timewisefall • 2003 fall • 2003 · sk rrif rpp (restricted funds)* gics choice of life, yes yes...

INSIDE:

Yearend Procedures for2003 Pension Contributions

2004 Employee DelegateNomination Form

INSIDE:

Yearend Procedures for2003 Pension Contributions

2004 Employee DelegateNomination Form

TimeWiseTimeWiseFA L L • 2 0 0 3FA L L • 2 0 0 3

** Mutual funds and other securities are offered through Credential Securities Inc. Commissions, trailing commissions, management fees andexpenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual fundsand other securities are not insured nor guaranteed, their values change frequently and past performance may not be repeated. CredentialSecurities Inc. is a Member-CIPF. ®Credential Securities & Design are registered marks owned by Ethical Funds Inc. and are used underlicence.

Co-operative Trust’s retirement options together with CredentialSecurities’® advice can help you create the plan that’s right for you.

Sean FolstadInvestment AdvisorTel: 306.956.1992Fax: 306.931.3281Email: [email protected]

You are unique...so are your retirement needs!

Toll Free: 1.800.788.6311Email: [email protected] site: www.co-operativetrust.ca

Plan Source Investment Length of Can I Change Lump SumType of Funds Options Plan My Payments Withdrawals

RIF RRSP GICs Choice of Life, Yes YesRPP (unrestricted funds) Mutual Funds** Specified Amount

Self-Directed Plans or Specified Term

LIF RPP (restricted funds)* GICs Age 80 - plan Yes NoLIRA/Locked-in RRSP Mutual Funds** converts to LifeLRIF Self-Directed Plans Annuity or LRIF

(in certain jurisdictions)

LRIF RPP (restricted funds)* GICs Life Yes NoLIRA/Locked-in RRSP Mutual Funds**LIF Self-Directed Plans

SK RRIF RPP (restricted funds)* GICs Choice of Life, Yes YesLIRA/Locked-In RRSP Mutual Funds** Specified AmountLIF Self-Directed Plans or Specified TermLRIF

Annuity RRSP N/A Life or Can be indexed NoQuotation Service RPP Guaranteed Period to allow for

LIF inflationLIRA/Locked-In RRSP

Note: LIF/LRIF products are governed by provincial legislation and vary by province. Contact your plan administrator for further details.* SK RRIF product is governed by Saskatchewan legislation.

Knowing your options and obtaining sound advice is important inhelping you decide what’s best.

CO-OPERATIVE TRUSTCOMPANY OF CANADA®

CONTENTSPROFILE

Herb Carlson: New Director has years of Experience 12

SPECIAL FEATURESRetirement Income for Life – Part II 6

CSS Pension Plan Considering Pre-Retirement Fund 10

Board of Directors

President – Peter Zakreski

Vice-President – Don Pavelick

Directors – Herb Carlson

Earl Hanson

Wayne King

Gerry St. Pierre

Staff

General Manager – Bill Turnbull

Investment Manager – Eldon Braun

Accounting/Investment Officer – Joel Sawatsky

Member Services Manager – David Kapeluck

Information Officer – Muriel Baribeau

Systems Administrator – Vaun John

Office Administrator – Fiona May

Office Administrator – Rhonda Ens

Office Administrator (Part-time) – Joanne Anderson

TimeWiseTimeWise is published at least twice a year by the Co-operative Superannuation Society Pension Plan (registrationno.0345868), Box 1850, Saskatoon, Saskatchewan S7K 3S2. Phone (306) 244-1539.TimeWise is the official publication of the Co-operative Superannuation Society Pension Plan and is provided freeto all active contributing members of the Pension Plan through the Pension Plan’s member organizations and to allretired members of the Pension Plan.Opinion and comment expressed in TimeWise does not necessarily reflect the official policy of the CSS Pension Plan.This issue of TimeWise is printed on RESOLVE COATED GLOSS which contains 50% recycled fibre of which aminimum of 15% is post-consumer waste.FALL, 2003 Volume 26, Number 2

FEATURES2 Yearend Procedures for 2003 Pension Contributions

3 News Briefs

4 Operations Update

5 Attention Terminating & Retiring Employees

9 Attention Pensioners!

18 “I Know That!” Contest

REGULAR COLUMNS8 In Remembrance

15 New Pensions

19 Election of Employee Delegates

20 Nominee Questionnaire

2 TimeWise • Fall 2003

YEAREND PROCEDURES FOR 2003 PENSION CONTRIBUTIONSAttention Managers andPayroll DepartmentsContribution Deadline for 2003

Please be advised that the deadline for2003 contributions to the CSS Pension

Plan is Friday, January 9, 2004. The CSSPension Plan must receive the final pen-sion contributions for 2003 by this dead-line in order to be included in the PensionPlan’s 2003 records and thus appear on theemployees’ 2003 Annual Statements.

Any pension contributions for 2003received after January 9, 2004 will beincluded in the Plan’s 2004 records andtherefore will not be reflected on theemployees’ 2003 Annual Statements. Whenthis occurs, there is a difference betweenthe contribution amount shown on anemployee’s 2003 Annual Statement and thepension contribution amount shown onhis/her T4 slip for 2003. Such differencescan cause confusion for employees, as theymay not be sure whether all of their pen-sion contributions have been credited totheir pension account.

Remitting ContributionsManagers and payroll departments

should keep in mind that government pen-sion legislation generally states that all con-tributions must be remitted to the PensionPlan within 30 days of being deductedfrom an employee’s pay. Thus, delays inremitting pension contributions to the Planmay be contrary to pension legislation.

CSS Pension PlanRegistration Number andT4 Information

The CSS Pension Plan’s RPP registra-tion number is 0345868. This numbermust be indicated in “Box 50 - RPP orDPSP Registration Number” on allemployee members’ T4 slips.

The amount reported in “Box 20 - RPPContributions” on an employee’s 2003 T4slip must include the combined total ofthe employee’s 2003 regular required pen-sion contributions, plus any employeeadditional voluntary contributions madeto the Pension Plan for 2003. (Amountscontributed by the employer are notincluded in Box 20).

Employers must report the 2003Pension Adjustment (PA) amount in “Box52 - Pension Adjustment” on all employeemembers’ T4 slips for 2003. The 2003 PAamount is simply the combined total of allrequired (matched) employee andemployer contributions, plus any employ-ee additional voluntary contributions,plus any voluntary employer contribu-tions for 2003. In other words, the amountreported in Box 52 of an employee’s 2003T4 slip includes ALL 2003 contributionsto the Pension Plan made by and on behalfof the employee in 2003. Canada Customsand Revenue Agency (CCRA) uses the2003 PA amount when calculating theemployee’s 2004 RRSP contribution limit,which is reported on the employee’s 2003Notice of Assessment from CCRA (the2003 PA amount reduces the amount thatan employee could otherwise contributeto an RRSP for 2004).

Pension AdjustmentReversal (PAR)

If an employee member terminateshis/her employment before obtaining vest-ing (i.e., ownership) of the employer con-tributions, and subsequently withdrawshis/her own employee contributions fromthe Plan, the employer contributionsmade on his/her behalf are forfeited.(Vesting is obtained after completing twoyears of continuous working service).

Such forfeited employer contributionsare reported as a PAR in order to re-estab-lish the employee member’s RRSP roomthat would otherwise be lost. The CSSPension Plan is required to submit PARs

for the appropriate employee members toCCRA, thus no action is required by theemployer members.

CSS Pension PlanContribution limit for 2004

As announced in the February 2003Federal Budget, for 2004 the CCRA maxi-mum pension plan contribution limit foremployee members of defined contribu-tion pension plans, such as the CSSPension Plan, is the LESSER of:

• 18% of the employee’s compensa-tion for the year, or

• $16,500 (the maximum dollar limitfor the year).

Please note that this maximum dollarlimit is $1,000 more than the 2003 maxi-mum dollar limit of $15,500. The maxi-mum dollar limit is expected to be$18,500 for 2005.

For example, if an employee will havean annual salary of $30,000 in 2004,his/her pension plan contribution limit forthe year will be $5,400 (i.e., 18% of$30,000). However, if the employee termi-nates his/her employment on June 30,2004 and earns $15,000 year-to-date, thenhis/her year-to-date pension plan contri-bution limit at June 30, 2004 will be$2,700 (i.e., 18% of $15,000). If anemployee will earn $91,667 or more in2004, his/her pension contribution limitwill be $16,500 for 2004.

The CSS Pension Plan does not knowan individual employee’s compensation forthe year. Therefore, it is the responsibilityof the employer (i.e., payroll department)to ensure that the combined employeeand employer contributions, plus anyadditional voluntary contributions to thePlan are within each employee’s individualpension plan contribution limit for theyear. An employee’s 2004 CCRA maxi-mum contribution limit to the CSSPension Plan is separate from the maxi-mum amount that he/she can contributeto a personal RRSP for 2004.

TimeWise • Fall 2003 3

NEWS BRIEFS

Congratulations to the 10 lucky winners ofthe Spring 2003 “I Know That!” contest.

