TABLE OF CONTENTS
REPORTS OF THE STANDING COMMITTEES
AND OTHER COMMITTEES
As Considered by
The Council of the City of Toronto
on December 16 and 17, 1998
CORPORATE SERVICES COMMITTEE
REPORT No. 18
1Actuarial Valuation Results -The City of York Employee Pension Plan
City of Toronto
REPORT No. 18
OF THE CORPORATE SERVICES COMMITTEE
(from its meeting on November 9, 1998,
submitted by Councillor David Miller, Acting Chair)
As Considered by
The Council of the City of Toronto
on December 16 and 17, 1998
1
Actuarial Valuation Results -
The City of York Employee Pension Plan
(City Council on December 16 and 17, 1998, amended this Clause by adding thereto the following:
"It is further recommended that:
(1)the confidential report dated November 24, 1998, from the Chief Financial Officer and Treasurer, headed 'OMERS
Type 3 Supplementary Agreement and the York Fire Association', embodying the following recommendation, be adopted:
'It is recommended that the $1.5 million savings as a result of the OMERS Type 3 Agreement be deposited into the
Employee Benefit Reserve.'; and
(2)the Chief Financial Officer and Treasurer be requested to submit a full report to the Corporate Services Committee
on how the City of York Employee Pension Plan came to be in its current negative financial situation.")
(City Council on November 25, 26 and 27, 1998, deferred consideration of this Clause to the next regular meeting of City
Council to be held on December 16, 1998.)
--------
(Clause No. 24 of Report No. 17 of The Corporate Services Committee)
The Corporate Services Committee recommends the adoption of the following report (October 27, 1998) from the
Chief Financial Officer and Treasurer:
Purpose:
To forward the Report on the Actuarial Valuation of the City of York Employee Pension Plan as at January 1,1998, and to
submit a request for additional funding as required under the Pension Benefit Act of Ontario.
Funding Sources, Financial Implications and Impact Statement:
Funds are available in the Employee Benefit Reserve Fund to deal with the one time payment described in this report.
Recommendations:
It is recommended that:
(1)the Report on the Actuarial Valuation of the City of York Employee Pension Plan be received for information; and
(2)approval be granted to fund the $829,602.00 additional one-time payment from the Employee Benefit Reserve Fund.
Background:
The Actuary has completed his valuation and report of The Corporation of the City of York Employee Pension Plan as at
January 1, 1998. The purpose of this valuation is to determine the funded status of the plan on a going concern and
solvency basis and establish the minimum funding requirements for 1998. The last valuation was as at January 1, 1995.
The valuation of the plan on a going concern basis determines the relationship between the respective values of assets and
accumulated benefits, assuming the plan will be maintained indefinitely. The results of the valuation as at January 1,1998
indicates a funding excess (surplus) of $4,503,000.00 compared to $1,669,000.00 as at January 1, 1995. There was a
subsequent post retirement adjustment granted as calculated under the By-law that decreased the going concern funding
excess by $1,407,000.00.
The main reason for the increase in the funding excess was due to a positive plan experience on investment returns of
$9,146,000.00. This was offset by losses for the granting of cost of living adjustments, reductions in special payments and
mortality experience.
The actuary advises that the funding excess of $4,503,000.00 may be used to eliminate the previous special payment of
$602,760.00 annually for unfunded liability and reduce the payments for the post retirement adjustment granted July
1,1995, from $66,252.00 annually to $30,780.00.
The Ontario Pension Benefits Act requires that when a pension plan is reviewed its financial status must be examined on a
"solvency basis" as well as on that of an ongoing arrangement. A solvency type valuation is intended to duplicate the
valuation that would be performed if the Plan were discontinued, in its entirety, as of the date of valuation. If a deficit
emerges on the solvency basis, the Act prescribes that such deficit may be amortized over five years or until December 31,
2002, if later. The actuarial opinion must specify the amount of solvency deficit and the proposed method for its
amortization.
In the actuary's opinion, the plan's assets would be less than its actuarial liabilities if the plan were to be wound up on
January 1,1998. Actuarial liabilities would exceed the plan assets by $14,014,000.00. The actuary has advised that it would
require special payments of $1,389,000.00 annually to December 2002 to eliminate this solvency deficiency.
