Orchestras Canada

Musicians’ Pension Fund of Canada
Caisse de Retraite des Musiciens du Canada
Orchestras Canada
October 27, 2010
This presentation is a summary based on the Plan provisions currently in effect. In the event of any differences in interpretation
between this presentation and the official Rules and Regulations and the Trust Agreement, the official Rules and Regulations of
the Plan and Trust Agreement will apply. The Rules and Regulations can also be amended by the Trustees at any time.
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Presenters
• Ellen Versteeg-Lytwyn, Fund Administrator
• Humbert Martins, Manager, Pension Benefits
• Chair and Moderator,
Katherine Carleton,
-Executive Director-Orchestras Canada
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
NAME CHANGE
• We are now the
Musicians’ Pension Fund of Canada
www.mpfcanada.ca
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Registered Status
• The Musicians’ Pension Fund of Canada is
registered with the:
—Financial Services Commission of Ontario
—Canada Revenue Agency
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
A BIT OF HISTORY
• Established in 1962 as a result of collective
bargaining between employers and the AF of
M.
• The Fund was administered in New York until
1971 when the administration was moved to
Canada
• In 1972 the Fund was a one person operation
with $3M in assets and 18 pensioners
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
History (cont’d)
• It has grown to an operation of 9 staff with
assets of $550M and over 2200 pensioners
and beneficiaries receiving in excess of $24M
per year
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Some Facts about the Pension
Fund:
• The Musicians’ Pension Fund of Canada is a multi-employer
pension plan with members and participating employers
across Canada;
• The funding of the Plan is based on contributions by
employers. Employee contributions are not required nor are
they permitted.
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Some Facts about the Pension
Fund:
• The Plan is administered by a Board of Trustees, consisting of
three employee and three employer representatives, who
are responsible for the overall operation of the Plan. They
serve without compensation;
• The Trustees are aided by professional advisors
-Legal Counsel
-Investment Counsel
-Plan Actuary
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Some Facts about the Pension
Fund:
Legal Counsel
-ensures legal compliance with provincial legislation and the
Income Tax Act
Investment Counsel
-advises on the asset mix of Fund’s Portfolio
-aids Trustees in hiring Investment Managers
-Fund currently has 12 Managers with mandates that
diversify the Fund’s assets, with a goal to minimize risk
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Some Facts about the Pension
Fund:
Plan Actuary
-Performs and signs off on actuarial valuation to demonstrate
the Fund’s ability to pay its promised benefits
-Does actuarial calculations to determine what rate of
contributions are needed to be able to provide a certain level
of benefits and what rate of return on investments are
needed to hold benefits at a certain level, among other
things.
-Helps the trustees create a plan that not only satisfies all
legislation, but one that balances legal requirements with
fairness to all participants, regardless of province.
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Some Facts about the Pension
Fund:
• Members can accrue pension credits under the Pension Fund
whenever they are working for participating employers,
anywhere in Canada;
• Under this Plan there are Normal, Early, Deferred, Special
Retirement, Disability, and Survivor Benefits.
• The Pension Fund provides defined benefits and therefore,
members’ benefits are not directly related to the Pension
Fund’s investment returns. In other words, members’
benefits do not fluctuate from year-to-year, depending on
the Pension Fund’s rate of return.
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Some Facts about the Pension
Fund:
• Members’ benefits are secured by Pension Fund assets
of over $550 million.
• The Plan has over 2200 monthly pensioners
and beneficiaries receiving benefits in the total amount of
$2.025 million monthly (over $24 million annually).