Each winner has either received a copy ofDiane McCurdy’s book “How Much isEnough?” or Jerry White’s book “Death &Taxes”. The 10 lucky winners whose nameswere drawn at random on May 2, 2003 are:Sandi Apshkrum, Forget SK; S. GlennisEliasson-Hein, Kelowna BC; Della Farnsworth,Swift Current SK; Karen Hodgson, Calgary AB;Hedy Klysko, Dawson Creek BC; BarbLaferriere, Winnipeg MB; Rita Maure, FalherAB; Steve McDougall, Moose Jaw SK; ElainePoirier, Winnipeg MB; and Brenda Price,Tisdale SK. The crossword puzzle solution forthe Spring 2003 contest is as follows:

Across:1. Three primary factors affect the amount of monthlypension income that can be provided with a given lumpsum.

4. Each year, your contribution limit to the CSS PensionPlan is separate from the amount you can contribute to anRRSP for that year.

6. For the four-year period ended December 31, 2002, theNon-Retired Lives portfolio’s annualized total return of4.35% exceeded the benchmark portfolio’s return of 2.67%for the same period.

9. The value of the Non-Retired Lives Portfolio’s equitiesdeclined by 16.52% in 2002.

10.The Plan’s primary objective is to earn a rate of returnthat exceeds the return that might have been earned on abenchmark portfolio over rolling four-year periods.

Down:1. The objective of the RPS is to provide information andhelp participants search for their own answers in planningfor a meaningful, successful and happy retirement.

2. The investment structure of a pre-retirement fund isdesigned to produce lower short-term market volatility ascompared to a “balanced” fund, while also providing alower rate of return.

3. The Non-Retired Lives Portfolio’s bonds earned 8.52%for the year.

5. The 10-year average income allocation rate at the endof 2002 is 9.83%.

7. The Plan’s total expenses equate to 20.8 basis points,which is less than the average fee paid by the average planfor outside investment management alone.

8. Jeanette Kirchner of Calgary Co-op, retired from theboard of directors after four years of service as an employ-ee director and 10 years of service as an employee delegate.

Details of the latest contest appear on page 18.

“I Know That!”Contest Update

The “In Remembrance” column in the spring 2003 issue of TimeWise did not cor-rectly indicate the name of the employer for the name of the deceased pension-

er. Below is a corrected list. The CSS Pension Plan sincerely apologizes for any con-fusion and concern this error may have caused the family and friends of thosedeceased pensioners.

John Airey Watrous Co-op, Watrous SKHazel Balon Assiniboia Credit Union, Assiniboia SKJune Bilan Credit Union Central, Calgary ABMabel Blow Calgary Co-op, Calgary ABFred Carlson Fort St. John Co-op, Fort St. John BCLester Chance Weyburn Co-op, Weyburn SKMarie Cherniwchan Shaunavon Co-op, Shaunavon SKEdward Duquette Calgary Co-op, Calgary ABLouis Elder Southern Alberta Co-op, Lethbridge ABTerezia Farkas First Calgary Financial, Calgary ABRobert K. Feeney Medicine Hat Co-op, Medicine Hat ABAlexander Fletcher Moose Jaw Co-op, Moose Jaw SKNorman Floate Kindersley Co-op, Kindersley SKRobert Gangloff Vermilion Bay Co-op, Vermilion Bay ONJake Goebel Sherwood Co-op, Regina SKEd Hegel Federated Co-op, Saskatoon SKH.O. Heuchert Saskatoon Co-op, Saskatoon SKJohn Hoeppner Pineland Co-op, Nipawin SKEmily Homenko Arborg Co-op, Arborg MBFrancis Howis Manning Co-op, Manning ABJames Hunter Federated Co-op, Canoe BCVictor Keep Assiniboia Credit Union, Assiniboia SKTom Lamb Edmonton Co-op, Edmonton ABNorman Lonsdale Federated Co-op, Saskatoon SKKenneth Melby Radville Co-op, Radville SKFrank Oberding Moose Jaw Co-op, Moose Jaw SKRose Oleson Pioneer Co-op, Swift Current SKBertha Peters Moose Jaw Co-op, Moose Jaw SKRaymond Prevost Red River Co-op, Winnipeg MBMarjorie Rollheiser Calgary Co-op, Calgary ABJames Roth Southern Alberta Co-op, Lethbridge ABC.W. Tremaine Sherwood Credit Union, Regina SKLorne Turner Landis Co-op, Landis SKFlorence Wagner Pioneer Co-op, Swift Current SKErnest Walter Federated Co-op, Saskatoon SKGeorge Wickett Dauphin Co-op, Dauphin MBFrances Wright Pioneer Co-op, Swift Current SK

CORRECTION


Selected financial information relatingto the CSS Pension Plan’s operations

for the first 8 months of 2003 (January1/03 to August 31/03) appears above. Theregular Quarterly Update for the thirdquarter of 2003 will be distributed to allemployer members in mid to lateOctober. As always, employers are askedto share the Quarterly Update with theiremployees. Members who have Internetaccess can find the Plan’s QuarterlyUpdate in the “What’s New” section ofthe Plan’s web site at www.csspen.com

Investment Performance1

Canadian Investment markets pro-duced positive results for the first 8months of 2003. To August 31, theS&P/TSX Index (Canadian Equities)rose by 15.03%. The Scotia CapitalUniverse Bond Index also increased, butby only 3.49%.

Foreign equity returns were positive,with world equity markets rising inresponse to improved corporate prof-itability, a strengthening economic recov-ery and a “regime change” in Iraq.Foreign equity returns to Canadianinvestors were reduced significantly,however, by a strengthening Canadiandollar, which rose 13.85% as against theU.S. dollar over the period. From January1 to August 31, the S&P 500 Index (U.S.

Large Cap Equities) gained 2.19% whilethe S&P 400 Index (U.S. Mid CapEquities) rose by 6.86%. The EAFE Index(Non-North American Equities) appreci-ated by 0.8% and the MSCI World Index(Global Equities) improved by 1.74%.

Most developed equity markets beganthe year in negative territory butrebounded strongly, as the bear market2

that began in the spring of 2000appeared to end in March of this year.Canadian bonds also produced positivereturns for the first half of 2003 as inflationary pressures declined and theBank of Canada eased monetary policy.At the time of writing, most equity markets continue to rise at a more moderate pace, while bond returns,although still positive, have declinedsomewhat since reaching an intra yearhigh on June 13th.

At the end of the first quarter, theNon-Retired Lives (NRL) portfolio was ina loss position with a market return of–3.86%. Since the beginning of the sec-ond quarter, however, the NRL portfoliohas appreciated significantly as its stocksand bonds have both produced stronggains. For the first 8 months of the year,the NRL portfolio’s total market returnwas 7.42%. For this same period, thereturn earned by the Portfolio’s bench-mark was 6.89%.

VolatilityMembers will recall that effective

January 1, 2002 the capital gains andlosses in the NRL portfolio are no longer“smoothed” over a rolling four-year period when calculating the IncomeAllocation Rate (IAR). As a result, theIAR is based on the NRL portfolio’s totalmarket return. This will result in greatervolatility in the annual IAR to members,but is not expected to have a significantimpact on the accumulation of members’retirement savings over the long-term.This change was made to improve thefairness and transparency of the Plan’sincome allocation policy.

The Chart on the following page compares the Plan’s actual IARs for thepast 46 years, to hypothetical marketreturns based on the total market returnof a portfolio invested on the basis of theNRL portfolio’s current benchmark.3 Itdemonstrates that the annual marketreturns earned by the benchmark portfo-lio (the gold colored bars) would havebeen more volatile than the Plan’s actualannual IARs, with an annual loss occur-ring eleven times over the entire 46 yearperiod. It also shows, that the 10-yearrolling average market return for thebenchmark portfolio (the gold coloredline) would have outperformed the Plan’s actual rolling 10-year IAR for

31/08/2002 31/08/2003 ChangeTotal Assets (Market Value) $2,088,951,335 $2,192,040,008 4.93%

Member Equity (Non-Retired Lives) $1,761,931,952 $1,633,728,915 -7.28%

Repayments (Including Interest) $44,492,178 $68,670,004 54.34%New Contributions $44,076,107 $44,044,664 -0.07%Pension Payments $22,276,077 $23,258,015 4.41%Administrative Expense $728,171 $779,254 7.02%Investment Expense $2,334,688 $2,113,479 -9.47%

Income (Loss) to be Allocated ($82,939,730) $118,988,760

OPERATIONS UPDATE - August 31, 2003


twenty-eight of the thirty-seven 10-yearperiods ending from 1966 to 2002.

Return ExpectationsThe NRL portfolio operates like a

large, well diversified, balanced mutualfund (but at a much lower cost). Like aninvestment in a mutual fund, the value ofCSS Pension Plan members’ equity willgenerally trend up and down with themarkets, but with some dampening as aresult of the NRL portfolio’s broad assetdiversification and relatively heavy bondweighting.4

In 2003, the U.S. economy appearsto be strengthening, while economies inthe Euro-Region and Asia are generallyweak, with some being in recession. TheCanadian economy would normally beexpected to rebound along with the U.Seconomy, but this year has suffered theimpacts of SARS, mad-cow disease and astronger Canadian dollar. Finally therecontinues to be much geo-politicaluncertainty, with the threat of terroristattacks ever present. Notwithstandingthis uncertain outlook, however, marketperformance so far this year has been

positive. While it is not possible to fore-cast market performance to December31st, at this point it appears that thePlan is likely to post a positive returnfor 2003.

