pension & benefits committee 9 9:30 a.m. to 11:45 a.m. nh ... · members are supplied with...

Board of Governors PENSION & BENEFITS COMMITTEE

Friday 9 December 2016 9:30 a.m. to 11:45 a.m.

NH 3318

OPEN SESSION ACTION 9:30 Consent Agenda†

Motion: To approve item 1 and to receive for information item 2 below.

1. Approval of the 11 November 2016 Minutes* and Business Arising Decision

2. Execution Against the Work Plan* Information

9:35

9:45

3. Report from RPPI* [Hardy/Forrest]

4. 30 Year U.S. Treasuries Transaction (RPPI) [Forrest]Motion: To approve the sale of the balance of the 30 year U.S. Treasuries currently in the pension plan (~$64M) prior to December 31, 2016 and proceeds to be invested 100% into High Quality Short Corporate Bond Fund

Information

Decision

9:50 5. Retiree Life Insurance – Reinstatement of coverage indexation*[Hornberger] Decision

Information

Information

Information

Information

Discussion

10:00 6. Indexation to Pension Benefit and Contribution Limits* [Hornberger]

10:10 7. Update on Government Pension Plan Initiatives [Shapira]

10:45 Break

11:00 8. Request for Credit for Past Service* [Thompson]

11:15 9. Other business

11:25 10. Proceed into Confidential Session

P&B 9 December 2016 of 28

11:25

CONFIDENTIAL SESSION

11. Approval of the 11 November 2016 Minutes (Confidential)* and BusinessArising

Next Meeting: Friday 20 January 2017, 9:00 a.m. – 11:30 a.m., NH 3318 Luncheon to immediately follow meeting

Decision

*attached** to be distributed

† Note: To allow the committee to complete a number of matters quickly and to devote more of its attention to major items of business, the agenda has been divided between items that are to be approved and/or received for information by consent and those that are to be presented individually for discussion and decision and/or information.

A consent agenda is not intended to prevent discussion of any matter by the committee, but items listed under the consent sections will not be discussed at the meeting unless a committee member so requests. Committee members are supplied with appropriate documentation for each item and all items will be approved by means of one omnibus motion. The committee will then move immediately to consideration of the items on the regular agenda.

2 December 2016 Sian Williams Senior Legal Counsel, Secretary to the Committee

Future Agenda Items: • Report to the Community

Please convey regrets to Terri Rau at 519-888-4567 x37549 or [email protected]


mailto:[email protected]

University of Waterloo Board of Governors

PENSION & BENEFITS COMMITTEE Minutes of the 11 November 2016 Meeting

Present: Monika Bothwell, Lori Curtis, Mary Hardy, Dennis Huber, David Kibble, Ramesh Kumar, Michael Steinmann, Marilyn Thompson, Christine Wagner, Marta Witer Regrets: Stewart Forrest, Ranjini Jha, Ian Orchard, Karen Wilkinson Administration: Sarah Hadley, Lee Hornberger, Alfrieda Swainston Guests: Linda Byron, John Olsen, Allan Shapira

Secretariat: Sian Williams, Terri Rau

Organization of Meeting: Marta Witer took the chair on behalf of Karen Wilkinson and Sian Williams acted as secretary. The secretary advised that a quorum was present. The agenda was approved without formal motion. 1. WELCOME The committee welcomed new member Ranjini Jha in absentia. 2. MINUTES OF THE 7 OCTOBER 2016 MEETING AND BUSINESS ARISING A motion was heard to approve the minutes as distributed. Hardy and Huber. Carried. There was no business arising from the minutes. 3. EXECUTION AGAINST THE WORK PLAN The report was received for information. Williams advised that that the committee was on schedule. 4. UPDATE ON GOVERNMENT PENSION PLAN INITIATIVES Shapira provided an update on the Government Pension Plan Initiatives, reminding the committee that at the meeting on 9 September 2016 he had previously presented the Aon Hewitt report entitled “Review of Ontario’s Solvency Funding Framework for Defined Benefit Plans (Consultation Paper) (the “Report”). Shapira indicated that the university is currently in stage 1 of solvency relief, and that on 1 January 2017 the university will apply for stage 2 solvency relief, at which time interest payments on the solvency deficit will be required. There will be no further news about the Marshall consultation in regard to universities until the new year. 5. Q3 DASHBOARD – FUNDED STATUS AT 30 SEPT 2016 Byron presented a previously distributed report entitled “Pension Risk Management Dashboard, as of September 30, 2016”. In reference to the going concern (page 8 of the agenda packaged materials), Byron noted that the plan’s funded ratio increased to 98.2% at 30 September 2016 due to asset performance exceeding expectations, contributions of $19.5 million, and an increase in liabilities primarily due to interest growth. Byron also took the committee through the risk-free benchmark (page 9 of the agenda packaged materials), and noted that the plan’s funded ratio increased to 57.0% at 30 September 2016 due to asset performance exceeding expectations, contributions of $19.5 million, and an increase in liabilities due to a decrease in the risk-free rate. Byron noted that there was a lightly positive improvement in the solvency position of the plan (page 11 of the agenda packaged materials). The plan’s funded ratio increased to 80.8% at 30 September 2016 due to asset performance exceeding expectations, contributions of $19.5 million, and an increase in liabilities primarily due to a decrease in risk-free rates.

6. ASSET LIABILITY STUDY – RISK DIAGNOSIS Olsen presented a previously distributed report entitled “Asset-Liability Study Risk Diagnosis Meeting - November 11, 2016”. Olsen took the committee through the purpose and objectives of the study, risk diagnosis, asset classes and constraints, and the project plan. Olsen noted three purposes of the study – to review the projection of key financial metrics for the current target asset mix, to agree on asset classes and constraints for further modeling, and to identify any modifications required for assumptions and/or methodology. University objectives include providing long-term security of promised benefits to plan participants, ensuring the long-term affordability and sustainability and equity of the plan, and maintaining a reasonable level and volatility of plan contributions for members and the


university. Committee members also discussed risk diagnosis, noting that risk diagnosis involves projecting the plan’s financial state over the next 10 years. Projections of demographic measures, such as average age of active members and active liability as a percentage of total liability, are included. Projections of financial measures such as expected portfolio return, university current serve cost, university contributions, going concern funded status, risk free liability funded status, solvency funded ratio and total current service cost are also involved. Asset classes and constraints were also discussed (page 39 of distributed material). Olsen noted that in January 2017 the committee will have an opportunity to review the range of asset mixes. 7. MOMENT OF SILENCE

The committee held a minute of silence at 11 a.m. to show their respect on this Remembrance Day for the veterans and all those who have lost their lives in world conflict.

<8. BREAK>

9. REQUEST FOR CREDIT FOR PAST SERVICE Thompson provided a verbal report on the request for credit for past service issue, which was most recently raised in the fall 2016 confidential sessions of the committee. Thompson described the historical background of the request for credit for past service issue, noting that the issue has been brought before previous committee meetings on several occasions, commencing in 1991. Thompson indicated that she would provide a written summary of her verbal report in regard to the history at the next committee meeting. Hornberger then took the committee through the raw data (pages 81 and 82 of the agenda packaged material). Hornberger indicated that further analysis of the 420 employees of interest will have to occur by pulling hard copy employee files from archives. Hardy commented that in her view it appeared as if many employees were given poor advice about when to join the pension plan. Thompson noted that previous committee members had acknowledged that some people may have been given poor advice, but going forward it would be necessary to not only pull the files of identified employees from storage, but also review the files of specific employees who contact Human Resources.

