Submission: Submission

The Colleges Of Applied Arts And
Technology Pension Plan Submission





February 27, 2009



This submission contains the comments of the staff of the Colleges of Applied Arts & Technology (CAAT) Pension Plan (the Plan) in response to the Ministry of Finance request for feedback concerning the report of the Ontario Expert Commission on Pensions (OECP) entitled "A Fine Balance: Safe Pensions, Affordable Plans, Fair Rules".

We thank the Ministry of Finance for taking the initiative to establish the OECP with a mandate to examine the legislation in Ontario that governs the funding of defined benefit pension plans and issues relating to the security, viability and sustainability of the pension system in Ontario. We thank the Minister of Finance for allowing us this opportunity to comment on the report.

The CAAT Pension Plan strongly encourages the Minister of Finance and the Ontario government to pursue legislative solutions and to co-ordinate legislation to improve the pension system in Ontario. This submission is a reflection of the CAAT Plan's desire to support the Ontario Government, the Ministry of Finance and the OECP in the important work of identifying areas of law that can be improved to achieve this goal. The CAAT Plan believes that a thorough, reasoned discussion concerning the issues of  pension stability and sustainability can lead to comprehensive legislative reform that will benefit not just stakeholders in the Ontario pension field, but Ontario society in general.


The CAAT Pension Plan covers the employees of the 24 Colleges of Applied Arts and Technology (or Community Colleges as they are more popularly known) in the Province of Ontario.

The CAAT Pension Plan commenced on June 1, 1967 when the Community College system was introduced.

The CAAT Pension Plan is a jointly sponsored defined benefit pension plan with a Bi-Cameral Governance structure having equal employee/employer representation on all of its governance committees. At the time of our last actuarial valuation on January 1, 2008 the Plan was fully funded with over $5 billion in assets (externally managed) to meet the pension promise to its members and former members. The Plan serves over 17,000 active employees and over 11,000 current and deferred pensioners.

The CAAT Pension Plan is a well regarded player within the Canadian pension industry through our membership in, or affiliations with, most of the major Canadian pension associations or groups.


In the interest of brevity, we will list the recommendation numbers as presented in the OECP report, individually or together as a related group, and comment on them as we see appropriate. We have concentrated our comments mostly in respect of the recommendations in chapters four and five of the report. We feel that these chapters are the most important of the report and will have the greatest impact.

