Date: December 2015
To: Active and Inactive Plan Participants on August 31, 2015
From: Howard Van Mersbergen, Executive Secretary-Treasurer
The enclosed report shows your status with the Plan as of August 31, 2015. Be sure to check the information carefully and contact us promptly if it is incorrect or incomplete, or if your records do not agree with ours. Please check that your designated beneficiary is current. If you need to add or change your beneficiary, you can obtain the Change of Beneficiary form from the “Employee Benefits” section of our website (www.csionline.org), under “Canada Pension”, then “Forms”.
Final Average Earnings (FAE)
Beginning September 1, 2015, the time period through which FAE is calculated was extended from August 31, 2015, to August 31, 2017.
Earliest Unreduced Retirement Date
As described in the April 2015 Your Pension Update, the early retirement subsidies are being changed beginning September 1, 2016. The enclosed status report reflects this change.
Retirement Calculations Online
The status report contains a projection of your pension at retirement. However, you can go online and create your own projections. Instructions are in the status report. The information you receive will help you plan and prepare for retirement.
We are happy to do the calculations for you and project your benefit to your retirement date. We can do these calculations for more than one retirement date. Just call us at 877.274.8796, ext. 231, or email us at firstname.lastname@example.org and provide potential retirement dates.
The enclosed checklist suggests steps you can take regarding your participation in the Pension Plan to prepare for retirement. Choose the checklist that is applicable to you and complete the steps to work toward your retirement goals.
The Trustees confirmed 1.35% as the interest rate to be credited to the participant’s contribution account for 2015/2016.
At the Plan’s year-end on August 31, 2015, the Trust Fund's net equity consisted of investments having market values in excess of $279 million. The asset composition was 1% cash or cash equivalents, 30% Canadian fixed-income securities, 17% Canadian equities, and 52% international equities. The total investment portfolio’s time-weighted annual rate of return through September 30, 2015, was 6.8% for the past year, 11.4% for the past three years and 8.6% for the past five years. The actuarially assumed interest rate is 6.75%.
As explained in the April 2015 Pension Funding Update, the last valuation as of August 31, 2014, showed the Plan to be funded at 92%. The next valuation is as of August 31, 2015, and is being prepared.
Plan Book and Summary Plan Description
To stay current with the Plan, you may always request an updated copy be sent to you or you may view the most recent version of both documents on the website at www.csionline.org/benefits, under “Canada Pension”, “Publications”.
The Plan was recently amended to:
• eliminate small benefit force-out payments
• permit buybacks of 2015 small benefit force-out payments
• remove the advance notice of suspension requirement
• allow individuals who opted out of participating at the time their school joined the Plan to enrol on any successive September 1.
The Plan was also was amended to comply with new pension legislation in Alberta and British Columbia. This includes:
• updating the definition of “spouse”
• changing the small benefit test
• revising the options where cashouts can be transferred
Bang for the Buck
Retirement planning is complicated by a challenging marketplace. Due to the increased promotion and use of defined contribution retirement plans (RRSP) over the past several decades, the advantages of defined benefit (pension) plans are not well known.
A common misconception is that defined contribution plans cost less and are a better value. This is false. The only savings gained by employers who switch from a defined benefit to a defined contribution plan is through a dramatic reduction in the retirement benefit provided to the participant. When designed to achieve equivalent benefits in retirement, defined benefit plans like the CSI pension plan dramatically outperform RRSP plans. In fact, an in-depth study by the National Institute on Retirement Security shows that defined benefit plans can deliver equivalent retirement benefits at a cost 46% lower than defined contribution plans.
How can this be? The key difference is in the approach — defined contribution plans are based on an individual’s savings, whereas defined benefit plans use a community model.
There are several factors that combine to help defined benefit plans dramatically outperform defined contribution plans. These factors are:
• lower fees
• higher investment returns
• sharing the risk of out-living retirement benefits.
For more information about these factors, visit www.csionline.org/benefits
Contacting Us for Support
More information about our benefit plans and past Updates is located on our website at www.csionline.org. Select “Employee Benefits” and the appropriate plan. As always, if you have questions, please contact Marcy Sterken at 877.274.8796, ext. 231, or 616.284.3231, or by email at email@example.com.