In the longer term, investment com-mentators and analysts are forecastingsingle digit equity returns as corporateprofitability continues to be hamperedby the deflationary effects of excesscapacity and weak demand. Bonds arealso expected to provide lower, singledigit returns as interest rates stabilizeand eventually rise from their currentcyclical lows.

1 All returns are stated in Canadian dollars. Allindices quoted are “total returns” including pricechanges and interest or dividends accrued to August 31.

2 A “bear” market is one that has fallen morethan 20% from its most recent peak.

3 Benchmark: 17% Canadian Equities; 13%U.S. Equities; 8% Global Equities; 12% Non-NorthAmerican (Non-N.A.) Equities; 48% Bonds; 2%Short Term

4 The CSS Pension Plan invests approximately50% of the Non-Retired Lives portfolio in Canadianbonds and 50% in Canadian, and foreign stocks. Mostlarge pension plans hold approximately 40% of theirassets in bonds and 60% in stocks. The overall returnfor the Non-Retired Lives portfolio is therefore lessaffected by the performance of the stock markets.

ATTENTION TERMINATING & RETIRING EMPLOYEES!• Are you planning to terminate

your employment with an employ-er member of the CSS Pension Planat the end of this year?

• And, are you planning to with-draw or transfer your funds fromthe Plan after receiving the year-end allocation?

If so please note that because ofyearend procedures, the CSS PensionPlan does not process any withdrawal ortransfer requests from the middle ofDecember until January 31. This isbecause the Plan’s final results for theyear will not be known and the annualallocation rate will not be set until then.

If you do not wish to experience thisyear-end delay, you should considerwhether you might wish to move yourtermination date up slightly. To withdrawor transfer your funds by the middle ofDecember, in addition to your employ-ment terminating at some point beforemid-December, the CSS Pension Planmust receive your final pension contribu-tions and the necessary withdrawal/trans-fer documents by December 12. If youmiss this mid-December deadline, pleasenote that the processing of withdrawaland transfer requests does not resumeuntil early February 2004.

Members withdrawing or transferring

their funds by mid-December will receivean income allocation based upon thePlan’s estimated market performance(positive or negative) to the date of theirwithdrawal or transfer. However, mem-bers whose funds will be transferred inearly February 2004 will receive the actu-al income allocation for all of 2003 (positive or negative), plus the incomeallocation (positive or negative) forJanuary 2004 based on the Plan’s estimat-ed January market performance.

Please do not hesitate to contact theCSS Pension Plan if you have any questions and think the above mayaffect you.

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Ann ual Mark et Return Ann ual Plan IAR 10 Yr . P lan IAR 10 Yr . M ark et Avg

SPECIAL

FEATURE


Annuity / Pension Strengthsand Weaknesses

When the CSS Pension Plan beganissuing its own monthly pensions in

1972, a life annuity was the only availablemethod of converting a member’s accu-mulated equity into a retirement income.Today, retiring members must choosebetween complicated and quite differentretirement income options. Each has itsadvantages and disadvantages. Where amember’s primary objective is to have thesecurity of a guaranteed, fixed, periodicretirement income that will continue nomatter how long he/she lives, a monthlypension from the CSS Pension Plan, or alife annuity is a suitable retirementincome option.

1. Pooling mortality riskAs we have seen, the basic underly-

ing principle of an annuity is that itconverts the retiree’s accumulated pen-sion benefit into a guaranteed andfixed periodic payment for the remain-der of the retiree’s life (and his/her sur-viving spouse in the case of a joint andlast survivor annuity/pension). This istrue no matter how long the retiree (orspouse) lives. The annuity providertakes the risk of the retiree’s funds run-ning out before the retiree (and/orspouse) dies. This risk is managed bypooling the mortality risk of eachretiree with that of a group of otherretirees so that the assets of those whodie before reaching average lifeexpectancy can be used to continuemonthly payments to those who livebeyond average life expectancy.Eliminating the risk of outliving yourretirement savings is the chief advan-tage of converting your pension equityinto a monthly pension from the CSS

Pension Plan or a life annuity from aninsurance company.

2. Preserving an EstatePooling mortality risk, however, is

also the Achilles heel of a monthlypension or life annuity. A retiree whoselects a monthly pension or life annu-ity takes the chance that he/she willnot live long enough to use up his/herentire equity. If any equity remains atdeath it does not form part of theestate, it is used, in effect, as “insur-ance” to protect the others in the poolwho outlive average life expectancy.

If a retiree lives almost to averagelife expectancy and leaves a fairlysmall balance in the pool the “premi-um” for this “insurance” seems mod-est. However, when a retiree dies at anearly age the balance remaining in thepool and available to pay the benefitsof other long-lived retirees can be sig-nificant. To protect against such a pos-sibility, the Income Tax Act (Canada)permits monthly pensions and lifeannuities to be “guaranteed” for up toa maximum of 15 years.

Monthly pensions from the CSSPension Plan can be guaranteed for 5,10 or 15 years. Where a guarantee isselected, the full amount of the month-ly payments will continue after theretiree’s death for the balance of theguarantee period. In the case of a jointand last survivor pension, the survivingspouse will receive the original pay-ment amount until the guarantee isover, while in the case of a single lifepension the retiree’s designated benefi-ciary(ies) or estate will receive the pay-ment. Therefore, in the case of a 15-yearguarantee, the retiree is guaranteed thatat least 15 years worth of payments willbe made from his/her accumulatedequity, regardless of when he/she dies.

3. Investment Risk and Return

Some consider a monthly pensionor life annuity to be a poor retirementincome choice because the investmentreturn used to calculate the monthlypayment is typically lower than theexpected long-term return for a diver-sified portfolio of stocks and bondsthat could be used to fund a LIF, LRIFor PRRIF. This is a valid concern,although, as we have discussed1, thereis a logical, investment-related reasonfor the lower rate used to calculate amonthly pension or life annuity pay-ment. It is that the fixed monthly pay-ment will be paid for life.

The funds used to pay the monthlypension/life annuity must be investedin a high-quality, long-term bond inorder to generate a secure and regularmonthly retirement income. A long-term bond will earn a lower long-termaverage return than a diversified port-folio of stocks and bonds. The earningsfrom a diversified portfolio of stocksand bonds, although higher on averageover the long-term, will fluctuate fromyear to year and will even be negativefrom time to time. In the investmentworld there is no free lunch. To have achance at earning higher returns, theinvestor must take more risk.

Whether a monthly pension, lifeannuity, or a LIF, LRIF, or PRRIF funded by a diversified portfolio ofstocks and bonds is the better choiceshould be decided, not just on thebasis of the expected long-term aver-age return, however, but also on thevolatility of annual returns. Eachretiree must determine whether he/sheis willing and able to cope with aretirement income that varies from

RETIREMENT INCOME FOR LIFE – PART IIThe following is second in a series of two articles relating to

monthly pensions offered by the CSS Pension Plan.The first article of this series appeared in the spring 2003 issue of TimeWise.


year to year, and the risk of losing partof his/her capital, in order to have theopportunity to earn higher long-termaverage returns.

An individual contemplating takinga monthly pension/life annuity at afuture retirement date faces the uncer-tainty of what long-term bond yieldsmight be at that time. Bond yields varywith the prevailing level of interestrates from time to time. As a result, theamount an individual might receivefrom a monthly pension/life annuitystarting several years in the future can-not be estimated with accuracy.

Currently, long-term bond yieldsare historically low. Because themonthly payment from a monthlypension/life annuity is tied to theinterest rate paid on long-term bonds,it currently takes more equity to pro-vide a $100 payment from a monthlypension/life annuity compared towhen long-term bond interest rateswere higher.

4. Access to capital in retirement

Some retirees want to have accessto their accumulated benefits duringretirement in order to make capitalpurchases (a motor home), to fundextraordinary expenditures (a trip) orto provide for contingencies (an unan-ticipated need). Taking a monthly pen-sion/life annuity eliminates this flexi-bility. The capital is “spent” at thecommencement of the monthly pen-sion/life annuity to purchase thestream of fixed monthly payments.This fixed monthly payment is theretiree’s only entitlement.

In those jurisdictions offering LIFsand LRIFs a retiree is permitted limitedflexibility. LIF and LRIF contracts aresubject to a maximum annual with-drawal limit established by provincialpension legislation. If this maximumexceeds the retiree’s retirement incomerequirement for the year, the excessamount up to the maximum can bewithdrawn, net of income tax and used

for one-time purchases for example,such as a trip or to make a gift.

In Saskatchewan, with the intro-duction of the PRRIF, a retiree now hascomplete flexibility in terms of accessto capital during retirement, subject toobtaining his/her spouse’s consent.The PRRIF is not subject to a maxi-mum annual withdrawal limit. Theentire balance can be withdrawn ascash, net of tax, at any time. The use ofaccumulated retirement funds for non-retirement purposes, however, obvi-ously precludes the use of these fundsto provide retirement income.

5. Inflation protectionA LIF, LRIF or PRRIF funded by a

diversified portfolio of stocks andbonds is sometimes recommendedover a monthly pension/life annuitybecause such a portfolio provides someinflation protection. This recommen-dation is based on the conventionalwisdom that stock prices appreciate intimes of inflation, thereby providingsome protection against the erodingaffects of rising prices. This recommen-dation, however assumes that theretiree is willing and able to accept thevolatility and risk that results from hav-ing his/her retirement income based onthe variable returns earned by a diver-sified portfolio of stocks and bonds.