  • 4-1, 4-2,   We agree with the principle behind more transparent actuarial standards and with the Superintendent having the authority to order an independent valuation or peer review for any valuation that appears to depart from accepted practice.
  • 4-3,   We would accept that Going Concern valuations no longer exclude promised indexation and that Solvency Valuations would no longer use smoothing practices as an acceptable tradeoff. As we noted in our original submission to the OECP, we strongly  agree that amortization periods for special contribution increases should be extended. We confirm our position in our original submission that any solvency deficiency should be funded over fifteen years instead of five. We would extend this position to include going concern deficiencies being funded over fifteen years.  In addition, we would encourage the Minister to exclude any type of agreement/consent conditions such as those that are being proposed in the temporary solvency funding relief legislation scheduled to be introduced in the spring, or to prevent the consent conditions from being so administratively difficult that few if any plans will have the capability of implementing them.
  • 4-4,   We could accept that triennial valuations be filed within six months versus the current nine months. However, we question the benefit of the time change. After all, if the regulator has waited for three years for a valuation, then what real benefit is there in moving the filing date up by three months? Although most plans could probably comply, some plans due to their governance and approval structures may have difficulty reaching the new deadline. Instead, we would suggest that only plans that are in a deficit position (new or continuing since the last valuation) be compelled to file within 6 months, with all plans in a fully funded position retaining a nine month filing timetable. This would be a minor incentive for those fully funded plans but more importantly would assist the regulator in more quickly identifying and initiating required actions for those plans that are having financial difficulty and require additional monitoring.
  • 4-5 to 4-7,   We could accept the additional emphasis and scrutiny from the Superintendent concerning the valuation filing process. However, there should be reasonable, principle based benchmarks and thresholds built into the regulations so that all plans can clearly determine what is required of them and what the consequences will be for non-compliance.
  • 4-8 to 4-15,   We are strongly of the opinion that JSPPs, such as the CAAT Pension Plan, are extremely unlikely to ever be wound up and, in accordance with our submission to the OECP, we strongly support the OECP recommendations that advocate that a JSPP or a MEPP should not be subject to solvency funding requirements of any kind, with the single exception being in the event of a final plan windup.
  • 4-16 to 4-18,    Although the CAAT Pension Plan is a JSPP with a clearly established Funding Policy that includes clear directives about surplus utilization, we would welcome any clarity on the issue in order to avoid drawn out potential court proceedings that could have unknown corollary effects. Less stringent consent procedures may discourage plan sponsors from deliberately funding to the bare minimum.
  •  4-20 to 4-21    Although we have plan-established indexation provisions that are also incorporated into our funding policy, we cannot support any provision in the PBA that would require indexation based upon a prescribed formula in the event of "inflation emergencies".  What would be defined as an inflation emergency and who would be making this decision? This opens up the possibility of political pressure at any given time imposing indexation upon plans, thereby influencing individual plan costs and causing funding implications that the plan itself cannot rationally foresee. It would also basically remove or severely hamper the plan's option of instituting temporary ad hoc indexing in exceptional circumstances. We are of the opinion that plan sponsors do not live in a vacuum regarding inflation and its effects upon retirees and plan members, and that the individual plan sponsors themselves are the best judge of how to address any temporary situation through a temporary ad hoc amendment (or a series of ad hoc amendments if need be) based upon the financial circumstances that the individual plan finds itself in. In fact, our submission to the OECP took the opposite tack in that we recommended that Sponsors should be permitted to curtail future increases arising out of guaranteed indexation for existing pensioners where a plan has a solvency deficiency.
  •  4-22 to 4-23   Although the situation of unpaid contributions is unlikely to ever occur to the CAAT Pension Plan, we agree that the allowance of using letters of credit or asset pledges would provide increased flexibility and increased surety of contribution payments being made to any pension fund.
  • 4-24   We agree that the Ontario Government should encourage the federal government to increase benefit and contribution limits. Although there has been some slight movement by the federal government in recent years, because of decades of inaction we are still far behind most other developed countries in this respect. Our recommendation to the OECP provides some detail of the changes to the limits that we feel are prudent, especially in terms of the surplus limit (to 150%) and the maximum pension accrual (to $5,000/yr. of service). We also agree that the DB plan is best suited to providing financial security and the federal government should be encouraging increased participation in DB plans.
  • 4-25   In accordance with our submission to the OECP, we encourage any course of action that would eliminate some of the unnecessary restrictions on investment rules. Our submission provides details of some maximum limits that we feel should be modified.