10. INDEXATION OF BENEFITS MAXIMA Hornberger presented a brief report in regard to extended health and dental benefits (page 83 of the distributed material). The indexing model on page 83 shows that increasing the benefit maxima for January 1, 2017 based on 1 year inflation results in a $49,000 annual on-going cost.

The committee heard a motion to apply the indexing ratios as shown in the indexing model on page 83. Bothwell and Wagner. Carried.

Hornberger also presented a brief report in regard to retiree life insurance, (page 84 of the distributed material), indicating that Aon Hewitt had prepared an indexing model to adjust the coverage extended to retirees on a go forward basis. It was proposed that indexation would be resumed on January 1, 2017 via a choice of three scenarios. The committee decided to table this item to allow for further discussion.

11. REPORT FROM RPPI SUBCOMMITTEE This matter was tabled to the next meeting.

12. OTHER BUSINESS

There was no other business.


NEXT MEETING The next meeting is on Friday 9 December 2016 from 9:30 a.m. – 12:00 p.m. in Needles Hall Room 3318.

With no additional business in open session, the Committee proceeded into confidential session.

05 December 2016 Sian Williams Senior Legal Counsel Secretary to the Committee


Pension & Benefits Committee, Board of Governors, University of Waterloo Execution against Work Plan

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.

1 The 2015 version of the SIPP was approved by the Board of Governors at its 27 October 2015 meeting. There is also a need to consult with the community on the incorporation of environmental, social and governance factors into investment decision-making. So the annual review of the SIPP will be deferred until after consultation takes place. 2 1 January 2014 Actuarial Valuation Report was filed in July 2014.

Task Frequency 11 Dec 2015

15 Jan 2016

26 Feb 2016

11 Mar 2016

20 May 2016

17 Jun 2016

9 Sept 2016

7 Oct 2016

11 Nov 2016

9 Dec 2016

Approval of Actuarial Valuation Assumptions Annual

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

Annual 1 1

Preliminary Valuation Results (RPP and PPP) Annual

Actuarial Valuations (RPP and PPP) Annual

Actuarial Filing2 Minimum every three years

Cost-of-living adjustment to payroll pension plan limit

Annual

Cost-of-living Increase for Pensioners Annual

Pensions for Deferred Members Annual

Salaries for Pension Purposes for Individuals on Long-term Disability

Annual

Benefits Plan Premium Renewals Annual

Indexing of Long-term Disability Plan Benefits and Maxima

Annual


4 Completed in September 2016

Task Frequency 11 Dec 2015

15 Jan 2016

26 Feb 2016

11 Mar 2016

20 May 2016

17 Jun 2016

9 Sept 2016

7 Oct 2016

11 Nov 2016

9 Dec 2016

Investment Status of PPP Annual

Review of Contribution and Protocol Caps (RPP and PPP)

Annual

Budget Overview Annual

Benefits/Financial Analysis Report Annual

Cost of Removing Life-time Maximum on Out-Of-Province Health Care Coverage for Retirees

Annual

Investment Manager Review (provided under reports from RPPI)

Twice 4

Total Fund Overview (provided under reports from RPPI)

Quarterly 4

Flexible Pension Plan Annual

Previous Years’ Fees and Expenses Annual

Annual Audit of the Pension Plan Fund Financial Statements

Annual

Annual Report to the Community Annual

Indexing of Health and Dental Plan Maxima Annual

Committee Evaluation3 Annual


Report to the P&B Committee from the RPPI subcommittee members

The RPPI met on 30 November 2016. Attached to this report you will find the summary performance review of the RPP investments at 30 September 2016.

1. Review of total fund performance as at 31 October 2016 The year to date (TYD) return is 5.62% which is 0.43% above target of CPI+3.7%. Most of this return came from the third quarter (3.91%).

It was noted that long term interest rates are rising, which will generate losses on the bond portfolios, but the plan liabilities will also fall. The net effect should be a reduction in the solvency and wind-up deficits.

2. Investment Manager Presentations Oldfield Partners, Walter Scott and Trilogy all gave presentations. Oldfield is on watch, although that was not mentioned in their presentation. Over the past 5 years Oldfield has underperformed the index at a cost of close to $26 million in terms of the UW pension assets. However, their last quarter performance has been stronger, giving them a YTD return of 7.62%, compared with the index YTD of -0.13%. Given that their YTD in June was -5.5%, there has been a significant swing in the past few months, largely from their heavy weighting (33%) in Japanese stocks. The Nikkei index has risen 19% since June 2016. The Oldfield presentation was not very specific. They explained that they use “multiples and variables” to determine target prices. They tell us that they believe that they now have a ‘tail wind’, that the past few years have not suited their style of investing, and that their portfolio will do better with rising interest rates. However, this seems inconsistent with their heavy weighting in Japanese stocks. Walter Scott’s returns overall over the past five years, net of fees, have performed slightly below the index, at a cost to the plan of less than 1 million compared with a passive strategy. Walter Scott’s strategy is to select a small number of value stocks that should outperform in down markets, but may underperform in up markets. The added value history suggests that they are successful in the downside protection, outperforming the index in all of the eight down market quarters since 9/09. Their YTD return is 2.69%, which is 2.82% above the index. Their 1-year performance is still stronger than Oldfield. The Trilogy presentation also emphasized that the past few years have not suited their investment style. Their theory is that investors are pushing up the price of dividend paying stocks, and that firms are paying excessive dividends to attract the income seeking buyers. When interest rates rise these buyers will return to fixed interest, and the high dividend stocks will fall, in which case Trilogy’s “Growth At A Reasonable Price” (GARP) portfolio should do better. Interestingly, the stock specifically referenced by Trilogy as overvalued


(Johnson and Johnson) is one of the top performers in Walter Scott’s portfolio. Trilogy has lost a significant proportion of their assets under management, a fact that they attribute to Australian pension fund trustees selecting fewer fund managers (rather than their quite poor performance over the past few years). They have also lost or laid off around 10% of their staff, with no new hires. Trilogy invests in a very large number of stocks compared with the other managers. Their YTD return is -0.80%, which is below the index (-0.16%). In the past four years (since our initial investment), the impact of Trilogy’s underperformance on the pension assets, compared with the index is around $7.5million. A brief discussion after the three presentations concluded with a consensus to take no immediate action, but to keep Oldfield on watch. Since the ‘new manager bounce’ effect was discussed at the meeting, I have prepared a couple of plots illustrating the manager selection problem. Managers are selected based on excellent recent performance, but, since much of this performance is purely random, it is rarely maintained. The attached charts show results for our three global managers. The first set of bars shows the performance in the year before we selected each one. The subsequent bars show the performance in the years immediately following selection. The first graph shows the performance relative to the MSCI index, and the second shows performance relative to other global equity managers. In this case, the best managers would be rated 100 and the worst would be rated 1. In both graphs we can see that the performance immediately after selection was significantly worse than immediately before.

3. Sale of US treasuries The RPPI agreed to recommend the sale of the 30-year Treasuries (around 64 million); proceeds will be placed in the TDAM Active short corporate bond fund, for now. At some point, when interest rates have stabilized, we should reinvest in long bonds to improve the liability match.

4. Global Equity Manager Search This is on hold until the F&I committee finds a replacement for Satish Rai, and the RPPI committee is at full complement.

