May Treasurer Newsletter

GSI’s role is threefold:

• Plan Sponsor – responsible for designing the structure of the plan.
• Plan Administrator – responsible for oversight, management, and administration of the plan in accordance with the regulations and guidelines. This includes, but is not limited to, investment decisions and selecting and monitoring any third-party providers.
• Record-keeper – responsible for maintaining accurate accounts for each member.

GSI has:

• hired staff with the appropriate education and experience;
• nominated directors with related skills and who undergo continual board education;
• engaged consultants to provide additional expertise.

The directors provide oversight, monitoring, and review. A general review is done on a regular schedule (mostly quarterly) and deeper due diligence is done on a rotational basis for the various mandates or programs.

Here is a high-level summary of the past two decades:

• 2001 to 2012 - resolving the unfunded liability in the Retiree Fund portion of the Pension Plan
• 2011 to 2015 – improve member outcomes by revising the contribution policy and changing the investment structure
• 2018 - review of the ELCIC Pension Plan text to eliminate discrimination based on age or employment class and clarify other attributes

There are currently only three options:

Defined Contribution (DC):

• defined level of contributions,
• investment income is earned,
• upon retirement, the account balance is used to purchase an annuity or Life Income Fund (LIF).

Defined Benefit (DB):

• works in reverse; pension benefit is defined by formula and works back into what contributions are needed in relation to the investment risk taken.

Target Benefit (TB):

• Combines features of both DC and DB,
• Contributions are fixed and benefit defined, but benefit can be modified, which is why it is a ‘target’.

The motion refers to a public sector type defined benefit pension. These plans are not accepting new employers. Certain defined benefit plans have created a new option under their structure to accept other employers. These are known as Target Benefit Plans; therefore, this report examines that option. 

In April and May 2021, the GSI newsletter provided a two-part education series on the general differences between a DC and DB pension. These issues are archived on the GSI website if you would like to refer back to them. We will summarize some of the attributes between the DC and TB in the table below:

In a DC plan, you as a plan member, have all the risk; if you use the account to purchase a Life Income Fund (LIF), you may run out of money or you may have lots left over when you die, which becomes part of your estate.

In a TB plan, the risk is pooled, so that if you die young, your funds are used to provide a pension to those plan members who live longer and vice-versa, and there are no funds available for your estate.

In other words, in a DC plan, what’s yours is yours and in a TB plan what’s yours is ours as everything is shared.

This is where it becomes subjective. What is an advantage to one member may be a disadvantage, or at least not a priority, to another member. A DC plan provides flexibility, especially since most provinces now allow a LIF to be fully unlocked, which means you can withdraw from the fund as much you wish, at any time, to be used as you see fit. This is good for members who may want to use their retirement savings to purchase a home or make home improvements, for travel and hobbies while young or delay using retirement savings for future care and health situations or who want to leave an estate for family or favorite charities. A TB plan provides a guaranteed income for life (with possible modifications), which is good for members who are healthy, not concerned about leaving an estate (or have other funds for leaving an estate), and have little interest in financial matters.

Therefore, while there are differences, these are not universally comparatively better or worse.

All pension plans are built on this basic principle:

contributions + investment income = annual lifetime pension amount

This equation holds true for any pension plan, so any differences between pension amounts are due to risk decisions, constraints, and goals for each element. If the underlying assumptions in pension calculations (including using online calculators) are the same, then the projected amounts will be similar.

Yes, GSI engaged an Actuarial Consulting Firm to provide current market options with information and details on the aspects, design, and formulas of those plans. This list encompassed several plans, including DBplus among others.

Yes, the Actuarial Consulting Firm tested a sample of ELCIC members with different ages, earnings, and length of service to determine if there were significant differences between pension benefit amount outcomes. The comparison specifically was between the ELCIC Pension Plan converting to a Life Income Fund at age 65 to different target benefit plans with retirement at age 65. This exercise was repeated using an age 70 retirement as a significant portion of the plan members are over age 65.

The findings indicate that no one plan produced better financial results for all members. At age 65 most of the outcomes were fairly similar and at age 70 the ELCIC Pension Plan was the leader in all cases.

Yes, they indicated that the ELCIC Pension Plan is well managed and provides a good pension for its members. They also advised that the ELCIC Pension Plan has a unique membership and demographic which may present significant challenges and transition complexities, all of which could be costly should a decision be made to join certain other plans. Examples of some of the challenges include but are not limited to: requirement to have a centralized payroll, no contributions allowed on taxable benefit amounts, and restrictions and/or reductions in amount transferred in to purchase past service.

GSI will continue to consider what is in the best interest of plan members and congregations. GSI will monitor pension outcomes for its members as it reviews ongoing expenses and policy strategies. As always, market information, options, and opportunities will be part of the ongoing knowledge and education that GSI receives.

Please advise us as soon as the hire is confirmed. You may also want to call GSI ahead to work through what the first invoice might include and the annual pension and benefits financial requirements.

The benefits coverage status will change from single to family (as required by the Canadian Life and Health Insurance Association). The benefit coverage and premiums will be effective on the date of marriage, so it is best to get this in place at that time, in order to avoid retroactive adjustments. The member will have the option to choose another health module, as of the date of marriage, so please remember to discuss this with them as well, so that you can confirm our invoice is correct.

The group benefits coverage includes a short-term disability program. If a plan member is unable to work due to illness or injury, GSI provides financial support based for medically supported absences. The policy on the GSI website outlines the details, requirements and timelines. Please contact us if the medical absence is likely to extend beyond two weeks in order to get the process started.

Please let Barb at GSI know as soon as possible as GSI must advise the member of claim submission deadlines, post-employment health benefit options, and eligibility for life insurance conversion. Missing these deadlines could put the congregation at risk for future obligations.