PIAC Releases Results of 2020 External Manager Survey
The results of the 2020 PIAC External Manager Survey are now available. The survey features changes designed to enhance coverage of available asset class and style exposures and to allow for greater analysis of the results. Sean Kulik of PIAC’s Member Services Committee noted that participation increased dramatically with 1,470 managers listed as compared to 963 in the 2017 survey.
Those plans who participated may click here to login to the website and see the results.
For those plans who have not yet participated, the survey form is still available here. If you complete the survey your fund will gain access to the results.
Consultation on Strengthening Federally Regulated Private Pension Plans
On January 14, 2021, PIAC commented on the federal Consultation Paper “Strengthening Canadians’ Retirement Security”. The seven-page response provided the rationale behind PIAC’s positions in these areas:
- Temporary Relief Measures. While PIAC supported the measures, the need for repeated rounds of temporary relief over the past decade is indicative of a pressing need for fundamental reform to the federal solvency rules and harmonization among jurisdictions.
- Plan Governance and Administration. PIAC opposed the proposal to require plan member and retiree representation for all plans. PIAC noted most of its members already have established governance and policies.
- Environmental, Social and Governance Factors. Because of their potential financial impacts on plan investments, PIAC agreed it is within the scope of its members’ roles as fiduciaries to consider ESG, including climate change, in their investment processes and disclosures.
- Solvency Reserve Accounts. PIAC supported the proposal with a more flexible approach to funding.
- Variable Payment Life Annuities. PIAC supported legislative amendments to facilitate the introduction of VPLAs.
- Ministerial Guidelines for Defined Benefit Plan Sponsors. PIAC supported the proposed guidelines on the process for seeking special funding relief.
- Restrictions on Borrowing. While not raised in the consultation, PIAC recommended that the federal government permanently remove the restriction on borrowing by pension plans.
Read the full submission
Submission to CAPSA on Guideline No. 7 – Pension Plan Funding Policy
On January 8, 2021 PIAC supported the draft guidelines and the inclusion of alternative plan designs, such as target pension arrangements. PIAC further agreed with CAPSA’s non-prescriptive approach.
Read the full submission
Asif Haque Joins PIAC Board
Asif Haque, Managing Director, Investments at CAAT Pension Plan, has joined the PIAC Board of Directors. Asif also serves as Chair of PIAC’s Member Services Committee. He has over 25 years of experience in finance and investments and is a member of the Investment Committee of the Pension Plan of the United Church of Canada.
Natasha Trainor is PIAC’s 2021 Board Chair
Natasha Trainor is the 2021 Chair of the PIAC Board of Directors. Natasha is the Director of Pension Investments for NAV CANADA where she leads a team of investment professionals in support of investment, risk and reporting activities for approximately $7 billion in pension assets across the spectrum of asset classes. Prior to moving to Ottawa, Natasha was the Chief Investment Officer at Provident10, where she was responsible for the oversight and strategic direction of Newfoundland and Labrador’s public service pension plan.
PIAC Releases Updated Corporate Governance Principles & Guidelines
A ground-breaking document when first published in 1993, the Principles & Guidelines are updated every three years to reflect changes in best practices. This revision has placed increased emphasis on the importance of Diversity & Inclusion as well as on the continued evolution regarding Environmental, Social, and Governance (ESG) factors.
The application of these Principles and Guidelines by PIAC members to the public companies in which they invest will assist in improving corporate governance, enhancing long-term shareholder value, and increasing confidence in capital markets.
Read the Corporate Governance Principles & Guidelines
Submission to the Ontario Securities Commission on its 2021-2022 Statement of Priorities
On December 11, 2020 PIAC submitted a response to the OSC’s proposed 2021-2022 Statement of Priorities. While generally supportive of the proposals to promote fair and efficient capital markets, PIAC noted more emphasis is needed to foster greater progress in key areas such as corporate governance, reporting and disclosures of ESG risks, say-on-pay, and diversity.
- ESG: Considering a recent announcement from the CEOs of Canada’s eight largest pension plans and new federal commitments, PIAC believes the OSC should develop concise regulations for ESG and climate change disclosure, which could reduce the burden to issuers given the many disparate disclosure frameworks that exist.
- Diversity on Boards and the Executive: PIAC advocated including in its priorities BIPOC individuals and for clear direction on the OSC’s expectations for transparency regarding issuers’ practices to achieve gender equality.
- Say on Pay: PIAC has consistently requested that the OSC include mandatory Say on Pay in its priorities in support of its goals to be an effective and responsive securities regulator, to align with international best practice standards and anticipated CBCA amendments, and to elevate investor confidence. Canada remains the only G7 country without a comprehensive requirement for Say on Pay on the ballot.
On December 2, 2020, PIAC responded to FSRA’s consultation on its draft Supervisory Approach to Asset Transfers under the Pension Benefits Act. PIAC supported the proposal and offered suggestions to further improve the draft guidance in three key areas:
- PIAC agrees with a consistent approach to Notices of Intended Decisions across all types of asset transfers but has a number of concerns over the 10-day notice period.
- Policy already requires the consent of each pension regulator so it is unclear why FSRA would need a more detailed review where an asset transfer application includes multiple pension plans or members in other pension jurisdictions. PIAC called for improvements to the 2020 Agreement Respecting Multi-Jurisdictional Pension Plans to reduce interprovincial barriers and red tape.
- FSRA’s public postings on approved variances should be broad in scope to avoid disclosure of sensitive information about individual transfers.
On November 27, 2020, PIAC responded to a consultation by the Canadian Institute of Actuaries’ (CIA) Actuarial Standards Board (ASB) on its Quinquennial Review of Part 3000. PIAC focused on three areas:
- Benefits Security
PIAC stated that the meaning of benefits security, and any mandated disclosures and related calculations are a public policy issue for law makers and regulators and not the responsibility of the ASB. “Going concern plus” funding is an appropriate and adequate measure to ensure the long-term funding of DB plans.