5. Liability Driven Investment Solutions Mary Hardy proposed inviting an LDI specialist to present to the P&B and RPPI committees.

Mary Hardy and Stewart Forrest

December 2 2016


-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

Year before 1 year after 2 years after 3 years after 4 years after

Value Added Trilogy

Oldfield

Scott

0

10

20

30

40

50

60

70

80

90

100

Before 1 year after 2 years after 3 years after 4 years after

Trilogy

Oldfield

Scott


Executive Summary

Page 1


Manager OverviewExecutive Summary

As of 30 September 2016

Manager Mandate Annual Fee (%) Aon Hewitt Rating Comments

Sionna Canadian Equity 0.370 Buy No comments.

TDAM Universe Bond Index

0.033

Buy In August, Krista Clairmont joined the firm as Vice President, Portfolio Manager, Passive Fixed Income. During the quarter, Joseph Pilato, Vice President and Trader, transferred from the Equity Trading team to the Fixed Income Trading team.

TDAM Active Short Term Corporate Bond Not Rated

Oldfield Global Equity 0.750 Qualified

Richard Oldfield, a Founding Partner, will step back as Lead Portfolio Manager of the global equity strategy in January 2017. Andrew Goodwin and Nigel Waller will assume Portfolio Manager responsibilities beginning January 1, 2017. Steps have been taken to identify a manager (or managers) to potentially replace Oldfield.

Trilogy Global Equity 0.530 Qualified No comments.

Walter Scott Global Equity 0.726 Buy No comments.

Brookfield Infrastructure - Not Rated No comments.

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

Total Fund ex. Currency Overlay 0.260 - Continue to monitor.

Page 2


AllocationMarketValue($000)

%

Performance (%)

1Quarter

YearTo

Date

1Year

2Years

3Years

4Years

5Years

10Years

Total Fund ex. Currency Overlay 1,501,585 100.0 3.91 (72) 5.34 (71) 9.29 (59) 8.82 (12) 9.62 (54) 8.96 (91) 8.93 (100) 5.75 (91)CPI + 3.7% 0.68 (100) 4.63 (84) 5.09 (100) 4.93 (84) 5.22 (100) 5.12 (100) 5.07 (100) 5.43 (95)Value Added 3.23 0.71 4.20 3.89 4.40 3.84 3.86 0.32Balanced Funds Median 4.30 6.43 9.65 7.05 9.81 10.09 10.14 6.40

Sionna 54,964 3.7 6.76 (22) 16.57 (19) 18.87 (7) 3.06 (64) 7.65 (79) 8.59 (85) 9.22 (71) 6.08 (57)S&P/TSX Composite 5.45 (75) 15.83 (23) 14.21 (40) 2.29 (74) 8.00 (75) 7.78 (91) 8.05 (95) 5.29 (78)Value Added 1.31 0.74 4.66 0.77 -0.35 0.81 1.17 0.79Canadian Equity Median 6.00 12.93 12.96 3.66 9.07 10.31 10.78 6.22Canadian Equities 54,964 3.7 6.76 (22) 16.57 (19) 18.87 (7) 3.06 (64) 7.65 (79) 8.59 (85) - -S&P/TSX Composite 5.45 (75) 15.83 (23) 14.21 (40) 2.29 (74) 8.00 (75) 7.78 (91) 8.05 (95) 5.29 (78)Value Added 1.31 0.74 4.66 0.77 -0.35 0.81 - -Canadian Equity Median 6.00 12.93 12.96 3.66 9.07 10.31 10.78 6.22Oldfield 120,851 8.0 8.84 (20) 2.83 (27) 10.25 (37) 9.54 (76) 10.87 (93) 14.61 (89) 12.58 (97) 5.39 (85)MSCI World Index (C$) 6.12 (69) -0.14 (52) 9.16 (47) 11.49 (51) 14.88 (54) 17.47 (60) 16.93 (62) 6.20 (70)Value Added 2.72 2.97 1.09 -1.95 -4.01 -2.86 -4.35 -0.81Global Equity Median 7.00 0.12 8.36 11.81 15.04 17.94 17.43 7.20Trilogy 164,402 10.9 8.80 (20) -2.23 (71) 6.93 (66) 9.99 (72) 12.99 (73) 16.20 (79) 16.57 (69) 6.29 (69)MSCI World Index (C$) 6.12 (69) -0.14 (52) 9.16 (47) 11.49 (51) 14.88 (54) 17.47 (60) 16.93 (62) 6.20 (70)Value Added 2.68 -2.09 -2.23 -1.50 -1.89 -1.27 -0.36 0.09Global Equity Median 7.00 0.12 8.36 11.81 15.04 17.94 17.43 7.20Walter Scott 209,026 13.9 4.66 (84) 2.56 (30) 12.02 (24) 14.16 (28) 15.45 (41) 17.70 (57) 17.12 (61) 9.21 (13)MSCI World Index (C$) 6.12 (69) -0.14 (52) 9.16 (47) 11.49 (51) 14.88 (54) 17.47 (60) 16.93 (62) 6.20 (70)Value Added -1.46 2.70 2.86 2.67 0.57 0.23 0.19 3.01Global Equity Median 7.00 0.12 8.36 11.81 15.04 17.94 17.43 7.20Global Equities 494,279 32.9 7.02 (49) 0.96 (41) 9.81 (42) 11.51 (51) 13.34 (70) 16.32 (78) 15.69 (82) 4.04 (96)MSCI World Index (C$) 6.12 (69) -0.14 (52) 9.16 (47) 11.49 (51) 14.88 (54) 17.47 (60) 16.93 (62) 6.20 (70)Value Added 0.90 1.10 0.65 0.02 -1.54 -1.15 -1.24 -2.16Global Equity Median 7.00 0.12 8.36 11.81 15.04 17.94 17.43 7.20

Executive Summary

Performance SummaryAs of 30 September 2016

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. *The RRB portfolio was liquidated and funds invested in a Short Term Corporate strategy on 17 December 2014.**In March 2014, TDAM U.S. equity portfolio was liquidated and invested in U.S. Treasury bonds. CPI+3.7% benchmark has been implemented retrospectively since 1 January 2016. Prior to that,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 July 2009 are based on composite returns.

Page 3


Executive Summary

Performance SummaryAs of 30 September 2016

AllocationMarketValue($000)

%

Performance (%)

1Quarter

YearTo

Date

1Year

2Years

3Years

4Years

5Years

10Years

TDAM Universe Bond Index 308,036 20.5 1.16 (96) 5.19 (87) 6.22 (86) 5.74 (50) 5.91 (57) 4.03 (79) 4.28 (91) 5.15 (100)FTSE TMX Universe Bond 1.19 (96) 5.28 (81) 6.31 (84) 5.80 (45) 5.98 (49) 4.11 (67) 4.38 (80) 5.22 (97)Value Added -0.03 -0.09 -0.09 -0.06 -0.07 -0.08 -0.10 -0.07Canadian Bonds Median 1.35 5.67 6.60 5.74 5.96 4.23 4.68 5.47TDAM Active Short Term Corporate* 261,011 17.4 0.81 2.61 3.30 - - - - -FTSE TMX Canada Short Term Corporate Bond 0.80 2.42 3.06 3.04 3.25 2.94 3.15 4.41Value Added 0.01 0.19 0.24 - - - - -

