the ad hoc Subcommittee

Background

Aon Hewitt’s proposal includes a Benefit Index© Analysis to determine the competitive positioning of

the current program design. The cost associated with this activity is estimated at $27,500 (excl. the

presentation of results) assuming 15 comparators with benefits data that already exists in their

database. The results of this tool demonstrate how current arrangements compare with what others

provide in terms of the total and employer value (i.e. at, above, or below average).

As it is the University’s responsibility to define the comparators for Aon Hewitt to review, an ad hoc

subcommittee was formed at the November 10, 2017 Committee meeting to develop a

recommendation.

Talent Pool Assumptions

Recognizing that the competitive market for talent differs among the three employee groups in terms of

region and sector, the subcommittee considered assumptions within each area. Recruitment data

(approximately 200 new hires) for the Staff employee group between the 2014 and 2016 calendar years

was available for reference.

EMPLOYEE GROUP SECTOR

Education Private Public & Not for Profit

CUPE 34% 33% 33%

Faculty 90% 5% 5%

Staff 31% 50% 19%

Combined 51% (2214) 33% (1439) 16% (688)

EMPLOYEE GROUP REGION

Local* Other Ontario National (outside Ontario)

CUPE 100% 0% 0%

Faculty 10% 40% 50%

Staff 83% 12% 5%

Combined 61% (2627) 20% (870) 19% (845)

*Local is defined as Cambridge, Guelph, Hamilton, Kitchener, London, and Waterloo

The above assumptions were used to develop weighting for the number of comparators within each

intersection between the regions and sectors. Based on the participation in the full benefits program

(est. 473 CUPE, 1447 Faculty, 2421 Staff), proportional breakdown of comparators is as follows:

REGION

REGION

Education Private Public & Not for

Profit Combined

Local 31% 20% 10% 61%

Other Ontario 10% 7% 3% 20%

National 10% 6% 3% 19%

Combined 51% 33% 16% 100%


2 | P a g e P & B C o m m i t t e e D e c e m b e r 8 , 2 0 1 7

Recommendation

Criteria that the subcommittee used to identify comparators of interest include Top 100 Employers,

research intensive institutions, recruitment statistics, as well as inclusion within previous Benefits

Index© reviews (conducted in 2005 and 2012).

Recognizing that the results will need to be presented by sector (education vs other), by region (local vs

non-local), and by Top 100 Employers separately, the subcommittee recommends that more than 15

organizations be included in the review. The costs associated will increase by $1,000 per comparator

above the initial proposal of 15 and by $3,000 per comparator not already included in the database

(note: the latter charge would be waived if the organization opts into the database going forward).

Although the National Private and National Public & Not for Profit areas might be somewhat relevant

from a talent pool perspective, it is the subcommittee’s recommendation that the comparators be

identified from within the other 7 areas.

Option 1: Review 17 organizations that are within Aon Hewitt’s database (plus Laurier and Toronto)

(estimated Benefits Index© analysis cost $27,500 + $6,000 + $2,000 = $35,500):

REGION SECTOR


Local Laurier* Guelph

Western

Toyota Manulife Sun Life

Hamilton Health Services

Other Ontario Toronto* Ottawa

York

KPMG Bell CIBC

Ontario Public Service Region of Peel

National McGill UBC

*Not currently included in the database but Aon Hewitt indicated that the data could be obtained

Option 2: Review 20 organizations – most within Aon Hewitt’s database plus others of interest as noted

in bold font below (estimated Benefits Index© analysis cost $27,500 + $21,000 + $5,000 = $53,500):

REGION SECTOR


Local

Laurier* Guelph

Western McMaster

Toyota Open Text Manulife Sun Life

Grand River Hospital Region of Waterloo

Other Ontario Toronto* Queen’s Ottawa

KPMG Bell CIBC

Ontario Public Service Ontario Teachers

National McGill UBC

*Not currently included in the database but Aon Hewitt indicated that the data could be obtained

Note: the Top 100 Employers are noted in italics in the above summaries (i.e. 6 in Option 1, and 7 in

Option 2); participants of the 2005 and 2012 reviews are marked with a and , respectively.

Action Required: Decision

• •• • • •• ••

• • •t •• • Ii

t

• •

---------------~ ~

• •


UNIVERSITY OF WATERLOO

BOARD OF GOVERNORS

PENSION & BENEFITS COMMITTEE

2015-17 Report to the Community

This report provides an overview of the issues addressed by the Pension & Benefits Committee from September

2015 to September 2017. While normally this report would consist of details over a given twelve month period, an

expand scope of coverage arises from the report being forgone during a turnover in committee secretaries in 2016.

