Report: Pension Committee - December 09, 2021

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Via Virtual Meeting room

REPORT NUMBER 47 OF THE PENSION COMMITTEE

December 9, 2021


To the Governing Council,
University of Toronto.

Your Committee reports that it held a virtual meeting in closed session on Thursday, December 9, 2021 at 4:00 p.m. with the following members present:

Present:
Cynthia Messenger (Chair), Janet L. Ecker (Vice-Chair), Brian Lawson (Chair of the Governing Council), Meric Gertler (President), David N. Bowden, Colleen Burke, Teo Dechev, Maureen Harquail, Louis Florence, Joan Johnston, Anna Kennedy, Rajiv Mathur, Alex D. McKinnon, Jun Nogami, Danielle Skipp, Maureen Stapleton, Paul Whittam, Lara K. Zink, Terezia Zoric

Regrets:
Harvey Botting, Kim McLean, Sameer Lal

Non-Voting Assessors:
Scott Mabury (Vice-President, Operations Real Estate Partnerships), Trevor Rodgers (Chief Financial Officer)

Secretariat:
Sheree Drummond, Secretary of the Governing Council, Anwar Kazimi, Deputy-Secretary, Patrick McNeill, Committee Secretary

In Attendance:
Ihab Khalil, Executive Director, Strategic Operations and Finance (People Strategy, Equity and Culture), Francis Low, Ernst & Young, Pierre Piché, Controller and Director of Financial Services, Allan Shapira, Managing Director, Aon

The Committee met in closed session


  1. Chair’s Remarks

    The Chair welcomed members and guests to the last meeting of the Pension Committee. Professor Messenger introduced Mr. Trevor Rodgers in his new role as Chief Financial Officer and Assessor to the Committee – and thanked Dr. Pierre Piché in his role as Interim CFO.

    The Chair reminded members that with the successful conversion to the University Pension Plan [the “UPP”], the trust assets of and the benefits under University of Toronto Pension Plan had been transferred to and merged into the UPP and the UPP trust fund. The UofT Plan no longer existed as a separate trust or plan. The UPP was now administered by the UPP Board of Trustees, and the Plan was jointly sponsored by the Joint Sponsors.

    Professor Messenger further stated that the UofT Pension Committee had been effectively replaced by the UPP Board of Trustees. However, at the final meeting of the Pension Committee there were some important residual responsibilities to be fulfilled – this included the 3 important approval items, plus the approval of the previous report.

    The Chair expressed thanks to Ms. Janet Ecker in her role as Vice-Chair over the past two years. She also thanked the Assessors and their team members for their contributions, which had enabled the Committee to meet its mandate and thanked the Secretariat for their support. In closing of the Chair’s Remarks, Professor Messenger expressed sincere thanks to all members of the Pension Committee, past and present, for their contributions and commitment.
  2. Reports of the Administrative Assessors

    There were no reports of the Administrative Assessors.
  3. Registered Pension Plan: Audited Financial Statements for the Year Ended June 30, 2021

    Mr. Trevor Rodgers and Dr. Pierre Piché jointly reported that the Audited Financial Statements for the Year Ended June 30, 2021 were being presented for approval based on the recommendation by the Audit Committee which met on December 1st, 2021. They stated that the audited financial statements would be filed with the Financial Services Regulatory Authority by December 31, 2021.

    Ms Janet Ecker, Vice-Chair, reported out on the meeting of the Audit Committee. She noted the following:
  • the Audit Committee had a full and complete discussion of the pension plan’s audited financial statements in order to ensure that they were fairly presented;
  • External auditors were present at the meeting. The auditors had performed additional procedures to satisfy themselves of the authenticity of documentation provided since this year’s audit was also performed remotely.
  • the Audit Committee received a detailed written commentary from the external auditors that reported on all areas of audit emphasis and provided the Committee with a summary of audit procedures and discussions with management that support their unqualified audit opinion;
  • inquiries were also made with respect to the risk of material misstatements due to fraud and suspected fraud; and,
  • there were no significant matters that arose from the audit and no corrected or uncorrected errors noted.