U.S. Treasury Bonds** 63,571 4.2 0.62 9.92 12.32 21.43 - - - -

Real Estate 46,272 3.1 -3.29 16.21 12.38 5.97 7.87 3.23 - -

Brookfield 104,581 7.0 17.93 37.18 48.17 33.02 26.35 23.78 - -

Operating Account 168,854 11.2Real Return Bonds 152,405 10.1 0.15 0.44 0.59 0.66 0.71 1.05 - -Operating Account 16,448 1.1 0.01 0.96 -0.19 -0.02 0.03 0.14 0.24 0.72Currency Overlay EffectTotal Fund & CO 1,499,011 99.8 3.64 6.11 9.54 8.16 9.02 8.49 9.25 5.26Total Fund ex CO 3.91 5.34 9.29 8.82 9.62 8.96 8.93 5.75Value Added -0.27 0.77 0.25 -0.66 -0.60 -0.47 0.32 -0.49Real 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. *The RRB portfolio was liquidated and funds invested in a Short Term Corporate strategy on 17 December 2014.**In March 2014, TDAM U.S. equity portfolio was liquidated and invested in U.S. Treasury bonds. CPI+3.7% benchmark has been implemented retrospectively since 1 January 2016. Prior to that,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 July 2009 are based on composite returns.

Page 4


2016 2015 2014 2013 2012 2011 2010 2009 2008 2007Total Fund ex. Currency Overlay 9.29 (59) 8.35 (3) 11.25 (100) 7.00 (95) 8.78 (89) 6.11 (1) 7.60 (47) 2.83 (88) -9.71 (59) 7.56 (79)CPI + 3.7% 5.09 (100) 4.77 (52) 5.80 (100) 4.81 (96) 4.90 (100) 6.98 (1) 5.69 (90) 2.80 (88) 7.22 (1) 6.26 (90)Value Added 4.20 3.58 5.45 2.19 3.88 -0.87 1.91 0.03 -16.93 1.30Balanced Funds Median 9.65 4.98 15.37 11.50 10.47 0.10 7.33 5.75 -9.06 9.27

Sionna 18.87 (7) -10.65 (83) 17.46 (91) 11.45 (66) 11.76 (40) -1.62 (21) 11.31 (36) -0.16 (65) -10.44 (7) 18.57 (80)S&P/TSX Composite 14.21 (40) -8.38 (75) 20.38 (53) 7.12 (96) 9.17 (76) -3.55 (36) 11.60 (33) 0.51 (57) -14.40 (41) 22.81 (45)Value Added 4.66 -2.27 -2.92 4.33 2.59 1.93 -0.29 -0.67 3.96 -4.24Canadian Equity Median 12.96 -4.92 20.45 12.91 11.07 -4.90 9.72 1.18 -15.67 22.24Canadian Equities 18.87 (7) -10.65 (83) 17.46 (91) 11.45 (66) - - - - - -S&P/TSX Composite 14.21 (40) -8.38 (75) 20.38 (53) 7.12 (96) 9.17 (76) -3.55 (36) 11.60 (33) 0.51 (57) -14.40 (41) 22.81 (45)Value Added 4.66 -2.27 -2.92 4.33 - - - - - -Canadian Equity Median 12.96 -4.92 20.45 12.91 11.07 -4.90 9.72 1.18 -15.67 22.24Oldfield 10.25 (37) 8.83 (84) 13.57 (96) 26.60 (49) 4.85 (98) 4.68 (4) 11.35 (9) -11.36 (100) -11.38 (5) 2.05 (94)MSCI World Index (C$) 9.16 (47) 13.86 (61) 21.98 (39) 25.58 (58) 14.81 (57) -2.84 (46) 2.04 (75) -1.36 (66) -20.87 (54) 7.86 (66)Value Added 1.09 -5.03 -8.41 1.02 -9.96 7.52 9.31 -10.00 9.49 -5.81Global Equity Median 8.36 15.03 20.98 26.42 15.40 -3.59 4.00 0.65 -20.38 9.44Trilogy 6.93 (66) 13.14 (65) 19.22 (74) 26.38 (51) 18.09 (19) -2.15 (37) 4.73 (43) 0.31 (54) -21.96 (65) 6.61 (74)MSCI World Index (C$) 9.16 (47) 13.86 (61) 21.98 (39) 25.58 (58) 14.81 (57) -2.84 (46) 2.04 (75) -1.36 (66) -20.87 (54) 7.86 (66)Value Added -2.23 -0.72 -2.76 0.80 3.28 0.69 2.69 1.67 -1.09 -1.25Global Equity Median 8.36 15.03 20.98 26.42 15.40 -3.59 4.00 0.65 -20.38 9.44Walter Scott 12.02 (24) 16.33 (40) 18.09 (82) 24.68 (68) 14.84 (56) -0.16 (18) 4.76 (43) 7.58 (18) -10.40 (4) 8.67 (58)MSCI World Index (C$) 9.16 (47) 13.86 (61) 21.98 (39) 25.58 (58) 14.81 (57) -2.84 (46) 2.04 (75) -1.36 (66) -20.87 (54) 7.86 (66)Value Added 2.86 2.47 -3.89 -0.90 0.03 2.68 2.72 8.94 10.47 0.81Global Equity Median 8.36 15.03 20.98 26.42 15.40 -3.59 4.00 0.65 -20.38 9.44Global Equities 9.81 (42) 13.25 (65) 17.07 (88) 25.75 (57) 13.21 (74) -0.70 (22) 4.21 (49) -6.25 (93) -30.20 (96) 5.87 (78)MSCI World Index (C$) 9.16 (47) 13.86 (61) 21.98 (39) 25.58 (58) 14.81 (57) -2.84 (46) 2.04 (75) -1.36 (66) -20.87 (54) 7.86 (66)Value Added 0.65 -0.61 -4.91 0.17 -1.60 2.14 2.17 -4.89 -9.33 -1.99Global Equity Median 8.36 15.03 20.98 26.42 15.40 -3.59 4.00 0.65 -20.38 9.44TDAM Universe Bond Index 6.22 (86) 5.27 (31) 6.25 (73) -1.44 (87) 5.31 (91) 6.80 (25) 7.13 (92) 9.99 (88) 4.74 (26) 1.61 (50)FTSE TMX Canada Bond Universe 6.31 (84) 5.29 (30) 6.34 (64) -1.28 (78) 5.45 (88) 6.66 (32) 7.33 (89) 10.34 (81) 4.62 (29) 1.62 (47)Value Added -0.09 -0.02 -0.09 -0.16 -0.14 0.14 -0.20 -0.35 0.12 -0.01Canadian Bonds Median 6.60 4.86 6.46 -0.89 6.20 6.47 8.05 11.67 4.28 1.60TDAM Active Short Term Corporate* 3.30 - - - - - - - - -FTSE TMX Canada Short Term Corporate Bond 3.06 3.02 3.66 2.01 4.02 3.87 5.66 11.68 4.70 2.77Value Added 0.24 - - - - - - - - -

U.S. Treasury Bonds** 12.32 31.29 - - - - - - - -

Executive Summary

Rolling Year PerformanceAs of 30 September 2016

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. *The RRB portfolio was liquidated and funds invested in a Short Term Corporate strategy on 17 December 2014. **InMarch 2014, TDAM U.S. equity portfolio was liquidated and invested in U.S. Treasury bonds. CPI+3.7% benchmark has been implemented retrospectively since 1 January 2016. Prior to that,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 WalterScott before July 2009 are based on composite returns.