Further information on any of these topics may be obtained by contacting the committee secretary Mike Grivicic

([email protected]) or by visiting the committee webpage.

A. The Committee and its Members

The Pension & Benefits Committee is a standing committee of the Board of Governors responsible for overseeing

the University’s employee pension plans, insured health care and dental plans, sick leave benefits, long-term

disability plan, and life insurance plan (the “Plans”). The committee consists of representatives from the

University’s employee groups, administration, Board of Governors, retirees, and affiliated and federated

institutions of Waterloo.

The committee meets on a monthly basis (except April, July and August); meetings are open to the University

community and agendas and minutes are available on the committee webpage. The committee monitors the health

and oversees the administration of the Plans. Recommendations for changes and improvements to the Plans are

developed, refined and approved by the committee and forwarded to the Board of Governors for approval.

The committee’s approach is based on the following principles:

1. There will be one pension and benefits plan for all members of the University community, regardless of

the type of work performed or the employee group to which one belongs.

2. Benefits are provided for both the employee and the family of the employee, where relevant.

3. Employees should be covered for catastrophic events.

4. The current level of benefits should be maintained.

5. Cost implications to both the University and its employees should be considered.

B. Committee Activities in 2015-17

1. Asset-Liability Studies. Over several months, the committee commissioned research from the consultant

Aon Hewitt of how the university’s management of assets and liabilities within the pension plan might be

optimized, including: liability awareness and matching in investing; impact of interest rates and inflation;

examining how current service costs of the plan change with market shifts. The committee directed that

abbreviated reports in the form of a Pension Risk Dashboard be brought forward quarterly.

2. Examination of Investment Governance. In early 2017, the Registered Pension Plan Investment

Subcommittee was unable to retain members from the Finance & Investment Committee to serve and that

administration has been tasked with examining options to effectively execute the governance function for

the pension plan assets. In the interim period, Finance staff will continue its regular due diligence of the

university’s investments and appropriate action on the investments will be routed through the Board

governance structure where necessary. A subset of members from the Pension and Benefits Committee

agreed to form a working group to help generate proposals for the Board’s consideration.

3. The committee observed that potential savings could be expected from newly-announced pharmacare

program, and the committee has maintained a watching brief on this subject with the view of developing

an optimized plan.

4. The committee obtained updates on the request for proposals and ultimate adoption of a new Employee

and Family Assistance Program, which was put into place in the latter part of 2016.

5. Annual Work Plan Items. In accordance with the annual work plan for the committee, the committee:

Reviewed the extended health and dental plan maxima and agreed to index the maxima by a

percentage equivalent to three years’ inflation. In November 2015, this resulted in an increase of

2.25% to the paramedical and private duty nursing maxima, 0.83% increase to the out-of-pocket

maxima for individuals and families, and 2.14% increase to the dental plan maxima, effective 1


mailto:[email protected]

https://uwaterloo.ca/secretariat/committees-and-councils/pension-benefits-committee

https://uwaterloo.ca/secretariat/committees-and-councils/pension-benefits-committee-agenda-and-minutes

https://uwaterloo.ca/secretariat/committees-and-councils/pension-benefits-committee

Pension and Benefits Committee

2015-17 Report to the Community page 2 of 4

January 2016. In November 2016, this resulted in an increase of 3.45% to the paramedical and private

duty nursing maxima, 1.98% increase to the out-of-pocket maxima for individuals and families, and

2.01% increase to the dental plan maxima, effective 1 January 2017.

Approved the benefits plans premium renewals negotiated by Human Resources in conjunction with

our consultants. Based on claims experience, the long-term disability premium paid by employees

decreased by 1.6% effective on 1 May 2016, and increased 7.5% on 1 May 2017. The committee

directed that the insurer be notified that the university will examine the plan design, and that the

university will not commit to the three-year timeline as proposed by the insurer.

Received reports in 2016 and 2017 from Human Resources on the benefits plan utilization rates and

associated costs.

Provided oversight to a number of other items that occur automatically according to plan provisions,

e.g. movement in the dental fee guide used for calculating reimbursement and annual indexation of

long-term disability benefits in pay.

C. Pension Plans

6. Education and Monitoring. The committee receives regular reports from the consulting actuary on

legislative and policy changes anticipated and in force that impact public sector pensions, as well as

changes implemented by other public sector pension plans. The committee discusses implications for the

University’s pension plans and takes said information into account when making decisions on matters

including plan design, funding and administration.

