OTF Works to Stabilize Pension Rates and Secure Benefits (OTF Report)

In the spring, the Ontario Teachers’ Pension Plan published its report to members. Highlights of the report included:

• the Plan’s net assets – $106 billion
• investment Income for 2006 – $12.3 billion
• the Plan’s rate of return as compared with the fund’s composite benchmark – 13.2 percent
• extra income as a result of this stellar per- formance – $3.4 billion

Nevertheless, the January 2007 funding valu- ation  showed  a  preliminary  estimated  short- fall  of  $17.4   billion.  A  subsequent  valuation was conducted using the revised rate of return assumptions  as  approved  for  the  2005  valuation. This revised 2007 valuation showed a $3.6 billion  funding  shortfall.  Both  the  initial  and the revised 2007 valuations show $11 billion of gains set aside in a smoothing account for future recognition.

January 1, 2008 is the date for the next valuation. By law the plan partners, OTF and the Ontario  government, are compelled to file that valuation with the provincial regulator. Over the last several years, the historically low real return bond rate (RRB) has put considerable pressure on Plan liabilities. OTF understands that when valuations  are  filed,  liabilities  cannot  exceed assets. We must be able to guarantee the cost of future pensions.  However, it is OTF’s position that  members  should  be  able  to  realize  both secure  benefits  and  stable  contribution  rates. OTF believes that this can be achieved in a vari- ety of ways. The Partners’ Funding Management Policy has many built-in funding safeguards. The Plan has revised its asset mix investment policy to help secure pension benefits. Given the RRB’s apparent volatility, adopting a less conservative valuation interest rate may help to stabilize contribution rates.

Currently,  an  international  expert  panel  is analyzing the actuarial assumptions used in Plan valuations. In  April 2007, OTF, the  provincial government, and the OTPP each made presentations to the expert panel. We expect the panel’s report later this  year. That  report, along with Pollara’s report on its survey of a large sample of Plan members (which is also now underway), will inform the decision-making of the Partners and the OTPPB  as  we enter into pension talks for 2008.

This is my final article to you as OTF president. It has been a fruitful year. Among the issues resolved were the revisions to the teacher performance appraisal process and issues around Bill 52, the Learning to 18 Act. (You may recall our concerns with the language in this Bill as originally proposed were around equivalent learning and its potential for privatization.) We elected the first Governing Council of the Ontario College of Teachers, giving teachers a true majority. As well, the Ministry of Education provided OTF with funds, training, and resources for professional development and bullying prevention.

My year in office as your spokesperson has been a truly rewarding yet humbling experience.

I thank you for the opportunity and I wish you a safe and rejuvenating summer holiday.