Benefit security. Stable contribution rates. Equity among generations of members.
These are more than just buzzwords; they are the highest strategic priorities for the CAAT Plan’s governors, and crucial components of a Modern, defined benefit (DB) pension plan. Without one, the other two would be difficult to achieve and to maintain.
In this article, five of the Plan’s governors explain why benefit security, contribution stability and equity among members are so vital to the long-term security of the CAAT Pension Plan.
- Harry Gibbs has served on the Board since 2003 as an Employer Trustee, bringing the perspective of a senior investment professional with over 55 years of investment industry experience.
- Brian Tamblyn is an Employer Committee member on the Sponsors’ Committee, and a retired member of the Plan. He spent 30 years at Georgian College, including 13 years as its President and CEO.
- Bill Kuehnbaum is a retired member of the Plan, and has been an Employee Trustee since 2016. A former professor of mathematics at Cambrian College, he was the first vice-president/treasurer of OPSEU.
- Gretchen Van Riesen has been an Employer Trustee since 2015. She is a pension expert with more than 40 years of consulting and corporate pension and benefits experience – from design and administration to investments.
- Rasho Donchev has been an Employee Trustee since 2015. He is a CAAT Plan member who works at Centennial College, and serves as President of OPSEU Local 559.
Three shared objectives lead to security
1. Benefit security
The Plan’s mission is to improve the financial security of members in retirement with meaningful and secure benefits supported by stable and appropriate contribution rates. Benefit security is paramount for members who want to be sure of the security of their retirement pension. The members of the Board of Trustees and of the Sponsors’ Committee are aware of this fact, and recognize that members and employers do not have unlimited resources, and want good value for their contributions.
As Bill Kuehnbaum points out, members are using their money to contribute to their future pensions, and they expect that the benefit they earn is the one they’ll receive.
Rasho Donchev adds that it’s important for the Plan to ensure benefit security, so the Plan can meet the needs of members both when they’re saving for retirement, and when they’re receiving a pension.
The Plan’s funding level is a key measure of benefit security. Currently, the CAAT Plan is 113% funded.
Your contributions are tax deductible, and matched dollar for dollar by your employer.
2. Stable contribution rates
Active members and employers equally share the cost of the Plan, and both desire and benefit from stable contribution rates. The Plan’s governors also want to ensure that members and employers receive good value for their contributions while keeping the Plan secure. To this end, they rely on a comprehensive Funding Policy to help make decisions, such as setting contribution rates that avoid unnecessary volatility.
Member and employer contributions, and the investment income earned on contributions that together make up the pension fund, are not the only keys to the Plan’s sustainability. To maintain a healthy plan, it’s equally important to identify and manage emerging risks that could impact pension obligations – for example, the Plan’s comprehensive advocacy program helps guard the Plan against political interference and detractors of the Modern DB model, while building pension Champions among our membership.
Harry Gibbs acknowledges that contribution stability is one of the cornerstones of successful and sustainable fund management, and that it is, at times, a challenging goal that requires “constant and consistent focus.”
3. Equity among members
Equity among different groups and generations of members is an important goal for the long-term sustainability of a pension plan. Actual or perceived inequities by members based on factors such as age, employment group, or length of membership can become a destabilizing force for how members view the value of their pension plan. One of the CAAT Plan’s strengths is its ongoing focus to ensure fairness in the relationship between contributions made and benefits received by members. To that end, in 2016, the Plan’s Equity Review Task Force, a sub-committee made up of Plan governors, completed its second review of benefit provisions from the perspective of equity among generations and member groups. Based on the 2016 Task Force’s recommendations, Plan changes were approved and implemented to address some minor inequities.
As Gretchen Van Riesen points out “Inequity between generations can lead to unexpected and unwelcome social and political pressure for remedies that may not be in the best interests of the members and employers.”
Brian Tamblyn asserts that the Plan’s design has to ensure that “one generation doesn't subsidize earlier ones, resulting in unmanageable contribution rates.”
Three key components
Benefit security, stable contribution rates, and equity among members are interrelated, and Modern DB Plans like the CAAT Plan – those that feature joint governance and shared risk and cost – are well-positioned to provide secure pensions for members at an appropriate cost.
Brian Tamblyn knows that keeping the Plan healthy is a complex task, but also that pension plans that share governance and cost “make more sense, now than ever before.”