Initiatives the committee has been monitoring, discussing and, where required, taking action over the past

two years include: discussions of a joint sector pension plan; development and commentary on proposed

new pension plan regulatory regime; enhancement of the Canada Pension Plan and potential interplay of

these changes with the university pension plan; investment management offerings of the recently-formed

Investment Management Corporation of Ontario; philosophical considerations for managing the plan

going forward.

7. Plan Amendments. In October 2015 and in recognition of the the University implementing a new

pension administration system, the University commenced a process of identifying pension calculations

that can be automated as part of the new system which brought a number of historical provisions to the

University’s attention which only apply to a small subset of plan members and may only apply to a

portion of their pensions. Because of the low volume of calculations and small dollar amounts, it was not

seen to make economic sense to build the calculation into the system (where it is not already part of the

program). However, if the calculation is not automated, the administrative costs and risk of human error

associated with this calculation increase. Further, the differential treatment of members may in some cases

be seen as an equity issue. As such, the University is looking at these types of provisions on a case by

case basis and determining the best way to deal with them moving forward. This may result in further

recommendations to amend the Pension Plan.

With respect to the approved amendment, the amendment harmonizes the calculation across groups and

termination scenarios. There were 132 members identified as being impacted by these provisions. The

change will resulted in a small, one-time increase in the going concern liability for the Pension Plan.

8. Commuted Value Standards. On the recommendation of the actuary and Human Resources, effective 1

October 2015, the committee approved the adoption of a new mortality table promulgated by the

Canadian Institute of Actuaries for the purposes of determining pension commuted values.

9. Member Projection Tools. The committee considered options for member retirement projection tools

and proceeded with the standard online tool rather than a comprehensive retirement planning tool. This

tool will be customized to consider any declared retirement dates, and references to Canada Pension Plan

and Old Age Security will direct the reader to the government web resource. Staff within Human

Resources are able to provide support to employees seeking estimates of their pension commuted value

and also of the impacts of entering into the Vacation Exchange Program.




10. Responsible Investing. The committee has received periodic updates from the Responsible Investing

Working Group, formed by the Board of Governors, and the committee was involved in the discussion

that brought the genesis of the group.

11. Principles for Deciding the Cost-of-Living Adjustments. In Fall 2015, a subcommittee provided

recommendations that were ultimately adopted by the committee regarding the application of cost-of-

living adjustments for both deferred pensions and for members on long-term disability.

12. Requests for Credit for Past Service The committee received a request for consideration from three

committee members to recognize credit for past service for several employees who in the past had been

advised to waive voluntary participation in the pension plan. The request was that they be allowed to buy

back contributing years in the plan. The committee observed that: this had been brought forward to the

committee on several occasions commencing in 1991 and had been discussed at previous P&B

Committees and the Board of Governors; the same advice was given to both men and women with no

indication there was a gender concern; and previous committee members had acknowledged that some

people may have been provided with this advice. It was affirmed that the current practice for all

employees is to provide a very comprehensive orientation to the compensation package (including

appropriate explanations about the pension plan) to new hires, that Human Resources has not provided

pension advice to new hires since 1998, that waivers must be signed for all those wishing to defer

participation in the pension plan, and new hires are advised to get independent financial advice if they

have any concerns in this regard. Persons who have concerns regarding being credited for past service are

directed to contact Human Resources. As no new information was brought forward from previous P&B

Committee discussions, the Committee did not reverse earlier decisions.

13. Stage 2 Solvency Relief. The university’s pension plan previously received Stage 1 approval for solvency

funding relief as provided under Regulation 178/11 to the Pension Benefits Act and based on the filed

actuarial valuation report of 1 January 2014. This Stage 2 funding relief allows the university to address

the solvency deficit in the pension plan over a scheduled period of time by making additional special

payments and provides an intentional approach to addressing the deficit. At the committee’s June 2017

meeting, a motion was passed to file the application for solvency relief, and at the September meeting the

committee considered whether to elect for one of two potential options for amortizing the solvency

deficit: (1) to amortize the solvency deficit over ten (10) years starting 1 January 2018, or (2) to defer

amortization for a three-year period from 2018-2021 with minimum interest-only payments over that

period, then amortize the solvency deficit at 1 January 2021 over seven years. The committee elected to

proceed with the latter solvency option, while also passing a resolution that the plan shall maintain as a

minimum the additional voluntary special contribution to bring University contribution to 163% of

member contributions (~$2.2 million per year in 2017) over the applicable three year deferral period.

14. 1 January 2016 Actuarial Valuation. An actuarial valuation report is required to be filed at least every

three years; however, the committee commissions a report on an annual basis for its planning and the

University’s budgeting purposes.

