BCTF Pension Plan · b. Why are we proposing changes to our pension plan? • de-integrate from Canada Pension Plan (CPP) –Year’s Maximum Pensionable Earning (YMPE) used to determine

BCTF

Pension Plan Consultations

Jim Iker video

BCTF Pension Plan Consultations 2

Agenda

1. What is going on?

2. What does our current plan look like?

3. What are the proposed options?

4. What does the survey look like?

5. What happens next?

6. What support materials are available?


What is going on?

a. What has happened so far?

• 2012 Teachers’ Pension Plan initiated discussions

with BCTF on possible plan design change

• Plan Member Partner (BCTF) discusses with

Plan Employer Partner (Government)

• principles for change agreed by both partners

• plan options selected by both partners with

Teachers’ Pension Board input

• consultations to guide BCTF in discussions with

Plan Employer Partner in selecting option.


1

What is going on?

b. Why are we proposing changes to our pension plan?

• de-integrate from Canada Pension Plan (CPP)

– Year’s Maximum Pensionable Earning (YMPE)

used to determine pension build up (accrual)

below and above this amount ($53,600 for 2015)

• flat accrual rate

– if high enough, generates a larger lifetime pension

and simpler to calculate than split accrual rates

– fair

• demographics of plan members


1

What is going on?


1

TPP – Pensions by age at retirement

Year <=55 56 57 58 59 60 61 62 63 64 >=65 Total

2004 248 212 220 184 143 177 56 55 32 33 47 1407

2014 81 118 150 158 153 236 94 84 87 81 179 1421

What is going on?


1

TPP – Pensions by age at retirement as percentage

Year <=55 56 57 58 59 60 61 62 63 64 >=65 Total

2004 17.6 15.1 15.6 13.1 10.2 12.6 4.0 3.9 2.3 2.3 3.3 100%

2014 5.7 8.3 10.6 11.1 10.8 16.6 6.6 5.9 6.1 5.7 12.6 100%

What is going on?


1

TPP – Pensions by age at retirement as percentage

What is going on?


1

57.0

57.5

58.0

58.5

59.0

59.5

60.0

60.5

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Ag

e (

years

)

TPP – Average age at retirement 2000–2014

What is going on?


1

TPP – Longevity

Average life expectancy for a 65 year old is

UK* Male = 83.6 Female = 86.2

Canada* Male = 83.5 Female = 86.6

Japan* Male = 83.7 Female = 88.7

TPP 1999 Male = 86.0 Female = 88.1

TPP 2008 Male = 87.2 Female = 88.7

TPP 2011 Male = 88.0 Female = 89.3

TPP 2014 Male = 88.5 Female = 91.1

* OECD Health Data

Average life expectancy for a 65 year old is

UK* Male = 83.6 Female = 86.2

Canada* Male = 83.5 Female = 86.6

Japan* Male = 83.7 Female = 88.7

TPP 1999 Male = 86.0 Female = 88.1

TPP 2008 Male = 87.2 Female = 88.7

TPP 2011 Male = 88.0 Female = 89.3

TPP 2014 Male = 88.5 Female = 91.1

What is going on?


1

TPP – Factor 90 (F90) benefit

• In 2001 77% of retiring members were under age 60.

• This number has decreased to 47% in 2014.

• As a result of members being above age 60, fewer members

are able to take advantage of Factor 90.

• This is the trend, as evidenced in the graph, and not a point

in time assumption.

• As a result the average age at retirement is also increasing, it

is now age 60.3.

• We expect this trend to continue.

What is going on?


• de-integrate from Canada Pension Plan (CPP)

– Year’s Maximum Pensionable Earning (YMPE) used

to determine pension build up (accrual) below and

above this amount ($53,600 for 2015)


– if high enough, generates a larger lifetime pension and

simpler to calculate than split accrual rates

– fair


• equity.


1

What is going on?


1

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Year’s maximum pensionable earnings (YMPE)

What is going on?