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
PENSION
• The greater the contributions made on their behalf, the
larger the monthly benefit
• When a member retires their monthly benefit payable from
the Musicians’ Pension Fund of Canada will be based on the
total contributions made on their behalf
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
CONTRIBUTIONS
• Contributions can only be made by:
— Employers that have an agreement:
• with or approved by the AFM;
• with or approved by an AFM Local
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Types of Pension Plans
• Universal rule applying to all pension plans
Contributions + Investment Income = Benefits + Expenses
• Two basic approaches
— Defined Benefit (DB)
• DB plans have a benefit formula that defines the pension payable
• Musicians’ Pension Fund of Canada is a DB pension plan
— Defined Contribution (DC)
• Work and appear like a savings account
• RRSP is a form of DC pension plan
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Defined Benefit (DB) Plans
• Similar to insurance, DB plans pool risks of all members
together
• Facilitates retirement planning by offering predictable levels of
retirement income
• Economies of scale from pooling result in very low expense
levels
— Less than 0.45% of assets per year for Musicians’ Pension
Fund of Canada
• Professional oversight
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Defined Contribution (DC) Plans
• Amount of pension at retirement is whatever amount can be
supported by the account balance
• Investments are usually directed by individuals
— Good investment experience will result in higher pensions
— Poor investment results can result in inadequate pensions
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Defined Contribution (DC) Plans
• Expense levels are typically much higher than for DB plans
(0.50% to 4.50% per year)
• All risks are borne individually by each member
• Retirement planning can be difficult and plans are often
revised for financial reasons
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Musicians’ Pension Fund of
Canada
• Monthly pension is based on contributions remitted to the
Plan
— $3.80 for every $100 of contributions remitted prior to 1992
— $3.70 for every $100 of contributions remitted after 1991
• Normal retirement at age 65
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Musicians’ Pension Fund of
Canada
• Normal Retirement Example
• Mark worked in pensionable employment for 20 years,
averaging $25,000 in covered earnings and a contribution
rate of 8%.
• Mark retires in October, 2010 when he turns 65
• He has $40,000 in contributions,$10,000 for the period prior
to 1992 and $30,000 for the period after January 1, 1992
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Musicians’ Pension Fund of
Canada
• Mark’s pension would be calculated as follows:
— Pre-1992 Pension
$3.80x100 = $380.00
— Post Jan. 1, 1992 Pension $3.70x300 = $1,110.00
— Total Monthly Pension
= $1,490.00
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Musicians’ Pension Fund of
Canada
• Early retirement as early as age 55
• Pension is reduced to reflect earlier payment and longer
payout period (at age 55, the reduction is 50%)
• Special early retirement benefit for active members who
retire with 15 years or more of service
• The normal reduction for Special early retirement is either
waived entirely (at age 61) or reduced
• Disability pension payable to active members for total &
permanent disabilities
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Musicians’ Pension Fund of
Canada
• Death benefits at any age
— Pre-Retirement
— Post Retirement
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Comparison of Projected Pensions
Based on Future Contributions
• Comparisons
—Contributions to Musicians’ Pension Fund of Canada
—Contributions invested in RRSP
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Comparison of Projected Pensions
Based on Future Contributions
• Economic assumptions
— Salary increases 2.5% per year
— RRSP investment income of 7.5% per year with 2.0%
expenses, for net earnings of 5.5% per year
— Life annuity purchase interest rate of 4.5% per year
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Comparison of Projected Pensions
Based on Future Contributions
• Sample individual
— 30 year old married male with spouse three years younger
— Current annual earnings of $41,000 and 10.0% contribution
rate
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
30 Year Old – Based on Future
Contributions
Monthly
Pension
30 Years
10,000
8,000
6,000
4,000
2,000
0
55
60
65
AFM
RRSP
Age at Retirement
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Contributions During Approved
Leaves of Absence
• Required by law (ie: Maternity Leave)
• Unpaid leave, subject to Income Tax Act provisions,
authorized by Employer
• Symphony agreement can provide for pension
contributions during unpaid authorized leave
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Employers’ Responsibilities
• Pay musicians for services as per their agreements
• Remit pension contributions on a monthly basis
• Report contributions to Canada Revenue Agency as Pension
Adjustments. Seek tax counsel from accountants /legal.
Funding Deficiencies/Plan Windup
• MPFCanada is a multi employer plan so a windup is
extremely unlikely.
• Contributions are fixed by agreements and there is no
provision, as with a single employer plan, to have employers
make up funding shortfalls.
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Plan Changes Effective January 1,
2011
• OCSM and Canadian Conference of Musicians were
both advised that change is coming
• Background
— Plan subsidized
• Benefits in pay, or accrued/earned at December 31,
2010 will not be affected
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Plan Changes Effective January 1,
2011
• Accrual rate reduced to $3.25 from $3.70
• Benefits no longer subsidized on a go forward basis
• Changes made to forms of pensions
• Additional options provided for pensioners which
will not be any additional cost to the Fund
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada
Musicians’ Pension Fund of Canada
Questions and Answers?
Musicians’ Pension Fund of Canada
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Orchestras Canada
Caisse de Retraite des Musiciens du Canada