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Executive Summary

Rolling Year PerformanceAs of 30 September 2016

2016 2015 2014 2013 2012 2011 2010 2009 2008 2007Real Estate 12.38 -0.07 11.76 -9.52 - - - - - -

Brookfield 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. *The RRB portfolio was liquidated and funds invested in a Short Term Corporate strategy on 17 December 2014. **InMarch 2014, TDAM U.S. equity portfolio was liquidated and invested in U.S. Treasury bonds. CPI+3.7% benchmark has been implemented retrospectively since 1 January 2016. Prior to that,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 WalterScott before July 2009 are based on composite returns.

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Performance (%)1

Quarter YTD 1Year

2Years

3Years

4Years

5Years

10Years

Total Fund ex. Currency Overlay 3.85 (77) 5.14 (74) 9.00 (69) 8.54 (19) 9.34 (61) 8.67 (100) 8.64 (100) 5.48 (95)CPI + 3.7% 0.68 (100) 4.63 (84) 5.09 (100) 4.93 (84) 5.22 (100) 5.12 (100) 5.07 (100) 5.43 (95)Value Added 3.17 0.51 3.91 3.61 4.12 3.55 3.57 0.05Balanced Funds Median 4.30 6.43 9.65 7.05 9.81 10.09 10.14 6.40

Sionna 6.66 (24) 16.25 (20) 18.44 (10) 2.67 (70) 7.25 (85) 8.19 (87) 8.80 (84) 5.61 (75)S&P/TSX Composite 5.45 (75) 15.83 (23) 14.21 (40) 2.29 (74) 8.00 (75) 7.78 (91) 8.05 (95) 5.29 (78)Value Added 1.21 0.42 4.23 0.38 -0.75 0.41 0.75 0.32Canadian Equity Median 6.00 12.93 12.96 3.66 9.07 10.31 10.78 6.22Canadian Equities 6.66 (24) 16.25 (20) 18.44 (10) 2.67 (70) 7.25 (85) 8.19 (87) - -S&P/TSX Composite 5.45 (75) 15.83 (23) 14.21 (40) 2.29 (74) 8.00 (75) 7.78 (91) 8.05 (95) 5.29 (78)Value Added 1.21 0.42 4.23 0.38 -0.75 0.41 - -Canadian Equity Median 6.00 12.93 12.96 3.66 9.07 10.31 10.78 6.22Oldfield 8.64 (21) 2.25 (31) 9.43 (44) 8.73 (83) 10.04 (96) 13.76 (91) 11.75 (98) 4.60 (93)MSCI World Index (C$) 6.12 (69) -0.14 (52) 9.16 (47) 11.49 (51) 14.88 (54) 17.47 (60) 16.93 (62) 6.20 (70)Value Added 2.52 2.39 0.27 -2.76 -4.84 -3.71 -5.18 -1.60Global Equity Median 7.00 0.12 8.36 11.81 15.04 17.94 17.43 7.20Trilogy 8.66 (21) -2.68 (79) 6.30 (78) 9.38 (77) 12.37 (81) 15.57 (84) 15.95 (78) 5.72 (82)MSCI World Index (C$) 6.12 (69) -0.14 (52) 9.16 (47) 11.49 (51) 14.88 (54) 17.47 (60) 16.93 (62) 6.20 (70)Value Added 2.54 -2.54 -2.86 -2.11 -2.51 -1.90 -0.98 -0.48Global Equity Median 7.00 0.12 8.36 11.81 15.04 17.94 17.43 7.20Walter Scott 4.47 (86) 2.01 (34) 11.21 (32) 13.33 (35) 14.60 (57) 16.83 (71) 16.25 (73) 8.38 (20)MSCI World Index (C$) 6.12 (69) -0.14 (52) 9.16 (47) 11.49 (51) 14.88 (54) 17.47 (60) 16.93 (62) 6.20 (70)Value Added -1.65 2.15 2.05 1.84 -0.28 -0.64 -0.68 2.18Global Equity Median 7.00 0.12 8.36 11.81 15.04 17.94 17.43 7.20Global Equities 6.84 (54) 0.45 (44) 9.10 (47) 10.86 (61) 12.66 (77) 15.60 (84) 14.97 (87) 3.36 (100)MSCI World Index (C$) 6.12 (69) -0.14 (52) 9.16 (47) 11.49 (51) 14.88 (54) 17.47 (60) 16.93 (62) 6.20 (70)Value Added 0.72 0.59 -0.06 -0.63 -2.22 -1.87 -1.96 -2.84Global Equity Median 7.00 0.12 8.36 11.81 15.04 17.94 17.43 7.20TDAM Universe Bond Index 1.15 (97) 5.17 (88) 6.19 (86) 5.71 (53) 5.88 (58) 3.99 (80) 4.25 (92) 5.11 (100)FTSE TMX Universe Bond 1.19 (96) 5.28 (81) 6.31 (84) 5.80 (45) 5.98 (49) 4.11 (67) 4.38 (80) 5.22 (97)Value Added -0.04 -0.11 -0.12 -0.09 -0.10 -0.12 -0.13 -0.11Canadian Bonds Median 1.35 5.67 6.60 5.74 5.96 4.23 4.68 5.47

Executive Summary

Performance Summary (Net of Fees)As of 30 September 2016

Parentheses contain percentile rankings. (1st percentile is the best performing). Peer universe for percentile rankings are gross of fees.There was no exposure to Canadian Equities from January 2012 to April 2012. *In March 2014, TDAM U.S. equity portfolio was liquidated and invested in U.S. Treasury bonds. CPI+3.7% benchmarkhas been implemented retrospectively since 1 January 2016. Prior to that, 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 July 2009 are based on composite returns and earliest fee schedule.

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Executive Summary

Performance Summary (Net of Fees)As of 30 September 2016

Performance (%)1

Quarter YTD 1Year

2Years

3Years

4Years

5Years

10Years

TDAM Active Short Term Corporate 0.79 2.53 3.18 - - - - -FTSE TMX Canada Short Term Corporate Bond 0.80 2.42 3.06 3.04 3.25 2.94 3.15 4.41Value Added -0.01 0.11 0.12 - - - - -

U.S. Treasury Bonds* 0.62 9.90 12.28 21.40 - - - -

Parentheses contain percentile rankings. (1st percentile is the best performing). Peer universe for percentile rankings are gross of fees.There was no exposure to Canadian Equities from January 2012 to April 2012. *In March 2014, TDAM U.S. equity portfolio was liquidated and invested in U.S. Treasury bonds. CPI+3.7% benchmarkhas been implemented retrospectively since 1 January 2016. Prior to that, 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 July 2009 are based on composite returns and earliest fee schedule.