A typical monthly pension/lifeannuity does not provide inflation pro-tection. The payment amount is fixedfor life. Over time, therefore, inflationwill erode the purchasing power of thisfixed payment amount.

Retirees wishing a life annuity withinflation protection can purchaseindexed annuities from insurancecompanies. The monthly paymentamount from an indexed annuityincreases each year by a specified per-centage. Because of this feature,indexed annuities will initially havelower monthly payment amounts thantypical life annuities.

Rather than take a lower initial pay-ment, many retirees prefer to accept

the impact of inflation later in retire-ment when they expect their spendingneeds to reduce, in return for thehigher initial payment with a typicallife annuity (i.e., a non-indexed annu-ity). The CSS Pension Plan does notoffer indexed monthly pensions.

ConclusionA monthly pension/life annuity is just

one of many options available to membersof the CSS Pension Plan at retirement. Itprovides a fixed monthly income for mem-bers who are not willing or able to riskinvestment losses or adjust to a variableretirement income dependent on invest-ment performance. A monthly pension/lifeannuity will never run out, no matter howlong you live.

At the same time, however, a monthlypension/life annuity will not permit amember to preserve unused equity fortheir heirs (beyond the 15-year guaranteeperiod permitted by legislation), will notprovide inflation protection, and will notpermit access to capital for unanticipatedor extraordinary needs. Finally the amountof your monthly pension/life annuity pay-ment will be locked-in at retirement basedon prevailing long-term interest rates atthat date. In periods of low interest rateslike today, a monthly pension/life annuitycan be relatively expensive.

Whether a monthly pension/life annu-ity, or a LIF, LRIF or PRRIF is the bestoption for you will depend on many fac-tors, including your age and health atretirement, the extent of your other assetsand your tolerance for risk. And remem-ber – it is not an “all or nothing” decision.Some, members chose to use part of theirpension equity for a monthly pension/lifeannuity, and transfer the remainder oftheir equity to a LIF, LRIF or PRRIF.

As you approach retirement, the CSSPension Plan will be pleased to help byproviding information that you will needto make an informed decision that is bestfor you.

1 See, “Retirement Income for Life”, in thespring 2003 issue of Time Wise, beginning at page 5.


David AdrianLafleche Co-op, Lafleche SK

Menno BergFederated Co-op, Saskatoon SK

Theophil BeslerEdmonton Co-op, Edmonton AB

Julien BoivinRycroft Co-op, Rycroft AB

Edwin BrechinCarman Co-op, Carman MB

George BreretonValleyview Co-op, Virden MB

Violet BrownArcola Co-op, Arcola SK

Conrad BruggerPortage Co-op, Portage la Prairie MB

Lois CareyPrairie Centre Credit Union,Rosetown SK

Melvin CessnaKinistino Co-op, Kinistino SK

Rodrigue ChorelLafleche Co-op, Lafleche SK

Fred ChouchickMontmartre Co-op, Montmartre SK

Charles CoteSt. Paul Co-op, St, Paul AB

Nils Danielson Wetaskiwin Co-op, Wetaskiwin AB

Fredrick DavisRosthern Co-op, Rosthern SK

Elwood DouglasHartney Co-op, Hartney MB

Wayne DoyleSherwood Co-op, Regina SK

Clifford DurnfordCo-operative Trust, Saskatoon SK

Herman DyckFederated Co-op, Edmonton AB

Rene FisetSouthland Co-op, Assiniboia SK

Edward FisherBeeland Co-op, Tisdale SK

James Fletcher Federated Co-op, Regina SK

George FlondraMainline Co-op, Salmon Arm BC

Anthony GartnerDilke Co-op, Dilke SK

June GibsonSaskatoon Credit Union, Saskatoon SK

Dick GiesbrechtHerbert Co-op, Herbert SK

Lyle GingreySherwood Co-op, Regina SK

James GrayCredit Union Central, Calgary AB

Phyllis HainesNeepawa-Gladstone Co-op,Neepawa MB

Raymond HayConsumers’ Co-operativeRefineries,Regina SK

F.S. HendersonConexus Credit Union, Regina SK

Nadia HolowaychukSt. Paul Co-op, St. Paul AB

Marte HowattCalgary Co-op, Calgary AB

Mary HrynuikCo-operative Health Centre, Prince Albert SK

Walter JensenBorderland Co-op, Moosomin SK

Eleanor JohnstonAirline Credit Union, Winnipeg MB

Vance KnouseLast Mountain Co-op, Raymore SK

Nick Kudryk Andrew Co-op, Andrew AB

Fred LongstaffSask. Turkey Producers, Regina SK

Joann LukinskiBrandon Co-op, Brandon MB

Earle MacDonaldFederated Co-op, Edmonton AB

Donald MarcineCredit Union Central, Winnipeg MB

Leonard MatticePioneer Co-op, Swift Current SK

Peter MayerAgrifoods International, Saskatoon SK

Charles McClainPincher Creek Co-op, Pincher Creek AB

Robert McMillanWeyburn Co-op, Weyburn SK

Donald McNeillFoam Lake Co-op, Foam Lake SK

Allan Morrison Cornerstone Credit Union, Yorkton SK

Zelma NickellPrairie Co-op, Melville SK

George OanciaSherwood Co-op, Regina SK

J.W. OfstieMacrorie-Tichfield Credit Union,Macrorie SK

Lester OlsonSpalding Co-op, Spalding SK

Marie PelletierPrince Albert Co-op, Prince Albert SK

Fred PepperMoose Jaw Co-op, Moose Jaw SK

Polly PolischukBiggar Co-op, Biggar SK

Gladys PrinsPrince Albert Co-op, Prince Albert SK

Richard ProsserCalgary Co-op, Calgary AB

Alvin RennerMedicine Hat Co-op, Medicine Hat AB

Carrie RobyDrumheller Co-op, Drumheller AB

William RoneyConsumers’ Co-operativeRefineries,Regina SK

Roland RussellWetaskiwin Co-op, Wetaskiwin AB

Bruce RussellVanderhoof Co-op, Vanderhoof BC

Charles Sanford Arctic Co-op, Winnipeg MB

Anne SchellenbergGretna Co-op, Gretna MB

Lucien SchmidtWeyburn Co-op, Weyburn SK

Helen SengerPineland Co-op, Nipawin SK

Clarence StillingCalgary Co-op, Calgary AB

RIn emembranceIN THIS REGULAR COLUMN WE ACKNOWLEDGE THOSE

PENSIONERS WHO ARE NO LONGER WITH US. TO THEIR FAMILY

AND FRIENDS, WE EXPRESS OUR SINCERE CONDOLENCES.

ATTENTION PENSIONERS!The CSS Pension Plan is pleased to

announce that it is continuing itstradition of providing the December pen-sion payments to pensioners prior to theholiday season. Accordingly:

• Pensioners whose pension pay-ment is deposited directly into acredit union or bank account:your pension payment will bedeposited into your account onFriday, December 19 instead ofDecember 26.

• Pensioners receiving monthlycheques by mail: your chequewill be mailed from the PensionPlan’s office on Wednesday,December 17.

2004 Income Tax ChangesIncome tax changes effective January

1, 2004 may mean that the after-taxamount of monthly pension you receivein 2004 will be different than theamount you received in 2003.

Persons who are 65 years of age orolder in 2004 may be eligible for theentire or some of the federal and provin-cial Age Exemption amount. A personaged 65 or older whose total net incomein 2004 will be less than the federal and

provincial minimum threshold amountcan claim the appropriate full AgeExemption when calculating his/her fed-eral and provincial income tax payablefor 2004. However, a person aged 65 orolder whose total net income exceeds theminimum threshold in 2004, will havetheir Age Exemption reduced by 15% oftheir net income in excess of the mini-mum threshold. If a person aged 65 orolder has total net income in excess ofthe maximum threshold amount in 2004,he/she will not be eligible for any of theAge Exemption amount.

As a result, a pensioner aged 65 orolder should keep the above in mind ifhis/her total net income is expected toexceed the minimum threshold amount.If a pensioner falls into this category,he/she can contact the CSS Pension Planto have extra income tax withheld fromhis/her monthly pension in light ofhis/her eligibility to the above AgeExemption amount.

Pensioners wishing to find out howmuch of the federal and provincial AgeExemption they are eligible for shouldget the federal and appropriate provin-cial Tax Personal Credits Return forms(TD1) and applicable worksheets. Inaddition to the CSS Pension Plan’s office,

the TD1 forms are available on theCanada Customs and Revenue Agency(CCRA) Web site at www.ccra-adrc.gc.ca, or by calling 1-800-959-2221.Pensioners who need help to complete afederal or provincial TD1 form can callthe CCRA general enquiries line, tollfree, at: 1-800-959-8281.

T4A SlipsThe T4A slips for 2003 will be mailed

directly to pensioners by early February2004. Watch your mail, as you willrequire the T4A slip when filing your2003 Income Tax Return. CCRA regula-tions state that a T4A slip must only beissued when total payments for the yearare more than $500.

