Municipal Pension Plan

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Municipal Pension Plan
Report on Pension and Other Benefits
Vancouver, Victoria, Kamloops, Nelson, Prince
George November 8, 2003
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Overview

• Pension and non-pension benefits
• Major Benefit Issues in 2003
• How changes are made to plan rules and benefits

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What Are Pension Benefits?

• Pension Benefit on Retirement
• your basic entitlement under the Plan
• Commuted Values
• taking contributions out of the Plan
• Pre-retirement death benefit
• Disability pension benefit
• Service accrual while on approved long term
  disability

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Enhancing Your Basic Pension

• Purchase of past service
• payment for arrears
• purchase of past leaves of absence or
  probationary periods
• rules simplified beginning in 2002
• Transfer of service
• there may be an advantage to consolidating
  service in other plans in the Municipal Plan

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What Are Non-Pension Benefits?

• Medical Service Plan of BC (MSP)
• Extended health benefits plan
• Dental plan
• Provided outside the Basic Account
• Supplemental Benefit Account
• Provided on a funding available basis
• No guarantees
• Retirees share in the costs

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Pension Plan Rules

• Detail the contribution requirements and benefit
  rules
• Existed prior to joint trusteeship in the Pension
  (Municipal) Act
• Adopted by the Board of Trustees at beginning of
  Joint Trusteeship
• Provincial Legislation and Joint Trust Agreement
  requires that vested rights be maintained

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Changing a Non-vested Benefit
Who Has the Power to Change?

• Trustees can change benefits
• If no increase in contributions is required
• Plan partners can change benefits
• If contribution increase is required

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Significant Benefit Changes in 2003

• Group benefits for retired members
• Special Agreements
• Other Benefit Changes

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Post Retirement Group BenefitsHow Are They
Funded?
1.0 of plan members salaries paid by Employers
are used to pay Group Benefit costs, with the
balance to Inflation Adjustment
Employee Contributions Employer Contributions
6.5 of pensionable salary
1.0 of pensionable salary
5 to 13 of plan members salaries
Basic Account
SupplementalBenefitsAccount
InflationAdjustmentAccount
Basic Pension
Future Indexing
Group Benefits Non-Pension Benefits
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Post Retirement Group BenefitsWhy Were Changes
Made?

• Not enough money to pay for benefits as currently
  designed
• demographic changes result in greater usage
• MSP changes increase premium costs
• Pharmacare changes shift costs to health plans
• drug costs and usage soars
• Costs increase 20 million (65) in three years
• Available funding not growing to match cost
  increases
• 90 of funding used to pay 2002 costs
• Cost projections indicate further increases

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Post Retirement Group BenefitsConstraints on
Funding

• Benefits for current retirees paid from limited
  employer contributions
• current contributions fund retiree benefits
• Pension contributions and fund investments cannot
  be diverted to fund group benefits
• Only Plan Partners can increase the funding
  available for benefits
• Projections show insufficient funds to pay for
  current benefit package in 2004
• all benefit payments cease once funding exceeded

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Post Retirement Group BenefitsBenefit Change
Principles

• Long term horizon
• find benefit package that can be sustained in the
  longer term
• Concentrate program on protection against
  catastrophic events
• Extend coverage for retired members living in
  Canada, outside of BC

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Post Retirement Group Benefits Changes Effective
January 1, 2004

• Coverage to retired members living in Canada,
  outside of BC
• No out-of-country coverage
• must purchase separate coverage if traveling
• Increased lifetime limit to 100,000
• up from current 40,000
• Partial premiums to be paid by plan members for
  EHB and dental coverage
• amount depends on pensionable service
• Changes in deductibles and co-insurance on EHB
  and/or dental

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Special Agreements

• Special arrangements between employers and
  employees for additional payments for pension
  purposes
• payments made into an RRSP like account
• funds available to purchase additional pension at
  retirement
• Funds held outside of the Basic Account
• not a basic pension benefit
• Most commonly used by Fire and Police
• approximately 6,000 members have special
  agreements

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Special Agreements

• Basic Pension
• Based on a fixed formula that considers years of
  service and highest average salary

• Special Agreement Pension
• Based on amount of contributions and actuarial
  factors that determine cost of pension

Basic Pension Service X HAS X 2
SA Pension Contributions plus interest X
actuarial factor
Total Retirement Pension
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Special Agreements

• Actuary indicated tables used to calculate
  Special Agreement pensions did not reflect
  current actuarial experience and assumptions
• Mortality rates too low resulting pension
  should cost more
• Inadequate provision for indexing of SA pension
  other plan members subsidizing non-basic SA
  pension benefits
• New conversion tables result in smaller but
  more appropriate - pension benefit
• Changes being implemented over three years

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Other Benefit Issues

• Criteria for approved LTD plan
• Definition of full time employment
• Co-habitation rule
• Contributions on rehabilitative employment
  earnings

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How Benefit Issues Come to the Board

• Regulators (CCRA or PBSA)
• Plan Actuary
• Plan members
• Plan employers
• Pension Corporation

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Benefit Decision Making Process
Issues identified by Regulators, Actuary, Plan
Members, Plan Employers or Plan Administrator
Benefits Committee reviews topic, gets legal or
actuarial advice as necessary
recommendation
Full Board makes final decision
referral
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Pension Plan Benefits
Questions?