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2016 2015 2014 2013 2012 2011 2010 2009 2008 2007Total Fund ex. Currency Overlay 9.00 (69) 8.07 (4) 10.95 (100) 6.70 (95) 8.51 (92) 5.86 (1) 7.34 (50) 2.58 (90) -9.93 (61) 7.30 (80)CPI + 3.7% 5.09 (100) 4.77 (52) 5.80 (100) 4.81 (96) 4.90 (100) 6.98 (1) 5.69 (90) 2.80 (88) 7.22 (1) 6.26 (90)Value Added 3.91 3.30 5.15 1.89 3.61 -1.12 1.65 -0.22 -17.15 1.04Balanced Funds Median 9.65 4.98 15.37 11.50 10.47 0.10 7.33 5.75 -9.06 9.27

Sionna 18.44 (10) -10.99 (84) 17.03 (92) 11.04 (71) 11.27 (47) -2.11 (24) 10.77 (40) -0.65 (67) -10.88 (10) 17.99 (83)S&P/TSX Composite 14.21 (40) -8.38 (75) 20.38 (53) 7.12 (96) 9.17 (76) -3.55 (36) 11.60 (33) 0.51 (57) -14.40 (41) 22.81 (45)Value Added 4.23 -2.61 -3.35 3.92 2.10 1.44 -0.83 -1.16 3.52 -4.82Canadian Equity Median 12.96 -4.92 20.45 12.91 11.07 -4.90 9.72 1.18 -15.67 22.24Canadian Equities 18.44 (10) -10.99 (84) 17.03 (92) 11.04 (71) - - - - - -S&P/TSX Composite 14.21 (40) -8.38 (75) 20.38 (53) 7.12 (96) 9.17 (76) -3.55 (36) 11.60 (33) 0.51 (57) -14.40 (41) 22.81 (45)Value Added 4.23 -2.61 -3.35 3.92 - - - - - -Canadian Equity Median 12.96 -4.92 20.45 12.91 11.07 -4.90 9.72 1.18 -15.67 22.24Oldfield 9.43 (44) 8.03 (89) 12.73 (97) 25.67 (57) 4.07 (98) 3.90 (6) 10.53 (11) -12.03 (100) -12.05 (5) 1.29 (96)MSCI World Index (C$) 9.16 (47) 13.86 (61) 21.98 (39) 25.58 (58) 14.81 (57) -2.84 (46) 2.04 (75) -1.36 (66) -20.87 (54) 7.86 (66)Value Added 0.27 -5.83 -9.25 0.09 -10.74 6.74 8.49 -10.67 8.82 -6.57Global Equity Median 8.36 15.03 20.98 26.42 15.40 -3.59 4.00 0.65 -20.38 9.44Trilogy 6.30 (78) 12.54 (70) 18.61 (79) 25.72 (57) 17.46 (27) -2.68 (44) 4.17 (49) -0.23 (57) -22.39 (68) 6.03 (77)MSCI World Index (C$) 9.16 (47) 13.86 (61) 21.98 (39) 25.58 (58) 14.81 (57) -2.84 (46) 2.04 (75) -1.36 (66) -20.87 (54) 7.86 (66)Value Added -2.86 -1.32 -3.37 0.14 2.65 0.16 2.13 1.13 -1.52 -1.83Global Equity Median 8.36 15.03 20.98 26.42 15.40 -3.59 4.00 0.65 -20.38 9.44Walter Scott 11.21 (32) 15.48 (47) 17.21 (87) 23.75 (75) 13.98 (65) -0.92 (26) 3.97 (51) 6.73 (21) -11.13 (5) 7.79 (67)MSCI World Index (C$) 9.16 (47) 13.86 (61) 21.98 (39) 25.58 (58) 14.81 (57) -2.84 (46) 2.04 (75) -1.36 (66) -20.87 (54) 7.86 (66)Value Added 2.05 1.62 -4.77 -1.83 -0.83 1.92 1.93 8.09 9.74 -0.07Global Equity Median 8.36 15.03 20.98 26.42 15.40 -3.59 4.00 0.65 -20.38 9.44Global Equities 9.10 (47) 12.64 (69) 16.35 (92) 24.91 (68) 12.45 (77) -1.38 (29) 3.50 (61) -6.89 (95) -30.69 (96) 5.15 (81)MSCI World Index (C$) 9.16 (47) 13.86 (61) 21.98 (39) 25.58 (58) 14.81 (57) -2.84 (46) 2.04 (75) -1.36 (66) -20.87 (54) 7.86 (66)Value Added -0.06 -1.22 -5.63 -0.67 -2.36 1.46 1.46 -5.53 -9.82 -2.71Global Equity Median 8.36 15.03 20.98 26.42 15.40 -3.59 4.00 0.65 -20.38 9.44TDAM Universe Bond Index 6.19 (86) 5.24 (34) 6.22 (77) -1.47 (88) 5.27 (92) 6.77 (26) 7.09 (92) 9.95 (88) 4.70 (27) 1.57 (56)FTSE TMX Canada Universe Bond Index - C$ 6.30 (84) 5.29 (30) 6.34 (64) -1.28 (78) 5.45 (88) 6.66 (32) 7.33 (89) 10.34 (81) 4.62 (29) 1.62 (47)Value Added -0.11 -0.05 -0.12 -0.19 -0.18 0.11 -0.24 -0.39 0.08 -0.05Canadian Bonds Median 6.60 4.86 6.46 -0.89 6.20 6.47 8.05 11.67 4.28 1.60TDAM Active Short Term Corporate 3.18 - - - - - - - - -FTSE TMX Canada Short Term Corporate Bond 3.06 3.02 3.66 2.01 4.02 3.87 5.66 11.68 4.70 2.77Value Added 0.12 - - - - - - - - -

U.S. Treasury Bonds* 12.28 31.25 - - - - - - - -

Executive Summary

Rolling Year Performance (Net of Fees)As of 30 September 2016

Parentheses contain percentile rankings. (1st percentile is the best ranking). Peer universe for percentile rankings are gross of fees.There was no exposure to Canadian Equities from January 2012 to April 2012. *In March 2014, TDAM U.S. equity portfolio was liquidated and invested in U.S. Treasury bonds. CPI+3.7% benchmarkhas been implemented retrospectively since 1 January 2016. Prior to that, 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 July 2009 are based on composite returns and earliest fee schedule.

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Performance Relative to Investment Policy Objectives

Manager4-Year Manager

Return Market Index4-Year Index

Return4-Year Value

AddedTarget Value

AddedPerformance

Objective Achieved IMF4

Passive Mandates:TDAM - Universe Bond Index 4.03% FTSE TMX Canada Bond Universe 4.11% -0.08% +/-0.06% 4.05% to 4.17% No 0.033%U.S. Treasury Bonds1

Active Mandates: Sionna - Canadian Equities 8.59% S&P/TSX Composite (CAD) 7.78% 0.81% +1.0% 8.78% No 0.370%Oldfield - Global Equities 14.61% MSCI World (CAD) 17.47% -2.86% +2.0% 19.47% No 0.750%Trilogy - Global Equities 16.20% MSCI World (CAD) 17.47% -1.27% +2.0% 19.47% No 0.530%Walter Scott - Global Equities 17.70% MSCI World (CAD) 17.47% 0.23% +2.0% 19.47% No 0.726%TDAM Short Term Corporate Bonds2 na FTSE TMX Canada Short Term Corporate 2.94% na +0.5% 3.44% na 0.108%

Total Fund ex. Currency Overlay 8.96% CPI + 3.7%3 5.12% 3.84% Yes 0.260%

1 Invested on 20 March 20142 Invested on 17 December 20143 CPI + 3.7% benchmark has been implemented retrospectively since 1 January 2016. Prior to that, CPI + 3.75% benchmark was implemented since 1 January 2014 and CPI + 3.85% prior to that.4 IMF: Investment management fees

Performance vs. Market Index BenchmarkAs at 30 September 2016

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During the last quarter, we have produced papers on the following topics. Although these topics may not be directly applicable to your plan, they may be of general interest and provide some insight into Aon Hewitt’s global research. For more details, please contact your Aon Hewitt Investment Consultant.

