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PENSION
2 Queen Street East. Suite 1400 P.O. Box 22 Toronto ON M5C 3G7
Tel 416.673.9000 Toll Free 1.866.350.2228 Fax 416.673.9029 www.caatpension.on.ca
PLAN
May 19, 2011
Attention: Pension Policy Unit
Financial Services Commission of Ontario
5160 Yonge Street, Suite 1600
Toronto, ON M2N 6L9
RE:
Actuarial Guidance Consultation
On behalf of the CAAT Pension Plan, I'm pleased to have this opportunity to respond to the
actuarial guidance note, regarding the Canadian Institute of Actuaries, Practice-Specific
Standards for Pension Plans, effective on December 31,2010.
The CAAT Pension Plan is a multi-employer, jointly sponsored defined benefit pension plan with
bi-cameral governance structure having equal member and employer representation on its
governance committees. The Plan has $5.5 billion in assets to meet the pension promise to
32,000 active and retired members. The CAAT Pension Plan covers the employees of Ontario's
24 colleges of applied arts and technology and four associated non-college employers.
Thank you for providing clarity on the regulation and for recognizing that jointly sponsored
pension plans like CAAT have shared risk mechanisms built into its governance structures. For
example, the CAAT Pension Plan has taken great care to develop a funding policy which
outlines the Plan's funding objectives and strives to balance the security of benefits with a stable
contribution rate and intergenerational equity.
We applaud the recognition by FSCO that valuation provisions intended to safeguard member
benefits in particular pension plans, may be deleterious to jointly sponsored (and multi­
employer) pension plans. As such, we fully support the recognition of jointly sponsored pension
plans, such as the CAAT Pension Plan, who have joint risk-taking and decision-making
governance structures.
The CAAT Pension Plan fully supports the approach that the boards or trustees for JSPPs and
MEPPs discuss with their actuary whether it is appropriate to include margins of adverse
deviation in the actuarial valuation. As fiduciaries, the boards would give due consideration to
the interest of plan members, their employers and other stakeholder, and to the issue of
intergenerational equity.
Regarding the discount selection and investment policy, the CAAT Pension Plan uses asset
allocation studies to ensure key risks of the funding policy are aligned with the plan's investment
objectives. We agree with the intent of this provision and already manage the CAAT Pension
Plan to ensure the SIPP, funding policy and valuation assumptions are parts ofthe whole, like
the legs of a balanced stool.
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We agree with FSCO's expectations that the actuary will continue to include an assumption for
future salary increases in the actuarial valuation report filed for the plan.
And finally, regarding actively managed investments, the CAAT Pension Plan supports FSCO's
expectation that justification of assumption for value-added returns from active management be
contained in the valuation report filed for the Plan. However we caution that expected alpha to
be generated in non-traditional asset structures (for example. private market investments that by
their nature are actively managed and have no passive benchmarks) should not be confused
with the value-add of active management for traditional asset classes such as public equities.
The former need not require extensive detail of support within an actuarial valuation report
because with a properly governed. jointly-sponsored plan the board of trustees provides the
required oversight to ensure expected future returns. which are used to derive the discount rate.
are within the context of the asset mix and other SIPP-related objectives and constraints.
The Board of Trustee for the CAAT Pension Plan thanks FSCO for its efforts to refine the practice specific standards for pension plans. Further, we thank FSCO for allowing us the opportunity to participate in this process. Yours truly.
CAAT Pension Plan
~~--CEO & Plan Manager
c.c. Lester Wong. Senior Actuarial Consultant. FSCO