If your total pension payments fromthe CSS Pension Plan for 2003 are lessthan $500, you will not receive a T4Afor 2003. However, you still mustdeclare the total of your pension pay-ments that you received in 2003 on yourIncome Tax Return.

Pension payments from the CSSPension Plan qualify for the PensionIncome Exemption (i.e., when calculat-ing the tax credits) on your Income TaxReturn. The maximum exemption thatmay be claimed is $1,000.

Mildred SturgeonPortage Co-op, Portage la Prairie MB

Gerald TernesCalgary Firefighters Credit Union,Calgary AB

Jacqueline TernowayFederated Co-op, Edmonton AB

Marie ThomsenFederated Co-op, Edmonton AB

May TradewellLloydminster Co-op, Lloydminster SK

Alice UngerDawson Co-op, Dawson BC

William WallaceMoose Jaw Co-op, Moose Jaw SK

William WelbySedgewick Co-op, Sedgewick AB

Margaret WestCalgary Co-op, Calgary AB

Ronald WigginsNorthern Co-op Trading, La Ronge SK

Stephen Wild1st Choice Credit Union,Lethbridge AB

Luverne WoodwardFederated Co-op, Canoe BC

M. Ann Wooldridge Blackie Co-op, Blackie AB

Albert WutchMedicine Hat Co-op, Medicine Hat AB


SPECIAL

FEATURECSS PENSION PLAN CONSIDERING

PRE-RETIREMENT FUNDIntroduction

In 2002 members of the CSS PensionPlan experienced their first negative

annual allocation. For members who havefollowed the changes occurring within thePlan over the past seven years, this result,although disappointing, was not a surprisegiven the down turn in the investmentmarkets. For a few, however, this result didcome as a surprise.

Given the Non-Retired Lives (NRL)portfolio’s asset mix, occasional annuallosses are possible. The Portfolio’s long-term average performance, however, isexpected to be similar to the Plan’s pastperformance.

As a result of the loss experienced bymembers in 2002, Delegates to the 2003Co-operative Superannuation SocietyAnnual Meeting passed a resolutionexpressing a need for a method to helpmembers protect their capital as they nearretirement. This article will update mem-bers on the Plan’s response to that resolu-tion and provide members with relevantbackground information.

What are the issues?The CSS Pension Plan is a money pur-

chase or defined contribution (DC) pen-sion plan. In a DC pension plan your contributions are known but your retire-ment benefit is variable.

The amount of your retirement benefitwill be a function of:• The amounts you and your employer

contribute to the plan;• The investment returns earned on

these contributions; • Your age at retirement; and• The type of retirement income option

you select.

In order to ensure that DC pensionplan members’ contributions earn an ade-quate return and bear an acceptable levelof risk, pension legislation requires thatthey be invested in a well-diversified,“prudent” portfolio of investments.

The structure of such a portfolio isdefined by Federal legislation. Typically itwill include stocks and bonds, but itmight also include smaller portions of“alternative” asset classes like real estate,private equity investments, hedge fundsor commodities.

Based on historical market returns,such a portfolio can be expected to pro-duce an adequate long-term averagereturn over a member’s working lifetime.However, it will also suffer short-termlosses on occasion.

For DC pension plans, pension legisla-tion requires that the portfolio’s actualinvestment performance be allocated tomembers’ accounts at least annually. Thisrequirement is intended to provide mem-bers with updated information on theinvestment performance of their retire-ment savings. When a pension plan’sinvestment portfolio experiences a short-term loss, however, it forces the allocationof the loss to the members by subtractingit from their accounts.

Depending on the type of retirementincome option you select, an investmentloss at retirement can have an impact onyour retirement income. If you intend tocontinue to invest your retirement savingsafter retirement in stocks and bonds, eitherdirectly or through mutual funds, a short-term loss occurring at retirement can berecouped in future years as markets riseagain. However, if you intend to “exit themarkets” at retirement and take a pensionfrom the Plan, buy an annuity or transfer

your accumulated savings to “guaranteedinvestments” like GICs, a loss at retirementcan mean a permanent reduction in yourmonthly retirement income. The value ofyour pension, annuity or GICs will notincrease in value when markets recover.

What can be done to reducethe risk of loss for membersnearing retirement?

Investment theory suggests that aninvestor’s risk tolerance decreases ashe/she ages. This is because an older per-son has fewer years in which to recoupinvestment losses. In addition, a retireehas a need to convert retirement assetsinto retirement income. This can requirethe liquidation of investments at a timewhen markets are weak, thereby forcingthe investor to “sell low”.

The CSS Pension Plan’s current strate-gy to help a retiring member who intendsto “exit the markets” at retirement managehis/her risk of retiring in a down year is:• To provide information and education

on the potential impacts of short-termlosses on the member’s expected retire-ment income;

• To explore with the member whetherhe or she can delay retirement or atleast the date of converting his or herpension equity, until a later date, whenthe loss might be recovered;

• To structure the NRL portfolio in anattempt to reduce the frequency andmagnitude of the annual losses thatcan be expected.Some DC pension plans, however,

have taken a different approach.Typically, this has involved creating a sep-arate, lower risk/lower return “pre-retire-ment” fund for the use of plan membersnearing retirement.


How does a pre-retirementfund work?

As you age, you may reach a stagewhere your primary investment objectiveis no longer growth, but “capital preserva-tion”. Once you reach this point, you arewilling to accept a lower return in order toreduce or eliminate the risk of short-termlosses. If you are planning to “exit themarkets” at retirement (i.e. take a pensionfrom the Plan, buy an annuity or investyour money in term deposits, savingsbonds, or GICs), this stage will be reachedas your planned “exit” date approaches.

It is possible to structure an invest-ment portfolio with “capital preservation”as its primary objective. Such a portfoliomight include short-term bonds, T-Bills,or money market instruments. Typically,the average return for such a portfolio willbe less than the average return for a “bal-anced” portfolio over longer periods oftime. However, once a member’s pensionequity is invested in such a portfolio, therisk of periodic short-term losses is great-ly reduced.

The use of a “pre-retirement” fund dur-ing your final working years can reducethe risk of suffering a loss immediatelyprior to your planned retirement date.However, it will not reduce the risk of suf-fering a loss immediately prior to the dateon which you planned to move your pen-sion equity into the “pre-retirement” fund.Partial transfers are one way of managingthis risk. By making a series of partialtransfers over an extended period you candollar-cost average the “exit” of yourretirement savings from the markets.

What issues can arise?For some time, the CSS Pension Plan

has been tracking the experience of otherpension plans that have already imple-mented “pre-retirement” fund options.The experience of these plans indicatesthat the provision of more than one invest-ment option for plan members creates cer-tain operational risks and complications:

• Member usage is typically lower thanexpected.

• Some members will lose money bytransferring funds back and forthbetween the available investment fundsin an attempt to “time the markets”.

• Some younger members who are notnear retirement, but are risk averse,will use the lower risk “pre-retirement”fund to “protect” their retirement sav-ings. This can result in an inadequatelong-term average return.

• Investment management and adminis-trative costs increase.

• Additional member education andcommunication is required.Some of these other pension plans have

limited member access to their “pre-retire-ment” funds in various ways, to managethese risks and reduce complications.Examples include: • Prohibiting access to the pre-retire-

ment option by younger members. • Limiting the frequency of fund trans-

fers to discourage market-timing.• Imposing a cost recovery fee on trans-

fers, to ensure a fair allocation of theadditional administrative expense

resulting from processing transferrequests.

How would a pre-retirementfund impact the CSSPension Plan?

The creation of a Pre-Retirement Fund(PRF) would have a significant impact onmany aspects of the Plan.

First, a suitable asset mix and invest-ment manager would have to be selected.To accomplish this, the Plan would con-duct an asset study and manager searchwith assistance from the Plan’s invest-ment consultant.

Next, the Plan would have to revise itsinvestment policy to include the PRF, alower risk/lower return investment fund,segregated from the NRL portfolio. Newpolicy provisions would be necessary todefine the purpose of the fund, describethe asset mix and identify the benchmark.

Changes would be required to thePlan’s computer systems to handle contri-butions, allocations and withdrawals for a


How do unit prices work?“Rate of interest” allocations on monies contributed or transferred into an investment

fund can be inaccurate in some cases depending on the amount contributed or trans-ferred, the date of the contribution, and the extent and timing of market gains and loss-es during the year. A rate of return based on a fund unit price, however, will correctlyreflect the investment performance of the underlying assets held in the fund at all times.

Monies entering a unitized fund purchase units at the current unit price on the dateof their receipt. This unit price accurately reflects the value of the investments held in thefund on that date. Thereafter the value of the units purchased fluctuates up and down, asinvestment gains and losses are passed on to the investor through changes in the unitprice. Similarly, on withdrawal of monies from a unitized fund, the value of the units dis-posed of occurs at a unit price that accurately reflects the value of the investments heldin the fund on the date of withdrawal.

Unit prices will accurately track an investment fund’s rate of return between any twodates. Unit prices reflect the true value of an investor’s holding at any time. Unit pricesalso ensure that the earnings received by an investor correspond exactly to the changein the value of the fund over the time that the units were held. This ensures that invest-ment earnings are allocated in a manner that is precise and fair to all members.