Topic Summary

Fallen Angels This paper examines the risk and return experience of high yield bonds originally issued as investment grade, but subsequently downgraded to below investment grade, also known as “fallen angels”. Fallen angels, across both U.S. dollar and Euro markets, have significantly outperformed original issue high yield historically (in both absolute and risk-adjusted terms) with fairly high consistency. Superior past performance may be attributed to both structural factors and behavioural factors, both of which still hold true today. http://www.aon.ca/pubs/ic/2016/Fallen-Angels.pdf

Factor Investing: Low Volatility Equities

This paper looks at factor investing through low volatility equities. Low volatility investing has historically generated superior risk adjusted returns, which goes against standard market theory that more risk is rewarded with more return. Behavioural biases, rebalancing effects and investor constraints are common explanations for the low volatility premium, but performance is cyclical and periods of underperformance can be long, making things uncomfortable for investors. http://www.aon.ca/pubs/ic/2016/Factor-Investing_Low-Volatility-Equities.pdf

For more timely access to our latest thinking, please visit and subscribe to the Aon Hewitt Retirement & Investment Blog: https://retirementandinvestmentblog.aon.com/

Page 11


http://www.aon.ca/pubs/ic/2016/Fallen-Angels.pdf

http://www.aon.ca/pubs/ic/2016/Factor-Investing_Low-Volatility-Equities.pdf

https://retirementandinvestmentblog.aon.com/

Retiree Life Insurance Reinstatement of Coverage Indexation

Employees with 10 years of continuous regular service are eligible for a University paid life insurance benefit at retirement as long as they elect an immediate pension at their date of retirement.

Eligible employees who retired prior to January 1, 1997 received coverage based on a percentage of earnings; however, eligible employees who retired on or after January 1, 1997 have been eligible for a flat benefit amount.

Since becoming a flat benefit amount in 1997, the coverage extended at retirement has increased several times with changes occurring January 1st if applicable, as indicated in the following table:

1997 1998 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010

$3,500 $3,600 $3,700 $3,800 $3,900 $4,000 $4,100 $4,200 $4,300 $4,400 $4,500 $4,600

Eligible retirees receive the life insurance coverage in effect as at their date of retirement and the volume is not subject to change during their retirement. Due to the Compensation Restraint Act, benefits coverage was frozen at the 2010 levels since no cost of living indexation was allowed for the March 24, 2010 to March 31, 2012 period; however, when the benefit indexing provision resumed for the extended health and dental benefits effective January 1, 2015, the previous practice of indexing the retiree life insurance benefit was not considered. As such, the current benefit provided to eligible employees at retirement continues to be $4,600.

Indexing Model Adjusting the coverage extended to retirees by resuming indexation can be accomplished in multiple ways. To that end, Aon Hewitt has provided a few scenarios to consider using the yearly percentage change in the Stats Can All Items index, as outlined in the following tables:

Option 1

Increase retiree life for eligible employees who retire on or after January 1, 2017

Effective Date Life Insurance Coverage

Current Scenario 1:

Re-indexing from 2011 to 2017

Scenario 2: Re-indexing from

2013 to 2017


2017 only

January 1, 2017 $4,600 $5,300 $5,100 $4,700


Option 2

Increase retiree life insurance for eligible employees who retired on or after January 1, 2015

Effective Date

Life Insurance Coverage

Current Scenario 1:

Re-indexing from 2011 to 2017


2013 to 2017


2017 only

January 1, 2015 $4,600 $5,100 $4,900 No change

January 1, 2016 $4,600 $5,200 $5,000 No change

January 1, 2017 $4,600 $5,300 $5,100 $4,700

Of the eligible employees who retired in 2015 and 2016, one retiree has passed away and the claim of $4,600 has already been settled with the beneficiary.

In December 2014, when the Committee decided to re-index the extended health and dental maxima effective January 1, 2015, the approach that was applied considered inflation over a 3-year period (i.e. 2012-2015). One year of inflation was applied effective January 1, 2016 and at the November 2016 meeting, the Committee decided to apply one year of inflation effective January 1, 2017.

The annual valuation of the post-retirement benefits as conducted by Aon Hewitt includes an assumption that life insurance amounts were $4,600 in 2008 and increasing by 2% each year (thus reaching $5,500 in 2017). Therefore under each scenario there would be a marginal impact to the liability and expense in resetting the life insurance amount. Each scenario would generate a minor accounting gain, with scenario 3 creating the largest such gain.

Action Required: Decision


Pension Benefit and Contribution Limits 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, 2017:

Pension Plan

2016 Benefit Limits 2017 Benefit Limits Maximum benefit

payable per year of pensionable service

Final Average Earnings at Threshold

Maximum benefit payable per year of pensionable service

Final Average Earnings at Threshold

RPP $2,890 $160,232 $2,914.44 $161,766

PPP $3,309 $181,182 $3,337 $182,894 *AIW increase is 0.84567% which is derived from the difference in the RPP limits between 2016 and 2017 (difference between 2015 and 2016 was 2.5226%)

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 benefit payable 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. Assuming an annual AIW increase of 1.5%, the RPP and PPP caps will be reached in 2024 and 2019, respectively; assuming an annual AIW increase of 2.5%, the RPP and PPP caps will be reached in 2021 and 2018, respectively.

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, 2017:

2016 Contribution Limit 2017 Contribution Limit Maximum annual

contribution Annual earnings at

threshold Maximum annual

contribution Annual earnings at

threshold $18,787 $214,747 $18,941 $216,483

Action Required: None


Pension & Benefits Committee Request for Credit for Past Service

Summary of historical records shared by the Secretariat

In October 1991, a former female employee wrote to David Dietrich (Human Resources) that she made a

decision in 1974 to defer joining the UW Pension Plan until the age of 35, as was available at the time. Since

joining the Pension Plan, she felt there was a significant disadvantage of not joining the Plan prior to age 35 but

that, at hire, she was advised that the ability to waive participation in the Plan was an advantage (i.e. more take

home dollars). She now requested the Pensions & Benefits Committee to consider allowing employees the

ability to buy back pension contributing years.

Board of Governors and P&B Committee Activity 1992-1998 (from committee minutes)

February 27, 1992 (P&B Committee).

The Committee participated in a discussion on the various reasons why some UW employees did not or could not join the Pension Plan at the beginning of their employment and whether the University had a legal or moral responsibility to allow those individuals the opportunity to buy back pension credits. Further, the cost to the University and to the employee, the tax implications, the effect on the Plan if all or some of those concerned decided to but back pension credits also were discussed. Highlights of the discussion included the following:

o Some people who opted out of joining the Plan may have been led to believe that they would receive an identical pension whether they joined immediately or at the age of 35. Personnel representatives indicated that poor advice may have been given in the past, but also that recollections (i.e., informed that it is not mandatory, not that it was not beneficial) may be “foggy”.

o Of those not allowed to join the Pension Plan, approximately 700 are the result of an administrative error on the part of the Personnel Department. However, it was suggested that not all 700 individuals would have decided to join the plan given the opportunity to do so. Figures involving other groups (e.g., those who consciously opted out, those on a definite-term appointment, those who resigned and came back) were discussed, but the Committee was in general agreement that the University, if taken to court, would likely be held liable for this group of 700 only. Therefore, a means to allow this group the opportunity to buy back pension credits should be identified.

o Various solutions were discussed. These included: allowing the group of 700 the opportunity to buy back pension credits – they would be required to pay their contributions plus any interest that would have been earned and UW would be required to pay its share; not allowing any form of buy back for those people who made a conscious decision to opt-out of the Plan or who were not allowed to join the Plan for legitimate reasons; allowing those who made a conscious decision to opt-out of the Plan, or those who were not allowed to join the Plan, to do so but require contribution to cover both employee and University contributions.

o Cost figures would be discussed for consideration at the next meeting.