- Meaningful Stress Testing
Stress testing standards should be principles-based and involve a risk review by the actuary and plan sponsor(s) / administrator. PIAC offered to assist the CIA in developing educational materials to help actuaries understand leverage, its inherent risks, and its impact on the expected return on assets and in turn on the discount rate; as well as the valuation methods for many of the privately traded alternative asset classes and their impact on smoothing of the value of these assets.
- Pension Plans
In hypothetical wind-up valuations, PIAC raised the concern that disclosure of a worst-case scenario on wind-up (such as a bankruptcy) will likely lead to disclosure and communication challenges for plan sponsors with their employees and plan members. Moreover, there is the potential for unintended consequences whereby the disclosure of the scenario motivates regulators to use it as a minimum actuarial standard to calculate transfer value ratios, which would ultimately lead to higher costs for plan sponsors.
Read the full submission
PSAB Review of Section PS 3250 Retirement Benefits
On November 4, 2020, PIAC provided comments to the Public Sector Accounting Board on its review of Section PS 3250, Retirement Benefits and proposed changes to discount rate guidance and deferral provisions. PIAC highlighted three concerns:
- PSAB has indicated it will align its standards with the International Public Sector Accounting Standards, however Canada’s public sector pension model is unique and recognized as a global leader. PIAC urged PSAB to deviate from these standards when considering how public sector entities should account for pension obligations.
- Increased volatility in public sector financial statements may result from a new requirement to measure pension obligations using discount rates related to the yield on high quality corporate bonds. This will result in higher valuation of pension obligations than the ultimate cost under the funding model. PIAC further recommended that PSAB standards encourage transparency and accountability by government decision-makers.
- The proposed standards are administratively complex and could result in additional costs to public pension plan administrators, sponsors, and members as well as governments.Read the full submission
PIAC Welcomes 700th Member
PIAC’s Member Services Committee Chair, Asif Haque, has welcomed our 700th member, Karen Chen! Karen is the Manager, Pensions & Retiree Benefits at Teck Resources Limited, based in Vancouver. She has her FCIA and FSA. “We look forward to Karen’s participation”, says Mr. Haque, “and to meeting her once we are allowed to hold in-person events again.”
Response to OSFI on its Guide for Preparation of Actuarial Reports for DB Plans
On October 13, 2020, PIAC commented on OSFI’s proposed Instruction Guide for the Preparation of Actuarial Reports for Defined Benefit Pension Plans. PIAC outlined in detail its concerns regarding changes in the determination of liability values using the replicating portfolio approach, and a supervisory cap on the going concern discount rate. Both issues particularly impact PIAC’s federally regulated plans. PIAC questioned the timing of both proposals, which put further pressure on resources at a time when the cash could be reinvested in businesses and the economic recovery. PIAC re-iterated the urgent need to reform pension funding rules at the federal level, which PIAC has sought for many years, given the record low interest rates and weak growth outlook due to COVID-19. PIAC urged the federal government to follow the direction of the larger provinces by moving to a single going-concern funding regime.
Read the full submission
On September 16, 2020 PIAC commented on FSRA's draft Principles and Practices Regarding Missing Members. PIAC supported the transfer of unlocatable members’ assets on plan wind up and automatic small benefit unlocking where FSRA has appointed an administrator. The increase of the small benefit threshold and a discharge for benefits of missing members at a certain age was recommended. PIAC advocated for a vehicle that allows plans to send money on behalf of unlocatable members so that the responsibility for these benefits rests with a government entity such as the Bank of Canada. PIAC encouraged the creation of a missing member registry and information sharing arrangements with governments. A waiver on sending statements for missing retired members would alleviate an administrative burden, but PIAC questioned the need for a waiver, since sending confidential pension information to an incorrect address may contravene the administrator’s duty of care.
Read the full submission
PIAC's Response to the Consultation on Modernizing Ontario's Capital Markets
On September 7, 2020 PIAC commented on the draft recommendations of Ontario’s Capital Markets Modernization Taskforce. PIAC supported:
- Streamlining and consolidating disclosure
- Electronic delivery of documents required to be published under securities law requirements
- Improving corporate board diversity
- Requiring an annual advisory vote on executive compensation and Say on Pay
- Enhanced disclosure of material ESG information
PIAC opposed introducing a regulatory framework for proxy advisory firms and informal procedures to exclude shareholder proposals.
The submission outlined in detail the reasons for PIAC’s positions.
Read the Full Submission
PIAC Responds to NS PBA Regulations
Read the Full Submission
PIAC Crosses the 100 Volunteer Mark
Simon Fréchet, Chair of the Pension Investment Association of Canada, has welcomed John McNair, MSc. as PIAC’s newest volunteer. McNair has volunteered to serve on the Risk Management Committee. This is the first time in its 43 year history that PIAC has more than 100 volunteers active at the same time. Working in a diverse variety of committees, these volunteers are responsible for executing advocacy efforts, creating resources across pension administration, governance and investment areas, and developing education and networking events from coast to coast. In recent years the areas of activity have grown to cover DC plans, responsible investment, risk, tax, legal and more.
“PIAC was created as a self-help organization and with the tremendous growth and complexity of the pension sector, our members have continued to step up to share, connect and create,” said Fréchet. “Our volunteers tell us they get tremendous value from participating with peers from across types, sizes and geographies of plans.”
McNair has a long history with the pension sector, currently as Vice President, Investment Risk Management & Analytics at the Investment Management Corporation of Ontario and previous roles at the Ontario Pension Board and OMERS.