Continued on page 14

When Herb Carlson became a directorof the CSS Pension Plan in 2002, he

was no stranger to the boardrooms ofSaskatchewan co-operative and commu-nity organizations. Currently, he alsoserves as a director of Federated Co-oper-atives Limited, the Gateway Co-operativeAssociation, the Centre for the Study ofCo-operatives at the University ofSaskatchewan, and the Lutheran churchin Buchanan, Saskatchewan.

Lives on the home farmBuchanan, Herb’s home town, is a

small community about 25 km northeastof Canora, Saskatchewan. He grew up ona farm there, and today he lives on thehome farm with his wife, Sarah. That farmis where Herb and Sarah raised their twochildren, now grown. Their son, Leif, is amarketing analyst with the CanadianWheat Board in Winnipeg. Their daugh-ter, Annamarie, is working on a master’sdegree in psychology in North Dakota.

Today the family farm is part of a larg-er operation that Herb and his brother runtogether. “We are seed growers,” Herbsays. “It makes it a little more possible tobe away when you’ve got someone else.Someone’s always got to be home. Itwould be very hard [to arrange that] ifyou were on your own.”

Herb hasn’t always lived in Buchanan.“I was away for awhile. I was up atThompson, Manitoba, in the nickel indus-

try when I was young, and I was at theUniversity of Saskatchewan for a numberof years.” In the nickel industry, “I tooksamples from various steps along the pro-cedure, and prepared them for analysis in

the lab. I did that for about three years.Saved money so I could go back toschool.” At university, he studied agricul-tural economics, graduating in 1974. Thenhe went back to the farm and becameinvolved in the life of the community.

He isn’t sure just how many inhabi-tants Buchanan has today, but, like mostrural communities, it is losing population.“It used to be 500,” he says. “It’s probablyless than 300 now.” But it still has anactive local co-op, which amalgamatedwith the Gateway Co-operativeAssociation in the 1960s.

“…part of my life forever.”Herb says the Co-op “has been a part of

my life forever. Dad was on the Co-opboard, and I remember discussing whatwas happening with the Co-op when Iwas, probably, 12 years old. Dad alwaysused to talk about things very much. So,when I was growing up, I was alwaysaware of what was happening and thekinds of problems you run into. I guess itisn’t any surprise that I would end up get-ting involved. Then I went away for anumber of years. I wasn’t back a yearwhen a neighbour met me on the road oneday and said, ‘The Co-op meeting isTuesday night. My term is up and I wantyou to take my place.’

“We’re the Gateway Co-op, at Canora.There’s five towns and one Co-op. Eachtown elects a number of delegates toGateway Co-op and then one of them getselected to be the director. And so, in ’75, Iwas elected as a delegate for Buchanan,one of the five. The next year the directorretired and I was elected director.”

Herb CarlsonNew Director Has Years of Experience

BY TOM BOWMANPROFILEIN OUR CONTINUING SERIES OF PROFILES ON THE PENSION PLAN’S BOARD OF

DIRECTORS, FEATURED IN THIS ISSUE IS HERB CARLSON, WHO WAS ELECTED TO

THE CSS BOARD IN 2002


Herb says the Co-op “has been a part of my

life forever.

Providing services in a small town

Another vital part of any community isthe church, and Herb has long been activein Buchanan’s Lutheran church. “I gotinvolved there very shortly after we cameback to the farm. I’ve been off and on var-ious boards and committees over theyears. We built a new church, back in thelate ’70s. That was fun. Now, of course,with a small town congregation, it’s a bigchallenge keeping it operating. It’s thesame thing with a small-town co-op.”

It’s not only the town itself that isshrinking, Herb explains. “The rural areaaround the town used to have a lot of peo-ple, but now there’s getting to be very fewthere, too. And that’s not just Buchanan.It’s getting to be a real challenge, figuringout ways to provide some services in asmall community, because the people liv-ing there need them.”

That makes it hard for an organizationlike the co-op. “You know, your operatingcosts just keep going up. And if sales don’tgo up, then your margins just cover thebills. At some point, you have to say youcan’t provide these services anymore, butthat’s something to take one day at a time;we try to maintain as much as we can.And that’s a completely different mind-setthan the one we use when dealing with alarger centre, where you’re thinking interms of growth. Or with the Co-op sys-tem as a whole, which is growing rapidly.Then you have to change your way ofthinking when you get back to placeswhere you know you can’t grow.”

The situation, however, is not hope-less. “We have opened up more services insome of these places than we had before,but it’s a challenge. It’s a fact of the busi-ness world that you have to grow to stayhealthy, and that’s why we’re lucky we’repart of the system. You know, the wholeidea of co-operatives, in a small centre, isthat we are a part of a large organization,

Federated Co-op on the CSS board.Traditionally we have had one manage-ment person and one elected personbecause Federated [has] two positions onthe board. I was appointed a delegate tothe Pension Plan the very first year I waselected to the Federated board, so that wasin 1990. And then I was a delegate for,probably, five or six years running. Sincethat time I’ve been maybe once every threeyears. I don’t know how many times intotal, but a number of times. The presi-dent [of Federated] appoints people todifferent responsibilities, and I gotinvolved in other responsibilities.”

His experience as a delegate to thePension Plan made it a lot easier for Herbto take up his new duties as a CSS direc-tor, when he was elected to that positionlast year. “I remember the first couple ofmeetings, just coming to the annual meet-ing as a delegate, I spent a lot of time read-ing over all the material sent out and try-ing to figure out, What does this mean,and What does that mean?” Here hechuckles, and says, “Certainly the PensionPlan is speaking a different language fromyour normal business. So it was very use-ful that I had been a delegate for quite anumber of years, actually, prior to comingon the Board.”

You can’t predict the future…

I asked Herb two or three times whathe thinks the future holds for co-ops, orthe Pension Plan, or small communities.But he wouldn’t take the bait. “Who canpredict the future?” he asks. “Who couldpredict BSE? Who could predict SARS?On the very simplest level, when theCanadian dollar was dropping like a rock,they were predicting that it was going tokeep on dropping. And then, when it wastaking off like a rocket, they predicted itwas going to keep going up.”

so that we can be involved in large pro-jects where there is potential for growth.”

Co-operative organizations have con-tributed greatly to prairie communitieslike Buchanan. “Besides the co-op at homeI’ve been involved with the Pool and cred-it union. They’ve done lots of differentthings. And I guess working together issomething that worked. But you have to beof a mind-set that we’re going to do this foreverybody’s benefit, not just mine.”

Since Herb has that mind-set, andenjoys working with others for the sake ofall, it’s no wonder that his involvementwith co-ops has been so wholehearted,and that he has become involved beyondthe local level. As a director of GatewayCo-op, he became a delegate to the annu-al meeting of Federated Co-operativesLimited. Then in 1990, one of the FCLdirectors retired. “He had asked me if Iwas interested in running, because he wasgoing to step down. And a few othersapproached me. So I ran, and I got elect-ed. Well, you could say, maybe I got elect-ed. You have to be a delegate to the annu-al meeting to vote, and that’s where thevotes take place. It turned out that therewere two of us running, and the vote wastied. So the procedure is, you vote again,and then, if it’s still tied, you draw a nameout of the hat. So that’s why I say, maybe Iwas elected, because my name was the onepulled out of the hat!” He laughs at thememory. “So I’m on my fourteenth yearwith Federated.”

It was his position on the Federatedboard that led to Herb’s involvement withthe CSS Pension Plan, first as a delegateand then as a director. “I represent


Continued on page 14

“I look forward to working on the CSS

board”


…but you can position yourself for opportunities.

Herb likes to quote WayneThompson, CEO of Federated Co-opera-tives, on how to deal with the future: “It’snot so important to predict the future asto conduct your affairs in such a way thatif the future gives you an opportunity,you’ll be in a position to benefit.” Thisphilosophy is behind Herb’s ownapproach to all his directorships. “I thinkthe wise course is to see what’s out thereand to take issues as they arise. See thatthey’re all dealt with properly. If you keepmoving in a positive direction at alltimes, you don’t have to make big leapsand bounds to get a long ways.”

As for CSS, what he has to say is verystraightforward: “I look forward to work-ing on the CSS board, and trying to do agood job, keeping to our role as boardmembers, which is policy, and workingwith management to keep providing abenefit for the employees of co-ops andcredit unions, so that they’ll have some-thing when they’re ready to retire. I thinkit’s a good pension plan, and I’m going todo my best to make sure it continuesbeing a good pension plan.”

You can bet that his best is very good.Herb likes to work, so much so, that evenwhen he’s relaxing he seems to needsomething to work at.

“My wife is a really good gardener.She has a large flower garden. Actually,she has a big vegetable garden, too, butit’s the flower garden she’s probably more

interested in. She’s had me drag thebiggest rocks on the farm into the yard,and make flowerbeds around those. AndI look after the lawn. Cutting grass I’vealways found rather relaxing. When mydaughter left home, I bought a reallygood lawn mower. Without Annamarie tocut grass, I was going to have to do some-thing. Our yard is probably an acre andhalf, with lots of trees. It takes a bit ofattention. That’s just the house yard.Then there’s the farm yards as well.”

Well, maybe his life isn’t quite allwork. When interviewed for TimeWise,Herb was looking forward to a rare gameof golf at the end of July—his first allyear. But I wouldn’t be surprised if helooked hard at the fairways, thinking he’dlike to cut that grass.

second investment fund. To ensure fair,accurate and transparent allocations foreach fund, the “rate of interest” incomeallocation calculation now used by thePlan would have to be changed to onebased on unit prices (see “How do unitprices work?” on page 11).