    Ms Ecker reported that the Audit Committee was also informed by the auditors that they received excellent and on-going cooperation from management and that all required audit communications were provided to the Committee by the auditors. The Committee had no concern that would call into question the integrity of the financial statements.

    On motion duly moved, seconded and carried

    IT WAS RESOLVED,

    THAT, the audited financial statements for the University of Toronto Pension Plan for the year ended June 30, 2021 be approved.
  1. Asset Transfer and Conversion Actuarial Valuation as at July 1, 2021 for University of Toronto Pension Plan

    Mr. Trevor Rodgers and Dr. Pierre Piché jointly reported that the actuarial assumptions that underpin the estimation of actuarial results and the actuarial reports had been approved annually by the Pension Committee. This year, the assumptions were provided for information to the Pension Committee at its meeting on September 28, 2021, as the assumptions are prescribed under the Transfer Agreement between the Governing Council of the University of Toronto and the Employee and Employer Joint Sponsors of the University Pension Plan Ontario (UPP) (“Transfer Agreement”).

    Mr. Allan Shapira, Plan Actuary, Aon presented an overview of the Asset Transfer and Conversion Actuarial Valuation as at July 1, 2021, highlighting the following points:
  • On a UPP transfer basis, the financial status of the RPP improved to a surplus of $792.5 million at July 1, 2021 when compared to the going concern market deficit of $931.6 million at July 1, 2020. This improvement was primarily due to an investment return of 24.07% which was well above expected returns for the period, the removal of the impact of the new provincial funding rules (which are not applicable to jointly sponsored pension plans), and employer special payments totaling $99.1 million;
  • On a going concern basis, using a PfAD determined on a “closed plan” basis, the going concern market deficit fell from $931.6 million at July 1, 2020 to a deficit of $94.5 million at July 1, 2021. (It was noted that if the PfAD were determined on an “open plan” basis, the RPP would have had a going concern surplus of $210.7 million at July 1, 2021).
  • The UPP, as a jointly sponsored pension plan, is not subject to the statutory PfAD rules.
  • On an ongoing basis, the Board of Trustees of the UPP was responsible for setting the actuarial assumptions and would determine the appropriate level of margins to include in the discount rate;
  • The solvency deficit of the RPP decreased from $1,943.5 million at July 1, 2020 to $158.6 million at July 1, 2021 mainly due to investment returns over the year that were greater than expected returns, and an overall increase in the prescribed discount rates. The solvency ratio at July 1, 2021 was 97.7% compared to 73.8% as at July 1, 2020; and,
  • contributions to the pension plan in 2020-21 were made up of $111.6 million in member contributions, $138.9 million in University current service contributions, and $99.1 million in University special payments.

    Mr. Allan Shapira stated that the actuarial valuation constituted the Asset Transfer and Conversion Report under the Transfer Agreement. The Report would be filed with the UPP in March 2022 and will be the final actuarial report for the RPP.

    On motion duly moved, seconded and carried

    IT WAS RESOLVED,

    THAT the asset transfer and conversion actuarial valuation results for the University of Toronto Pension Plan as at July 1, 2021, attached as Appendix A, be approved

    Members extended special thanks to Mr. Shapira for his pension expertise and advice that he had offered to the University for over 30 years.
  1. Pension Plan: Annual Financial Report for Year Ended June 30, 2021

    Mr. Rodgers and Dr. Piché jointly reported that effective July 1, 2021, the net assets and related pension obligations of the University of Toronto Pension Plan (“RPP”) were transferred/assumed by the jointly sponsored University Pension Plan Ontario (“UPP”) – the report brought together in one location, and places in historical perspective, information on the funded status of the RPP, plan liabilities (including participants, benefit provisions and assumptions) and plan assets (including contributions, investment earnings, fees and expenses, and payments to pensioners).