  • 5-2 to 5-7 & 5-11   Who would pay for the Ontario Pension Agency? We are concerned that these costs may be imposed upon individual pension plans through some type of prescribed fee or premium. We would feel better about its creation if the set-up costs were to be borne by the government and the administrative and investment costs to come out of the stranded funds administered and invested by the OPA. What is the definition of a stranded pension? Would this include small pensions? This is more likely to be an issue if another recommendation in the report about immediate vesting is implemented. All plans would be adding a higher number of deferred pensions for very short term employees who are unlikely to stay in communication. Recommendation # 5-11 seems to contemplate this but does not provide guidance and does not seem to consider a transfer to the OPA instead of just a payment out. Would stranded pensions include deferred pensioners who have not stayed in communication and whom the pension plan cannot locate as contemplated in Recommendation # 5-7? Has any consideration been given to restricting the number of years a pension plan must track a deferred pensioner?  Why not consider that any vested deferred pensioner who is more than ten years from his/her earliest pension start date be transferred to the OPA instead of maintaining deferred pensioner status with the individual plan? Would stranded pensions include former members who simply refuse or neglect to return their option form? We would feel more reassured if the transfer of stranded pensions was not solely at the consent of the plan member but could also be referred by the pension plan in prescribed circumstances such as those described above.
  • 5-9   We strongly agree that grow-in benefits should not be provided for JSPPs and MEPPs. In fact, in our submission to the OECP we advocate the elimination of grow-in provisions altogether.
  • 5-10   We agree that the PBA should be amended to allow for phased retirement, but it must not be a requirement. It should only be enacted at the initiative of the individual pension plan.
  •  5-12 to 5-23   These recommendations pertain to plan mergers, plan splits and partial windups. They provide prescribed definitions for different scenarios. We agree with the intent of ensuring a plan's funded status by recommending that there is no requirement of surplus distribution or annuitization of benefits in the event of a partial wind-up.
  • 6-1 to 6-6   We would accept that the regulator have more formalized tracking and enforcement powers for plans at risk and for legislated distribution rights in the event of plan failure.
  • 6-7 to 6-12   We encourage any changes in federal legislation that would give priority to unpaid pension contributions or any other pension plan rights in the event of plan sponsor bankruptcy.
  • 6-13 to 6-19   As noted in our original submission to the OECP we advocated the immediate elimination of the PBGF altogether. This current environment illustrates the inadequacy of the current PBGF. As such, we have some concerns about supporting the continuation of this already insolvent fund, let alone increasing the monthly benefit guarantee to $2,500 while the issue of the PBGF is being studied.
  • 7-1 to 7-3   We agree with the intent to make the PBA the exclusive source of law for the pension system. We agree that this would consolidate responsibility for pension law under the PBA and would remove trust law implications and reduce litigation. We agree with the general premise behind the recommended mix of rules-based and principles-based approaches for different areas of the future PBA.
  • 7-4   This recommendation seems to confirm the current practice that the PBA would require standards established by the accepted professional bodies such as the CIA and CICA. However, it also seems to imply that the government or the pension regulator could prescribe standards that differ from the accepted standards of the CIA or CICA. If that is the case, we can accept this direction if the CIA or CICA is taking too long to upgrade their standards.
  • 7-5   We agree with simplified registration and filing requirements. However, we feel it should be for all plans, not just small and medium sized plans.
  • 7-7   We agree with the regulator developing an electronic system to help fulfill its mandate.
  • 7-9   We agree that the regulator should issue draft policy statements for consultation and comment before issuing a final policy.
  • 7-10   We agree that the regulator should have the power to provide advance rulings and opinions. However, the subsequent exclusionary clause seems extremely broad in its scope. It makes it appear as if the regulator could later change its advanced ruling or opinion for almost any type of reason.
  • 7-13   The creation of a Complaints Officer appears to us to be the same as an Ombudsman. We are opposed to this.
  • 7-14    We are uncomfortable with the word "participate" when it comes to defining the rights of unions etc. in the hearings/appeal process. We feel that the union should be required to "represent" the employee or pensioner or that they should have no standing. We are of the opinion that the part of the recommendation that suggests only the sponsor or the plan should be liable for legal costs in the event of a meritorious claim runs contrary to principles of equitable treatment. We feel that either side should be able to make claim for reasonable legal costs and that the Pension Tribunal hearing the case would be the best judge of the merit of any such claim. The possible imposition of legal costs for the opposing side would act as a deterrent and a censure for any hearing participant whose position lacks merit.
  • 7-15   In accordance with the principle established in other recommendations, we agree with the general principle of the Superintendent having the authority to hold hearings and issue interim or final orders.
  • 7-18 to 7-23, 7-25   We support the idea of an independent pension-focused regulator.
  • 7-24   We are concerned about the OPR creating a program of "enhanced risk-based regulation" based upon risk assessments that they model. We would need some assurance of the validity of the model.
  • 7-26 to 7-31   We agree that the creation of an independent Pension Tribunal with expert personnel is admirable. However, restricting membership to jurists (whether they have pension background or not) and actuaries is unnecessarily restrictive in our opinion. There are some very experienced and knowledgeable pension practitioners, who are not lawyers or actuaries, who would be eliminated from contributing based upon this restriction.  We could accept that the jurisdiction and the decisions of the Tribunal would be final and binding with the same authority as the Ontario Court of Justice. This would make it even more important that the Tribunal Panel selections be true pension experts.