Finally, additions to the Plan’s commu-nication and education programs wouldbe required to explain these changes.Messages on four related topics wouldhave to be developed:• General information on how a portfo-

lio’s asset mix affects its expected riskand return

• An explanation of how investment riskand return are inter-related;

• An explanation of unit pricing;• An explanation of the terms of the PRF.

These investment education and infor-mation programs would be developed withan eye to the new Capital AccumulationPlan investment disclosure guidelines justreleased by Canada’s financial regulators.

What’s next?Since the 2003 Annual Meeting, the

Plan has conducted a detailed investiga-tion into the creation of a Pre-RetirementFund. Based on this investigation, aframework for the creation of such a fundis taking shape. This framework has beenreported to the Board of Directors and iscurrently under review by Delegates andstakeholders.

The final decision to create a Pre-Retirement Fund (as well as its terms andlimitations) can only be taken by the

Delegates. A Delegate meeting will there-fore be necessary to consider the matteronce the Plan’s investigation is completeand a recommendation is finalized. This isexpected to take place in conjunction withthe 2004 Annual Meeting next March.

Finally, if the Delegates do decide tocreate a Pre-Retirement Fund, CSSPension Plan Rule changes must be passedby the Delegates and reviewed andapproved by provincial pension regulatorsand Canada Customs and RevenueAgency.

Members can expect further Pre-Retirement Fund updates on the Plan’swebsite located at www.csspen.com andin other Plan publications as this matterprogresses.

Continued from page 13

CSS PENSION PLAN CONSIDERING PRE-RETIREMENT FUNDContinued from page 11

Edward KoretzEastalta Co-op, Vermilion

Louise KostrybaCalgary Co-op

Chris LabineFederated Co-op, Edmonton

Paul LabrecqueSt. Isidore Co-op

James A. LecerfEckville Co-op

Shirley LeishmanThe Grocery People, Edmonton

Jonas LjunggrenValleyview Co-op

Clarence LonnebergValleyview Co-op

Everley F. LutzBeaver River Co-op, Bonnyville

Helen (Pat) MuddleRimbey Co-op

Howard MuhlbeierCalgary Co-op

Patrick S. NaphinCredit Union Central, Calgary

Patrick NeumannCalgary Co-op

Wayne PearceEastalta Co-op, Vermilion

Derrick PicklesCalgary Co-op

Earnest PottsFederated Co-op, Edmonton

Lorette GunnellEastalta Co-op, Vermilion

Viola HassardMedicine Hat Co-op

Irvin HeinrichsSedgewick Co-op

Sid HenstraCalgary Co-op

Miles R. HillsRimbey Co-op

Mervin HitchcockPonoka Co-op

Richard HoughFederated Co-op, Calgary

Rodney HowardEdmonton Co-op

Jean HussynecEdmonton Co-op

Edna JacksonCalgary Co-op

D.J.C. JamiesonGrande Prairie Co-op

Michael D. KellyFederated Co-op, Calgary

John KirbysonEckville Co-op

Caroline KlippertCredit Union Central, Calgary

Jerry M. KlippertFederated Co-op, Calgary

Donald W. KnowlerCalgary Co-op

ALBERTA

Frank AdamsCalgary Co-op

Richard AlexandreGrande Prairie Co-op

Frederick BartramMedicine Hat Co-op

Douglas BeveridgeFederated Co-op, Calgary

Bernard J. BoserCamrose Co-op

Ingrid BowmanEdmonton Co-op

Shirley ChristensenThe Grocery People, Edmonton

Leroy S. CloseVegreville Co-op

Edward CyrePlamondon Co-op

Mona D. EnslenMedicine Hat Co-op

Irma GastGrande Prairie Co-op

Norma GlasserPincher Creek Co-op

Dolores GrahamCredit Union Central, Calgary


PNew ensionsA TOTAL OF 208 NEW PENSIONS STARTED DURING THE FIRST NINE

MONTHS OF 2003. THIS IS UP SIGNIFICANTLY FROM THE 158 NEW

PENSIONS THAT STARTED DURING THE FIRST NINE MONTHS OF

2002. THE FOLLOWING 172 NAMES REPRESENT THE NEW PENSIONS

THAT STARTED FROM MARCH 2003 TO SEPTEMBER 2003 INCLUSIVE.

An asterisk * denotes that these pensioners are surviving spouses ofdeceased members of the CSS Pension Plan.

BRITISH COLUMBIA

Irene M. BuchananBella Coola Co-op

Bernard P. ErmantroutDawson Co-op

Tom FosterSurrey Co-op

Lawrence GreenwayMainline Co-op, Salmon Arm

Virginia M. HenricksonDawson Co-op

Beverley C. McLachlanSurrey Co-op

Darlene NelsonUcluelet Co-op

John C. NixonMid-Island Co-op, Nanaimo

David PankratzDawson Co-op

Hao QuachDawson Co-op

Goldie C. ReadSurrey Co-op

Joan M. WardDelmas Co-op, Massett

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Leslie G. ReevesPioneer Credit Union, High River

Bob RuffCalgary Co-op

Dianne I. SchmaltzMedicine Hat Co-op

Judy M. SchumanBarrhead District Co-op

Audrey SenetzaEdmonton Co-op

Cheryl ShandilyaCalgary Co-op

Audrey StenbeckPincher Creek Co-op

Ronald D. StoutFalher Co-op

John StrieglStony Plain Co-op

Katherine SwitzerCalgary Co-op

Judith TetachukPioneer Credit Union, High River

Kenneth B. TharesThe 11-22 Seed Cleaning Co-op,Medicine Hat

Dorrien ThompsonFederated Co-op, Calgary

Brian WalkerWetaskiwin Co-op, Wetaskiwin

Glen WendtBeaver River Co-op, Bonnyville

Andrew A. WeselakVegreville Co-op

Clarence WoltjerRed Deer Co-op

Tony W. YaremkoFederated Co-op, Calgary

Eugene M. ZadvornyFederated Co-op, Calgary

SASKATCHEWAN

Phillip D. AdamsWilkie Co-op

Donald AndersonSpalding Co-op

Marlene J BakerBroadview Co-op

Elden W. BauerDinsmore Credit Union

Lionel BolenLestock Co-op

John J. BretiLipton Co-op

Annette M. ButlerShellbrook Credit Union

Gary CarlsonSask. Federation. of Agriculture,Regina

Andy CasavantSaskatoon Co-op

John Gerald ChorneyQuill Lake Credit Union

Shirley CollingwoodWishart Credit Union

Robert G. CookFederated Co-op, Regina

Frank EllingsenFederated Co-op, Regina

Ardie EnglishConexus Credit Union, Regina

Donald H. FallisEstevan Co-op

Sr. Pauline FeistFides Co-op, Saskatoon

Doreen A. ForbesParkland Co-op, Porcupine Plain

Marilyn R. FosterPrince Albert Co-op

Jean M. FreemanRegina Cablevision Co-op

Jacob FriesenAgrifoods International,Saskatoon

Henry T. FunkDrake Co-op

Janice GarrettPioneer Co-op, Swift Current

Gerald GermsheidSouthwest Co-op, Maple Creek

Margaret GibsonSaskatoon Credit Union

Sharon V. GilbertMoose Jaw Co-op

Louis GilmerEast Central Co-op, Kelvington

Ruby HeidelBattlefords Co-op, North Battleford

Gary B. HelgasonKindersley Co-op

Judith P. HillSaskatoon Co-op

K. Dale HillmerConexus Credit Union, Regina

Garth HindmarchEstevan Co-op

Maude J. HorrocksEstevan Credit Union

Melita M. JessStoughton Co-op

Trudy JewittPioneer Co-op, Swift Current

Betty L. KeeferAgrifoods International,Saskatoon

Mildred KerrCommunity Health Services,Saskatoon

W. Diane KlatikConexus Credit Union, Regina

T. Keith KnoxConsumers’ Co-operativeRefineries, Regina

Laura E. KobasaRosetown Co-op

Norma J. LelandAdvantage Credit Union, Melfort

James MacDonaldBorderland Co-op, Moosomin

Pat L. MassierCredit Union Electronic Services,Regina

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June McLachlinPioneer Co-op, Swift Current