1

Calculated value of lifetime pension

Assumptions : HAS - $78,000 with 25 years of service YMPE amount

$78,000

2.0% above YMPE

($594)

1.3% below YMPE

($628)

$0

2011

lifetime

pension $30,548

$78,000

2.0% above YMPE

($558)

2.0% above YMPE

($594)

1.3% below YMPE

($651)

1.3% below YMPE

($628)

$0

2011 2012

lifetime

pension $30,548 $30,233

$78,000

2.0% above YMPE

($538)

2.0% above YMPE

($558)

2.0% above YMPE

($594)

1.3% below YMPE

($664)

1.3% below YMPE

($651)

1.3% below YMPE

($628)

$0

2011 2012 2013

lifetime

pension $30,548 $30,233 $30,058

$78,000

2.0% above YMPE

($538)

2.0% above YMPE

($558)

2.0% above YMPE

($594)

1.3% below YMPE

($664) 2.0% of all salary

1.3% below YMPE

($651)

1.3% below YMPE

($628)

$0

2011 2012 2013 Option?

lifetime

pension $30,548 $30,233 $30,058 $39,000

2015 BCTF Pension Consultation Update to Fall Representative Assembly 15

Yet another indicator YMPE will likely increase next year

5. Pension consultation key points

2015 BCTF Pension Consultation Update to Fall Representative Assembly 16

TPP lifetime pension calculations are coupled with YMPE (1.3%/2.0%)

Year YMPE ($) YMPE

Increase

(% of

prev.

year)

Salary

increase

(% of

prev.

year)

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

43,700

44,900

46,300

47,200

48,300

50,100

51,100

52,500

53,600

54,900

3.80

2.75

3.11

1.94

2.33

3.73

2.00

2.74

2.10

2.43

29.93

2.50

2.50

2.50

2.00

0.00

0.00

0.00

2.00

1.25

1.00

13.75

Sample

Cat. 5

Salary ($)

68,709

70,427

72,187

73,631

73,631

73,631

73,631

75,104

76,043

76,803

Projected

PS

(years)

26

26

26

26

26

26

26

26

26

26

Lifetime

Pension

(1.3/2.0

Accrual

Rate)

$28,066

$28,668

$29,366

$29,862

$29,698

$29,498

$29,170

$29,754

$29,987

$30,182

Effective

Accrual

Rate (%)

1.5711

1.5656

1.5646

1.5598

1.5513

1.5408

1.5237

1.5237

1.5167

1.5115

Option a

Accrual

Rate (%)

1.8000

1.8000

1.8000

1.8000

1.8000

1.8000

1.8000

1.8000

1.8000

1.8000

Lifetime

Pension

(1.80%

accrual &

3% red.)

$31,191

$31,971

$32,770

$33,426

$33,426

$33,426

$33,426

$34,094

$34,520

$34,865

What is going on?


• de-integrate from CPP



• equity.

c. What were the guiding principles?

• preserve the pension promise

• future service

• sustainable indexing

• no additional costs. BCTF Pension Plan Consultations 17

1

What does our current plan look like?

a. Contributory service (CS)

• any TPP contribution made = full month of CS

• reduction calculations.

b. Pensionable service (PS)

• actual work time used to calculate pension, 35 year cap.

c. Highest average salary (HAS)

• average of best 5 years of income.

d. Accrual rate for lifetime pension

• 1.3% for salary up to and including YMPE* and

2.0% for portion of salary above. * YMPE = Years’ Maximum Pensionable Earnings ($53,600 for 2015).


2


e. Bridge benefit is a mini pension designed to bring

the pension to the full 2% amount until 65 or death

• (0.7% x lesser of last year’s YMPE or HAS).

f. Early-retirement Reduction Factor (ERF) is the

pension plan cost of early retirement = 3.0%.

g. Reduction point = lesser of 3% per year for every

year less than 60 or 3% per year less than Factor

90.

h. Factor 90 (F90) = age + CS.


2


i. Pension formula – split accrual rate (1.3% / 2.0%)

20

2

Data: HAS = $78,000 PS = 25 years bridge benefit to age 65 YMPE = $53,600

Formula: {lifetime pension} + {bridge benefit to age 65}

{([1.3% x ≤ YMPE] + [2.0% x > YMPE]) x PS} + {(0.7% x lesser of last year’s YMPE or HAS) x PS}

BCTF Pension Plan Consultations

(less early retirement reductions)

{([1.3% x $53,600] + [2.0% x $24,400]) x 25 years} + {(0.7% x $52,500) x 25 years}

{($696.80 + $488.00) x 25 years} + {$367.50 x 25 years}

{$1,184.80 x 25 years} + {$9,187.50}

{$29,620.00 lifetime amount + $9,187.50 bridge benefit}

(≤ YMPE = $53,600 > YMPE = $24,400)


j. Proposed formula – flat accrual rate (e.g. 1.80%)

21

2

Data: HAS = $78,000 PS = 25 years

Formula: {lifetime pension}


(less early retirement reductions)

{ [1.80% x $78,000] x 25 years}

{$35,100.00 lifetime amount}

What are the proposed options?

