Multi-Sector Pension Plan

1. Multi-Sector Pension Plan

2. Outline • Retirement Income Sources • Types of Pension Plans • Outline of the MSPP – Eligibility, Benefits, etc.

3. Retirement Income in Canada

4. Canada’s 3 sources of Retirement Income • Public Pension Plans • Canada Pension Plan (CPP) • Old Age Security (OAS) • Guaranteed Income Supplement (GIS) • Workplace Pension Plans • Defined Benefit • Defined Contribution • Personal Savings (RRSP)

5. Why a Workplace Pension Plan? • Average monthly benefits paid from public plans: Canada/Quebec Pension = $501.82 Old Age Security = $489.57 Total = $991.39 (Jan. 2009) • Many, especially women will not receive maximum benefit from public pension plans.

6. Workplace Pension Plans

9. Problems with DC Plans • Employees must face risk alone • Market fluctuations on investments • Interest rates on annuities • No guarantee of retirement benefits • Members are not professional investors • Must pay fees on investments

10. The Multi-Sector Pension Plan

11. Multi-Sector Pension Plan (MSPP) • Defined Benefit Plan – with hybrid features • Collective Approach • Retirement wages based on set formula • 100% union-run (CUPE and SEIU)

12. The Proposal This proposal is only for members who are on the DC Plan, not for members who are on the DB Plan (i.e. those hired before July 1, 1992)

13. The Proposal

14. The Proposal • All of the benefits from the MSPP will be in addition to what you have already accrued in the DC plan and with your own RRSPs • There is no change to what you have saved under your current pension plan • CPP is not affected by participation in the MSPP: i.e. CPP benefits are in addition to the MSPP

15. MSPP – Eligibility • Everyone in the bargaining unit must be covered after 500 hours of employment • Some exceptions can be made (e.g. if some are on superannuation, they can stay there)

16. MSPP – Benefits: Future Service Credit • $100 of contributions = $1.55 monthly retirement wage at age 65 • Roughly equivalent to 1.95% of salary per year of service

17. MSPP - Benefits Accruing Contributions: assuming full contribution level (10.5%) and wage increase of 3% per year

18. MSPP – Benefits: Past Service Credit • A unique feature of the plan may increase your retirement wage by as much as $186.20 per month at age 65. • Based on years of service with your employer at the time the employer commences participation in the MSPP.

19. MSPP – Benefits: Past Service Credit • $26.60 per year of service to a maximum of 7 years ($186.20) at age 65

20. MSPP - Benefits Some Examples: **These examples are in addition to CPP and to any RRSP coverage

21. MSPP - Benefits Retirement rates: comparison between annuity rates and MSPP benefits, assuming $100,000 contribution Data as of May 29, 2009

22. MSPP – Retirement Options • Must be “vested” to retire (24 months of contributions or Age 65) • “Normal” retirement is Age 65 • Can retire as early as Age 55 (6%/year reduction) • Several guarantee options available: • Joint and survivor benefits (50%, 60%, 75%, 100%) • 5-year, 10-year or 15-year guarantee

23. MSPP – Leaving before Retirement If you have 24 months of “vesting service”, you can: • Collect pension at a later date • Move value to locked-in pension vehicle • Move value to new employer’s plan if the new plan accepts the pension transfer

24. MSPP – Leaving before Retirement With less than 24 months of “vesting service”, your contributions are refunded with interest accrued.

25. MSPP – Plan Statistics As of May 2009: • 80+ participating employers • 5,600+ plan members • ~60 pensioners • $26 million in fund assets

26. MSPP – Plan Statistics Issue of under-funding • Young pension plans all face under-funding issues • MSPP based on Nursing Home plan: • 20 years – never cut benefits • Plan profile is excellent for the current downturn – growing plan with low retiree numbers • Pooled risk vs. individual risk

27. MSPP – Additional Information www.mspp.ca Questions/comments: Email Seth Sazant – sazants@psac-afpc.com