Willard J. McLartyPineland Co-op, Nipawin

Patricia MielkeHorizon Credit Union, Melville

Beverley MoninBorderland Co-op, Moosomin

Marlene G. MooreCornerstone Credit Union,Yorkton

Eugene NagyParkland Co-op, Porcupine Plain

Gwendolyn R. NedilaCommunity Health Services,Saskatoon

Angeline R. PanioPlainsview Credit Union,Kipling

Lucien A.E. PicheSaskatoon Co-op

Ben M. PlemelCredit Union Central, Regina

Elizabeth PopowichEast Central Co-op, Kelvington

Viola L. ProkopowFederated Co-op, Saskatoon

Dale RadomYorkton Co-op

Mel RewakowskyGateway Co-op, Canora

Ethel SchmidtMoose Jaw Co-op

Gale ScobieLloydminster Credit Union

Viola SilvesterFederated Co-op, Saskatoon

William SkeneKenaston Co-op

Annemarie SpitzerSherwood Co-op, Regina

Jeannine UsselmanCommunity Health Services,Saskatoon

Nancy D. WilkinsonCommunity Health Services,Saskatoon

MANITOBA

Clara J. AlfordSwan Valley Co-op, Swan River

Elisabeth AltmanMoosehorn Co-op

Shirley BreretonVanguard Credit Union,Rossburn

Helena M. CollierNorth of 53 Consumers Co-op,Flin Flon

Marion Crampain-HarvattValleyview Co-op, Virden

Robert CrawfordKillarney-Cartwright Co-op

Verna M. DerksenSun Valley Co-op, Altona

Maureen DickinsonVantis Credit Union, Winnipeg

Nellie DubowitsUkrainian Farmers Co-op,Fisher Branch

Bill EwanyshynGilbert Plains Co-op

Heather D. FerrisRed River Co-op, Winnipeg

Carol FunkParkway Co-op, Roblin

Brenda GlutingCredit Union Central, Winnipeg

Louise V. GrahamSwan Valley Co-op, Swan River

John A. HorsburghLouise Co-op, Pilot Mound

Ruth K. JeansonWinnipeg Police Credit Union

Dianne R. KostickCredit Union Central, Winnipeg

Pearl C. KrywyCambrian Credit Union,Winnipeg

Vivian LivingstonNeepawa-Gladstone Co-op

Merv McKinnonDauphin Co-op

Edward F. MoskalCredit Union Central, Winnipeg

Donna M. PughBoissevain Co-op

Douglas B. RinnFederated Co-op, Winnipeg

Bernie SpakowskiRed River Co-op, Winnipeg

Anton SwidzinskiParkway Co-op, Roblin

John TaylorArctic Co-op, Winnipeg

Roy T. TimchukSun Valley Co-op, Altona

Terri J. WaltersCredit Union Central, Winnipeg

Franklin J. WeissManitoba Co-op HoneyProducers, Winnipeg

ONTARIO

Janis F. LakeCangeco Credit Union.Toronto

Mary E. MallettCanadian Co-operativeAssociation, Ottawa

Rosemarie MatthewsInterprovincial Co-op,Mississauga

Gerald SchulerCanadian Co-operativeAssociation, Ottawa

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“I Know That!” Contest

Complete the crossword puzzle below and mail your entry to the address below. Entry forms must be received no later than Friday, November 28,2003. The first ten correct entries drawn at random on December 1 will each win a copy of Alan Dickson’s book “Advance to Go! – The Road to a RichRetirement” or David Nicholl’s book “I am the Executor: What do I do?”. “Advance to Go! – The Road to a Rich Retirement” illustrates a rich retirementbeing measured in terms of leisure time spent with family and friends. “I am the Executor: What do I do?” removes the mystery surrounding the role andresponsibilities of the executor. Answers to all of the crossword puzzle clues below can be found in this issue of TimeWise. See page 3 for a list of win-ners and the correct crossword puzzle solution to the Spring 2003 “I Know That!” Contest.

ENTRY FORMMail to: “I Know That!” Contest, CSS Pension Plan

P.O. Box 1850, Saskatoon, Sask. S7K 3S2

Name (Please print): _______________________________________________________________________________________

Employer: _______________________________________________________________________________________________

Home Address: __________________________________________________________________________________________

City: __________________________________ Province: ______________________________ Postal Code: ______________

If my entry is one of the first 10 correct entries drawn on December 1, 2003, I wish to receive a copy of:

❏ “Advance to Go! – The Road to a Rich Retirement” or ❏ “I am the Executor: What do I do?” (Please check one)

Enter Our “I Know That!” Contest and You Could Win a Copy of “Advance toGo! – The Road to a Rich Retirement” or “I am the Executor: What do I do?”

ACROSS2. A LIF, LRIF or PRRIF funded by a __________ portfolio of stocks

and bonds is sometimes recommended over a monthly pension/lifeannuity because such a portfolio provides some inflation protection.

6. The CSS Pension Plan is a money purchase or defined __________pension plan.

7. For 2004 the CCRA maximum pension plan contribution limit foremployee members of defined contribution pension plans, such asthe CSS Pension Plan, is the __________ of: 18% of the employee’scompensation for the year; or $16,500 (the maximum dollar limitfor the year).

8. Members withdrawing or transferring their funds by mid-Decemberwill receive an income allocation based upon the Plan’s estimated__________ performance (positive or negative) to the date of theirwithdrawal or transfer

9. The use of a “pre-retirement” fund during your final working yearscan __________ the risk of suffering a loss immediately prior to yourplanned retirement date.

Down1. Eliminating the risk of outliving your retirement savings is the chief

__________ of converting your pension equity into a monthly pen-sion from the CSS Pension Plan or a life annuity from an insurancecompany.

3. The T4A slips for 2003 will be mailed directly to pensioners by early__________ 2004.

4. Canadian Investment markets produced __________ results for thefirst 8 months of 2003.

5. His experience as a delegate to the Pension Plan made it a lot easierfor Herb Carlson to take up his new duties as a CSS __________.

8 Given the Non-Retired Lives (NRL) portfolio’s asset __________,occasional annual losses are possible.

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year term from and by the Pensioners receivingmonthly pensions from the CSS Pension Plan.

Four (4) delegates will be elected for atwo year term from and by active contribut-ing employees employed in Alberta/BritishColumbia/Northern Canada.

Three (3) delegates will be elected for atwo year term from and by the active con-tributing employees employed in Mani-toba/Eastern Canada.

A nomination form for employee membersin the ALBERTA/BRITISH COLUMBIA/NOR-THERN CANADA region; the MANITOBA/EASTERN CANADA region and the PEN-SIONER group only is printed below. In addi-tion to completing the nomination form andgeneral questionnaire on the reverse of the

nomination form, candidates are requested toforward a recent black and white photowhich will accompany the ballot.

Nominations are to be forwarded to, andreceived by the Returning Officer no laterthan 4:30 p.m., Friday, November 28, 2003.

Upon close of nominations the ReturningOfficer will prepare the necessary ballots con-taining the names of those nominated and willforward these to employee members inAlberta/British Columbia/Northern Canada andManitoba/Eastern Canada for whom contribu-tions and a completed application for member-ship has been received prior to November 1,2003 as well as to pensioners who are receiving amonthly pension from the CSS Pension Plan.

Bill Turnbull, Returning Officer

Election of Employee Delegates(Alberta/B.C./Northern Canada Region; Manitoba/Eastern Canada Region; Pensioners)

Employee delegate elections are held on arotating two year basis by region or

group. In January 2003 seven delegates repre-senting the Saskatchewan region were electedfor a 2 year term.

For 2004, the election of employee dele-gates will be held for the Alberta/B.C./Northern Canada region, Manitoba/EasternCanada region and the Pensioner group.

This is the official notice of the calling ofan election for January 16, 2004 for employ-ee delegates to attend the Annual Meeting ofthe Co-operative Superannuation Society,scheduled for March 19, 2004 in Saskatoon.The number of delegates to be elected is asfollows:

One (1) delegate will be elected for a two

PLEASE CLIPCO-OPERATIVE SUPERANNUATION SOCIETY

BOX 1850, SASKATOON, SASKATCHEWAN S7K 3S2

NOMINATION FOR DELEGATESMust be received by November 28, 2003

Date:

We, the undersigned, nominate

of in for delegate.

Name of Employee Member (Please Print) Signature of Employee Member

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5

N.B. - To be valid nominations must be signed by five voting employee members.I hereby consent to allow my name to stand for election as an employee delegate to the Co-operative Superannuation Society.

Signature of Candidate Occupation of Candidate

DON’TDELAY

LATENOMINATIONS

WILL BEREJECTED

(Candidate’s Name)

(Address)


Everything You Wanted To Know About Being aDelegate - But Were Afraid To Ask!

● Delegates are required to attend the annual meeting of CSS (1 day), and any special delegate meeting necessary dur-ing their term. The need for such special meetings has been all but non-existent in recent years.

● Delegates, as representatives of the members, are the only ones able to effect a change in the bylaws or rules of thePlan as such bylaws and rules affect benefit provisions.

● Delegates elect the Board of Directors. While each delegate has the right to be nominated for such elections, eachdelegate also has the right to refuse such nomination.

● Delegates receive a per diem of $100 for attending meetings plus out-of-pocket expenses.

● Being a delegate is a responsible position – however it does not require a significant time commitment.

CONSIDER BEING A CANDIDATE FOR ELECTION AS A DELEGATE THIS YEAR!PLEASE CLIP

QUESTIONNAIRE TO BE COMPLETED BY EACH CANDIDATENOTE: The purpose of this questionnaire is to provide information for the voters and to give them some knowledge of employee members who have been nominated.

Name of Candidate Social Insurance Number

Present employer

Position now held

Co-op or Credit Union experience:

Educational Achievements:

Please provide any brief comments you may have about the future direction of CSS in areas such as investments, member education, plan provisions, etc.

A) Plan Provisions:

B) Investment Strategy:

C) Member Education & Services:

My photo is enclosed (black and white preferred)

Date Signature

timewisefall • 2003 fall • 2003 · sk rrif rpp (restricted funds)* gics choice of life, yes yes...

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