June 2, 1992 (P&B Committee)

In 1960, when UW’s Pension Plan was formed, eligible staff members could enter the Plan after completion of three months of service. In 1977, the Plan was amended to all eligible staff the opportunity to enter the Plan on the first day of the month following their hire date. However, the Plan continued to be applied to the 1960 wording. This oversight was discovered and rectified for all new employees on September 1, 1990.


Dietrich informed the Committee of the modest number of eligible active Plan members who have taken or plan to take advantage of the offer to buy back pension credits – out of the 660 eligible, 80-90 had made inquiries, 50 of which were being processed.

After noting that there were 60 current pensioners would meet the eligibility criteria, the Committee informally agreed that those eligible would be allowed the opportunity to buy back pension credits. Following a brief discussion, the Committee recognized that it would be too time consuming to contact all pensioners and to provide individual calculations at the time of initial contact, and agreed that Personnel should write to only those pensioners who are eligible and that the letter should include a sample calculation of the dollar figures involved; individual calculations would be provided upon request only.

February 2, 1993 (Board of Governors)

For current employees: o Each Employee who commenced Continuous Service with the University between July 1, 1977

and August 31, 1990 and who became a member of the University of Waterloo Pension Plan for Faculty and Staff (the “Plan) on the first of the month following 3 months of Continuous Service shall be permitted to buy 3 months of Credited Service in respect of such past service for the purposes of the Plan.

o Each Employee who elects to buy such 3 months of Credited Service shall be required to contribute to the Plan an amount equal to 4.875% X three months of the Employee’s current earnings. The Employee’s contributions shall be payable as determined by the University.

o The University shall contribute 113% of the aggregate amount contributed by Members to buy such past service.

o This option to buy past service shall be available only until November 1, 1992.

For pensioners: o Each former Employee who is receiving pension payments under the Waterloo Pension Plan for

Faculty and Staff (the “Plan) and who commenced Continuous Service with the University between July 1, 1977 and August 31, 1990 and who became a member of the Plan on the first of the month following 3 months of Continuous Service shall have their pensions increased January 1, 1993 to reflect an additional 3 months of credited service.

o The University shall contribute to the Pension Plan an amount sufficient to fund the increased liability of the three months additional service, with the calculation to be performed by the Plan’s consulting actuary.

September 24, 1995 (P&B Committee)

Pension Credit Buy Back. In response to a request, the Chair noted that this issue arises every year and that the Committee’s general policy has been not to allow individuals who opted out of the Plan to buy back pension credits. What is meant by “cost-neutrality” was identified as a future agenda item.


March 23, 1998 (P&B Committee)

Distributed at the meeting was a discussion paper prepared by Dietrich. The Committee reviewed the information presented, noting that (for various reasons) more than 50% of current pension plan members had some period of service for which they are not credited service in the Pension Plan. Included in the document are 4 categories of employees might wish to buy back credit - those who joined and then opted out; those who delayed entry to the Plan until they were 35; part-time and definite term employees who were not permitted to join because of eligibility rules in the Plan at that time; and employees who opted to make less than full contributions and were therefore given less than a full year of pension credit (e.g., sabbatical, maternity leave). (Secretary’s Note: These categories do not include the ~700 people who were allowed to buy back past service due to an administrative error, or those who have already retired).

Members discussed a number of issues, including the fact that as long as joining the Plan immediately upon hire is not compulsory, these situations will arise. One way to partially address this issue is to change the mandatory age from 35 to 30, so that members will have 35 years of credited years at age 65. Some felt that educating employees about the ramifications of not being in the Plan was more appropriate than reducing their flexibility, while others wondered what was significant about “age 35”; defining “35” as the mandatory age of joining implies that it is important vis-à-vis the design of the Plan (It is inconsistent with the Plan’s design which was put in place at a time when maximum credited service was limited to 35 years.). Also discussed was the value of requiring individuals who choose to opt out or not join until age 35 to sign a waiver indicating that they fully understand the ramifications of their decision and that purchasing past service is not allowed.

Further discussion at the next meeting will focus on “the right thing to do”. Dietrich will provide additional data re the number of employees in the four categories and will work with Mercer in designing a waiver form. Human Resources will contact all employees who are eligible and currently not members of the Plan and encourage them to join (or sign the waiver). It was also suggested that Pensions & Benefits Committee develop a brochure informing potential members of the value re joining the Plan at the earliest opportunity.

April 6, 1998 (P&B Committee)

There are several issues to be decided, including: the right thing to do; if the purchase of past service is allowed; the basis on which it should be done; and how the costs should be calculated.

Distributed and discussed at the meeting was a more detailed summary of individuals affected which lead to discussion about tax implications, impact on PSPAs, administrative implications, reasonable methods for calculating costs and, if the purchase of past service were allowed, whether it would be offered to one or all segments of population affected (there is a difference between those who were not allowed to purchase service and those who chose not to). It was suggested that the take-up rate would be low once individuals realized the costs involved; however, the administrative work (i.e., one-on-one counselling) would have already taken place. It was suggested that it might be worthwhile to publish some examples of cost.

Realizing this situation will continue as long as joining the Plan is optional (until age 35), members discussed the possibility of requiring employees to join the Plan at age 30 (consistent with the Plan’s design), instituting a requirement that one must join the Plan two years from date of hire, disallowing “opt outs” once an employee has joined, and generally improving employees’ knowledge about pension plans (i.e., the importance of joining early).

It was agreed that Dietrich would prepare, for consideration at the next meeting, examples of potential buy-back costs and a draft waiver form for employees to sign at time of hire to ensure that they are aware of the ramifications of joining/not joining and opting out.



Distributed and reviewed at the meeting was a document prepared by the Chair to identify and clarify the issues surrounding purchasing past service; tax implications are another area of complexity not yet addressed. Members participated in a lengthy discussion which included the sharing of various reasons and opinions as to why some individuals chose not to participate or opted out of the Plan. The majority of members were of the opinion that if the purchase of past service is allowed, funding should not be sought from the University’s operating budget or from the Pension Plan surplus (i.e., the employee would be required to contribute the full cost). Notwithstanding the foregoing, members were uncomfortable with making a gesture (allowing the purchase) knowing that the take up rate would be minimal (unless there is some tax incentive, there is no other financial incentive) while the administrative workload would be significant. The results of a straw vote (allow buyback for all groups with employee paying full cost, whatever that cost is determined to be) indicated that if the purchase of past service were allowed, the majority of members were in support of or saw no other alternative to employees paying the full cost. The Committee will return to the issue in September, with a view to reaching closure.

September 29, 1998 (P&B Committee)

Having confirmed the generally held consensus that the full cost (however calculated) would have to be borne by the individual, the Committee reconfirmed an earlier Committee decision that the purchase of past service would only be extended to those individuals who were not allowed to contribute to the Plan due to an administrative error. Numerous issues impacted the Committee’s decision (prohibitive cost; low take-up rate; no financial incentive; significant administrative work). No new information has come to light that would cause the Committee to reverse is earlier decision.

Lee Hornberger, Human Resources

Marilyn Thompson, Associate Provost Human Resources

November 2016


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