No F90 calculations.

Bridge amount folded

into increased lifetime

pension.

The options were selected

using current data and any

changes resulting from the

2014 actuarial valuation

released in Q4 will be

reflected at that time.


3


Options:

a. Accrual rate for lifetime

pension 1.80% for all salary

• ERF 3.0% reduction for

every year before age 61.


3


b. Accrual rate for lifetime




c. Accrual rate for lifetime





3


d. Accrual rate for lifetime




e. Accrual rate for lifetime





3



3

Summary—numerical (all options)

Scenario Accrual Rate ERF Rate ERF Age

61

61

61

62

62

60

Scenario Accrual Rate ERF Rate

3.00%

3.50%

4.00%

3.00%

5.00%

3.00%

Scenario Accrual Rate ERF Rate ERF Age

Option a

Option b

Option c

Option d

Option e

Option f (Current benefit)

Scenario Accrual Rate

1.80%

1.80%

1.85%

1.85%

2.00%

1.30%/2.00%



3

Summary—graphical

Earliest

retirement

Age 55

Age

70 Age

60

Age

75

Age

80

Age

85

Age

65

Canada Pension Plan

Old Age Security

Bridge amount

Lifetime pension

What are the proposed options? 3

Option c—1.85% accrual, 4.0% reduction from age 61

Macroscopic view of benefit for a future member



Option c—1.85% accrual, 4.0% reduction from age 61

Break even points


Break-Even point: age at which a person would have accrued a

greater benefit in a new plan option than under the current plan.




Option e—2.0% accrual, 5.0% reduction from age 62

Break even points



Retiring: 26 years of PS

1. 26 years all in current benefit (CB)

2. Ø CB

+ 26 new

=> 100% 26 26

3. 6.5 CB

+ 19.5 new

=> 75% 26 26

4. 13 CB

+ 13 new

=> 50% 26 26

5. 19.5 CB

+ 6.5 new

=> 25% 26 26

6. 23.4 CB

+ 2.6 new

=> 10% 26 26


3

Setting up to calculate annual pensions

• How to make sense of the annual pension per year

of service data?


Option c—1.85% accrual, 4.0% reduction from age 61, annual pension per year of service

Annual pension per year of service

33 BCTF Pension Plan Consultations

Current: $1,600 X 26yrs = $41,600 annual pension from 60 to 65 $1,225 X 26yrs = $31,850 annual pension from 65 till death

Revised 10%: $1,582 X 26yrs = $41,132 annual pension from 60 to 65 $1,244 X 26yrs = $32,344 annual pension from 65 till death

Revised 100%: $1,421 X 26yrs = $36,946 from 60 till death

3 What are the proposed options?

34 BCTF Pension Plan Consultations

Option e—2.0% accrual, 5.0% reduction from age 62, annual pension per year of service

Annual pension per year of service

Current: $1,600 X 26yrs = $41,600 annual pension from 60 to 65 $1,225 X 26yrs = $31,850 annual pension from 65 till death

Revised 10%: $1,584 X 26yrs = $41,184 annual pension from 60 to 65 $1,246 X 26yrs = $32,396 annual pension from 65 till death

Revised 100%: $1,440 X 26yrs = $37,440 from 60 till death



3

• BCTF pensions webpage

35

What does the survey look like?

Strongly Agree

Agree

Neither

Agree nor

Disagree

Disagree Strongly

Agree Don’t Know

Change early retirement

reduction factor to

3/3.5/4/4.5% a year for each

year below 61/62 to increase

accrual rate

O O O O O O

Increase accrual rate so

members currently working

receive larger percentage of

salary when retired

O O O O O O

4

Online September 8 to December, 2015


What happens next?

• January 2016—report and

recommendations to EC

• Winter RA 2016—report from EC

• 2016 AGM—pension option selected

• Spring 2016—partners inform

Trustees of option selected

• January 1, 2018—start date.

5


What support materials are available?

• BCTF pensions webpage

• video messages

• [email protected]

• online information

– FAQ, glossary,

schedule, data tables

• communication

– newsletter, eBlasts,

Newsmag

• notices for Local’s use.

6



Documents

BCTF Pension Plan · b. Why are we proposing changes to our pension plan? • de-integrate from Canada Pension Plan (CPP) –Year’s Maximum Pensionable Earning (YMPE) used to determine