  • 8-1, 8-5, 8-19 to 8-23   Information Required and Member Access to Information.  Many plans already provide much of the information demanded in the recommendations through their regular communications with plan members. These recommendations formalizing both annual funding statements (8-5 & 8-21) and triennial policy filings and statements (8-7 & 8-22) and distributing them to all plan members and retirees (note: would this also include deferred members?) seem both redundant and potentially alarmist (even more so when taken in the context of the current economic crisis). Considering that valuations are only filed on a triennial basis, it seems redundant to require additional annual statements to members and retirees as recommended in 8-5 and 8-21 as there would likely be no change in status for the intervening two years. These additional statements impose an additional administrative burden on DB plans which is one of the reasons so many plan sponsors are moving away from DB plans. As an alternative we would suggest that all plans be required to include a generic statement on the annual information statement issued to members and have a communication policy that would instruct members and retirees how to seek this type of information from the plan or the Regulator. Another alternative would be to have access to this information solely through the Regulator in accordance with Recommendation 8-19. We strongly support this recommendation that the Regulator create a free, on-line access point for plan members and retirees (and deferred members?) to view filed plan documents. The information required in Recommendations 8-5, 8-7, 8-21 and 8-22 could be listed by the Regulator and thereby accessible to all stakeholders. In our opinion, this would make the current Section 29 of the PBA redundant and unnecessary. The need for the plan administrator to provide the original documents for inspection, often at great distance and expense, would be eliminated. We have first-hand experience with this situation and the extreme administrative difficulties and expense incurred. We strongly urge the implementation of Recommendation 8-19 and the repeal of the current Section 29 of the PBA. This would be a rare and ideal opportunity for the Regulator to alleviate an administrative burden from plan administrators and sponsors.
  • 8-2 to 8-4   As a JSPP we have no difficulty with encouraging union participation in all aspects of governance and administrative oversight. We are not philosophically opposed to having retiree representation also as long as the balance of power remains even. We respectfully suggest that unions be encouraged to share their governance powers and committee memberships to allow the inclusion of retired members. In addition, we suggest that the union and retired representative(s) be required to represent the interests of all participants, non-union active employee members and deferred pensioners included.
  • 8-8   We agree with allowing jointly governed plans with the expertise the latitude to claim exemption from the 30% investment rule. This is one of the recommendations contained in our submission to the OECP.
  • 8-9 to 8-18   In our submission to the OECP we recommended that trustees should have a minimum level of skills or experience either before or soon after appointment. These recommendations encourage this but seem to fall short of making it a requirement. We encourage the Regulator or the Pension Champion (if created) to codify these qualifications and ratify any required educational programs to obtain the qualifications.
  • 8-24 to 8-26   These recommendations seem to be making optional advisory committees that are currently allowed under Section 24 of the PBA to be a requirement for all plans that do not have some form of joint governance. As a JSPP we do not have any issue with the recommendations but could see how smaller SEPPs would have difficulty implementing them.
  • 8-27   We agree with the basic philosophy behind establishing Jointly Governed Target Benefit Pension Plans.
  • 8-28 to 8-30   We agree that all types of members should have identical access to information (8-29) but wonder why the same principle does not hold concerning representation in governance processes (8-30). We feel that if there are non-union employees who are plan members they should also have representation.
  • 9-1 to 9-5   We find the recommendations for plan design innovation to be interesting. The recommendations of encouraging large-scale plans, commingling of investments and the creation of a provincial pension plan are interesting concepts to consider. The suggested national pension summit would provide an excellent forum to bring legislators and pension practitioners together to consider the possibilities, and if any type of agreement can be reached, to act in a coordinated fashion.
  • 10-1 to 10-9   The creation of a government funded arms-length Pension Champion is an interesting concept. The Pension Champion should have a mandate that requires the Ministry of Finance to consider its recommendations on a regularly scheduled basis. Having a Pension Community Advisory Council liaised with the Pension Champion for consultation purposes should be easily achieved. There is no shortage of informed groups and stakeholders such as the ACPM, PIAC and MOPPS that could make immediate contributions to any Advisory Council created. The CAAT Pension Plan would gladly respond to any invitation from the Pension Champion and/or Pension Community Advisory Council.


It has been over 20 years since the last substantive review of the pension system in Ontario. We agree with the mandate provided to the OECP that the defined benefit pension plan is the best type of pension plan available today, and that when combined with personal savings and government pensions such as the CPP and OAS, provides the greatest financial security to workers and their families.

We at the CAAT Pension Plan are pleased that many of the recommendations in the OECP Report addressed topics that we raised in our original submission to the OECP.

We substantively agree with the overall message contained within the OECP Report and the  recommendations contained therein. We are of the same opinion concerning the Expert Advisors' Recommendations on Technical and Operational Issues.

We are most pleased with the OECP recommendations concerning solvency funding requirements for MEPPs and JSPPs as per Recommendations 4-8 to 4-12. We strongly support these recommendations.

Once again, we thank you for allowing us to participate in this consultation. Please do not hesitate to contact us if you require any clarification on our comments, or if there are any other issues you would like to consult with us on.

CAAT Pension Plan
2 Queen Street East, Suite 1400
P.O. Box 22
Toronto, ON , M5C 3G7
Attn:     Jocelyne Mousseau
            Dave Calhoun
Phone:  (416) 673-9021