The 1 January 2016 report was prepared using the same assumptions as the 1 January 2015, with the

exception of a lower discount rate (5.70% vs. 5.75% in 2015, or CPI + 3.70% vs CPI + 3.75% in 2015).

The registered pension plan (the “Registered Plan”) is in a deficit position; however, the going concern

deficit position has improved since the reports of 1 January 2014 and 1 January 2015. The University

continues to make additional contributions to meet the unfunded liability.

The payroll pension plan (the “Payroll Plan”), which provides pension benefits (subject to plan caps) that

cannot be paid from the Registered Plan because of the application of the Income Tax Act maximum

pension, has a surplus of $1.6 million.

The full actuarial report for the Registered Plan and Payroll Plan can be found on the committee’s

webpage: Actuarial Valuation Results as of 1 January 2016.


https://uwaterloo.ca/secretariat/sites/ca.secretariat/files/uploads/files/valuation_1_jan_2016_and_protocol_calcuations.pdf



15. 1 January 2017 Actuarial Valuation. An actuarial valuation report is required to be filed at least every

three years; as well, the valuation assists on an annual basis for the purposes of planning and the

University’s budgeting. In 2017, the committee filed an actuarial valuation, as the previous valuation was

filed in 2014. The Board of Governors approved filing of the actuarial valuation of the plan as at 1

January 2017 at its June meeting.

The 1 January 2017 valuation was prepared using the same assumptions as the 1 January 2016, with the

exception of a lower discount rate (5.50% vs. 5.70% in 2016, or CPI + 3.50% vs CPI + 3.70% in 2016).

The registered pension plan (the “Registered Plan”) is in a deficit position; the going concern deficit

position has improved since the 1 January 2014 report, though the deficit increased somewhat since the

2016 valuation. The University continues to make additional contributions to meet the unfunded liability.

The payroll pension plan (the “Payroll Plan”), which provides pension benefits (subject to plan caps) that

cannot be paid from the Registered Plan because of the application of the Income Tax Act maximum

pension, has a surplus of $1.75 million.

The full actuarial report for the Registered Plan and Payroll Plan can be found on the committee’s

webpage: Actuarial Valuation Results as of 1 January 2017.

16. Review of the Statement of Investment Policies & Procedures (“SIPP”). With RPPI on hiatus, it was

decided to defer review of the SIPP in 2016. The SIPP will be reviewed in 2017.

17. Changes to investment portfolio. In October 2016, the committee approved the sale of approximately

$60 million of U.S. treasury bonds and to allocate the proceeds of the sale in equal parts to the existing

universe bonds and short corporate bonds, as well as recommending and securing Board approve to

invest a total of $15 million in the two TDAM indexed funds (to be distributed 60% in the TD Emerald

U.S. Equity Index Fund and 40% in TD Emerald International Equity Index Fund).

18. Annual Work Plan Items. In addition to the above, the committee:

Reviewed and approved the audited pension fund financial statements for filing with FSCO. The

statements show, among other things, that there are significant assets in the fund, the change in assets

over the year and drivers for that change, amounts paid out of assets, and compliance with the SIPP.

At the same time, the committee reviewed a more detailed breakdown of administrative fees incurred

annually by the plan since 2012, including consulting actuary’s fees, custodian’s fees, investment

managers’ fees, audit fees, salaries for pension administration personnel and HST recovery. The fees

totalled $5,171,000 in 2015 and $5,457,000 in 2016, which represents annual increases of 12.6% and

5.5%, respectively, over the previous years. The primary drivers were investment managers’ fees in

2015, and management/administration fees in 2016.

Reviewed and approved cost of living increases to earnings of individuals on long-term disability for

the purpose of calculating pension contributions, and to eligible deferred pensions.

Received the annual report from Aon Hewitt re: the contribution and protocol caps, including the

impact of indexing or removing the caps on costs and liabilities, the number of individuals who would

be impacted if the caps were not indexed, and the projected date on which the cap under the Income

Tax Act will hit the hard cap in the pension plan, if the cap is not increased. The committee monitors

these numbers annually in order to make decisions about how and when to increase the caps.

Provided oversight to a number of other items that occur automatically according to plan provisions,

e.g. annual indexation of pensions and caps for the payroll pension plan.

30 November 2017


https://uwaterloo.ca/secretariat/sites/ca.secretariat/files/uploads/files/10769_2017_valuation_results_-_pb_meeting_-_march_02_2017_finala.030817_0.pdf

pension & benefits committee friday 8 december 2017 9:30 … · 2017-12-01 · pension &...

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