One of the hallmarks of a Modern defined benefit (DB) pension plan is that those who share the costs and bear the risks have a say in how the plan is run. This system, called joint governance, is an important feature of the CAAT Pension Plan. As a member of the Plan, you can be certain that your interests are well-represented, because both members and employers share equally in making the decisions that affect your benefit security.
In this article, five of the Plan’s governors share their thoughts on this effective system of joint governance.
- Donald Wright, current Chair of the Board of Trustees, is a CAAT Plan member who works at George Brown College. He is the Treasurer for OPSEU Local 557, a member of the OPSEU Resolutions Committee, and has served as an Employee Trustee since 2000.
- Darryl Bedford, past Chair of the Board of Trustees, is a CAAT Plan member and Employee Trustee. He is a professor at Fanshawe College, President of OPSEU Local 110, and has served on the Board of Trustees since 2010.
- Alnasir Samji, an Employer Trustee, is a pension actuary with over 40 years’ experience. He has served on the Board of Trustees since 2010.
- Karen McRae has been an Employer Trustee since 2016, and has over 30 years’ experience in pensions, investment management and asset allocation.
- Kim Macpherson is an Employee Committee Member on the Sponsors’ Committee. She is a Benefits Counsellor in the Pensions and Benefits Unit of OPSEU, and a governor on two other jointly sponsored pension plans.
The requirements for success
Even with a common purpose, achieving shared objectives remains a complex task with a number of challenges. These Plan governors identified three key themes that are crucial to making a joint governance structure work.
1. Accountability to Plan members
The Plan’s governors are aligned in wanting secure, stable benefits for members. This shared goal helps them work together when faced with complex issues, or even disagreement.
Alnasir Samji is proud of the Board’s decision-making process, whereby each Trustee is responsible “first and foremost” to the Plan and its beneficiaries.
Darryl Bedford agrees that sharing risk and responsibility focuses the Board to do what is best for the sustainability and security of the Plan, rather than an individual group’s interests.
2. Balancing different perspectives
The decision-making process is a balancing act, with multiple perspectives being brought to the table. Thanks to the joint governance structure, the Plan’s governors have access to the insights and knowledge of both the members and the employers, allowing a deeper perspective that no one party would have on its own.
Donald Wright knows that this joint decision-making is important, and that “sharing of diverging views and coming to consensus are ingredients of sustainability.”
Karen McRae agrees, pointing out that governance meetings must allow for a “thorough vetting of the concerns of members and employers.”
3. A voice for those affected by the decisions
In all decisions made by the Plan’s governors, members and employers are represented, bringing their perspectives and points of view to the discussion.
As Karen McRae asserts, the Plan works best when both members and employers have a voice and are heard. This open and transparent sharing of information and perspectives, even when those perspectives are very different, is vital to long-term pension stability.
Kim Macpherson shares this view, and points out that it makes sense to seek the input and endorsement of members and employers when difficult decisions need to be made about future retirement benefits.
Putting joint governance to the test
Over the years, the Plan’s governors have made a number of decisions in support of the Plan’s ongoing stability. One such decision – the creation of the Funding Policy in 2006 – is an example of the governor’s collaborative approach to achieving and balancing their key objectives of benefit security, contribution stability, and equity among generations.
Funding policies are now a best practice for pension plans, and a cornerstone of the Modern DB Plan, but 11 years ago they were a relatively unknown innovation. In 2006, the Plan’s governors formed a Funding Task Force made up of members of the Board of Trustees and the Sponsors’ Committee to address the funding challenges of the day, and to develop a plan to guide future decisions. The resulting Funding Policy guides the governors in making informed decisions about contributions, conditional benefits, and funding reserves, based on the Plan’s funded level. It has been instrumental in building benefit security for members, and ensuring the ongoing stability of the Plan.
In following the Funding Policy, the Plan has been able to successfully weather several years of economic volatility, while improving the Plan’s long-term sustainability. The Plan’s funding level has steadily increased over the past several years; it is currently 113% funded, with reserves of more than $1.6 billion, and sits within Level 4 of the 6-level Funding Policy. The Plan’s ongoing strength is the direct result of the forum provided by the joint governance structure, and the opportunity it provides for open dialogue among the Plan governors.
Darryl Bedford sums it up by saying there is “deep cooperation” because both employer and employee trustees “feel a sense of shared purpose.”