    Mr. Rodgers stated that at June 30, 2021, the plan had a market surplus of $807.3 million on a UPP transfer basis, a change of $1,738.9 million from the June 30, 2020 market deficit of $931.6 million, primarily due to an investment return of 24.07% which was well above the expected return for the period, the removal of the impact of the new provincial funding rules (which were not applicable to jointly sponsored pension plans), and employer special payments totaling $99.1 million;

    Dr. Piché commented that it was important to note that while the financial status of the University of Toronto Pension Plan improved significantly in 2021, and had transferred its assets and obligations into the UPP at July 1, 2021 with an $807.3 million surplus on a UPP transfer basis, there continued to be risks that the University needed to be aware of and addressed in order to have stable and predictable funding for pensions that would shield the University from possible future past service deficits, as the University was responsible for 100% of any deficits on the transferred-in assets and liabilities for the next 10 years. Such deficits would require the University to make additional special payments to the UPP, and result in increased current service costs to the UPP.

    On motion duly moved, seconded and carried

    IT WAS RESOLVED,

    THAT the Pension Plan Annual Financial Report for the Year Ended June 30, 2021, be approved.
  2. Report of the Previous Meeting: Report 46, September 28, 2021

    On motion duly moved, seconded and carried

    IT WAS RESOLVED

    THAT the Pension Committee Report Number 46, from the meeting of September 28, 2021, be approved.
  3. Business Arising from the Report of the Previous Meeting

    There was no business arising from the previous meeting.
  4. Other Business

    Recognition of Chair, Professor Cynthia Messenger
    Mr. Brian Lawson, Chair of the Governing Council, expressed appreciation to Professor Cynthia Messenger for her outstanding service during her tenure as Chair of the Pension Committee (2020-2022). Mr. Lawson presented her with a chair with a plaque which read:

    “Presented to Cynthia Messenger in recognition of exemplary service and leadership as Chair of the Pension Committee, 2020-2022”

    Recognition of Pension Committee Members and Assessors
    On behalf of fellow Pension Committee members and the Secretariat team, Mr. Brian Lawson, Chair of the Governing Council and ex officio member of the Pension Committee, thanked all members of the Pension Committee, past and present, for their commitment and service to the University of Toronto. Mr. Lawson also thanked the assessors for their many contributions and support of the Committee.

    In particular, he expressed thanks to those individuals who had served since the first meeting of the Pension Committee including Professor Angela Hildyard in her role as Vice-President, Human Resources and Equity, along with Ms Sheila Brown, former CFO – both were original assessors. And finally, Mr. Lawson Allan Shapira, whose wise counsel and ability to forecast the actuarial results was truly appreciated.

    Mr. Lawson reflected that the Committee had experienced many “highs” as presented above and some “lows” like the year of 2008 – all in all the decisions of this Committee had always been made in the best interests of its Plan members – the new UPP would carry forward with this principle in mind.

    In closing, the Chair of the Governing council expressed thanks to all the representatives of the administrative staff groups (USW, CUPE and the PM group); to UTFA representatives; and members of Governing Council, who have served with distinction and commitment.

    Expression of Gratitude by President Gertler
    President Gertler commented that the Pension Committee had been a vital part of University Governance for over a decade – it had blended tremendous expertise with dedicated oversight; and had helped the university navigate the pension landscape – through considerable Sturm und Drang – since 2010.

    President Gertler reflected that although, in the best university tradition, the members didn’t always agree, meetings were always collegial, productive, and ultimately in the service of our common goals for the University. The hand off to the UPP marked a milestone in the history of the University. It was also the fulfilment of the Pension Committee’s original mandate, forged in consultations and negotiations with the Faculty Association, to provide monitoring and oversight of matters affecting the administration of the University’s pension plans.

    President Gertler stated that the Pension Committee had been vital source of good governance and institutional confidence in turbulent times; and as the pensions moved into the UPP era, their beneficiaries, and the University of Toronto itself owed a debt of gratitude to the Pension Committee and its membership.

    On behalf of that entire extended community, President Gertler expressed his thanks to the Committee and its Chair and Vice Chair.

    There were no other items of other Business.


The meeting adjourned sine die at 4:45 p.m.



December 14, 2021