Comments:
Allowance was made in the 1998 budget for special payments to the City of York Employees Pension Plan in the amount
of $670,000.00. The former City of York funded this Plan on a minimum funding basis and it is recommended that we
continue this policy. The effect of the funding requirements, disclosed in the actuarial report, is to increase the current year
expenditure from the budgeted amount of $670,000.00 to $1,498,614.00. The net changes in budget are as follows:
|
1997 |
1998 |
1999 |
1-1-93 Unfunded liability |
$602,760.00 |
- |
- |
1-7-95 Post Retirement Adjustment |
$ 66,252.00 |
$ 30,780.00 |
$ 30,780.00 |
1-7-98 Post Retirement Adjustment |
- |
$ 78,834.00 |
$ 157,668.00 |
Solvency Deficiency |
- |
$1,389,000.00 |
$1,389,000.00 |
Total |
$669,012.00 |
$1,498,614.00 |
$1,577,448.00 |
Net Change |
|
+$ 829,602.00 |
+$ 78,834.00 |
The City of Toronto is required by the Pension Benefit Act of Ontario to make these special pension contributions to the
City of York Employee Pension Plan.
The City currently administers five pension plans which were in existence prior to OMERS. The Finance Department is
undertaking a review of the relationship of these plans to the City with the goal to reduce or eliminate the administration
costs and limit the City's liability.
Conclusion:
The City should continue to maintain its minimum funding policy in regards to this pension plan. An actuarial review
should be done on an annual basis for the purpose of assessing the level of funding required.
Contact Name:
Ivana Zanardo
Director
Pension, Payroll and Employee Benefits
397-4143
(A copy of the Corporation of the City of York Employee Pension Plan - Report on the Actuarial Valuation for Funding
Purposes as at January 1, 1998, prepared by William M. Mercer Limited, was forwarded to all Members of Council with
the November 9, 1998, agenda of the Corporate Services Committee and a copy thereof is on file in the office of the City
Clerk.)
(City Council on December 16 and 17, 1998, had before it, during consideration of the foregoing Clause, the following
report (November 24, 1998) from the Chief Financial Officer and Treasurer:
Purpose:
To address the request made at the Corporate Services Committee on November 9, 1998 with respect to the most
appropriate use of the savings outlined in the joint confidential report (October 26, 1998) from the Chief Financial Officer
and Treasurer and the Executive Director of Human Resources, taking into consideration the report (October 27, 1998)
from the Chief Financial Officer and Treasurer regarding the Actuarial Valuations Results - the City of York Employee
Pension Plan.
Funding Sources, Financial Implications and Impact Statement:
There are no funding implications related to this report.
Recommendation:
It is recommended that the $1.5 million savings as a result of the OMERS Type 3 Agreement be deposited into the
Employee Benefit Reserve Fund.
Background:
A report (October 27, 1998) regarding the Actuarial Valuation Results - the City of York Employee Pension Plan was
before the Corporate Services Committee on November 9, 1998. This report recommended a one-time payment from the
Employee Benefit Reserve Fund of $829,602 to deal with the insufficient funds in the York Employee Pension Plan on a
solvency basis. The annual expenditure is being increased in 1999 to reduce the need for these type of special payments. In
addition, an actuarial review will be performed on an annual basis for the purpose of assessing the level of funding
required.
With respect to the $1.5 million savings related to the OMERS Type 3 Agreement, the City will not recognize these savings
until the end of the OMERS contribution holiday. The contribution holiday may end on July 31, 1999, however, it is
anticipated that it is likely to continue after that date so that the City will not enjoy the benefit of the York Fire Association
Type 3 Agreement until the contribution holiday is over.
Once the savings are recognized, they will be deposited into the Employee Benefit Reserve Fund to offset the additional
expenditure related to the York Pension Plan solvency issue.
Contact Name:
Ivana Zanardo
Director, Pension, Payroll and Employee Benefits, 397-4143)
Respectfully submitted,
DAVID MILLER,
Acting Chair
Toronto, November 9, 1998
(Report No. 18 of The Corporate Services Committee, including an addition thereto, was adopted, as amended, by City
Council on December 16 and 17, 1998.)
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