Letter to Active Members - The United Church of Canada

January 23, 2012
Dear Pension Plan Member,
As noted in the Annual Report for 2010 which was distributed last June, the Pension Board has been conducting
a thorough review of your pension plan and exploring changes to enhance its sustainability.
Following careful consideration of the results of that review, the Board has approved the following changes
effective January 1, 2013:
• a 2% increase in the contributions by plan members to 6% of pensionable earnings (currently 4%);
• a 2% increase in the contributions by pastoral charges and other participating employers to 9% of
pensionable earnings (currently 7%); and
• a decrease in the accrual rate, the rate at which pension benefits are credited, to 1.4% of
pensionable earnings (currently 1.7%).
No changes are being made in:
• benefits earned prior to January 1, 2013;
• the defined benefit structure of your plan, which provides that a specified amount of pension is
credited for each period of service, based on your earnings;
• the normal retirement age or early retirement provisions;
• death benefits or other ancillary features of the plan; or
• pension benefits currently being paid to members in retirement.
How did we get here?
We have communicated to you throughout 2011 about the significant changes in the underlying pension
environment that can no longer be considered temporary and that have a major impact on all pension plans.
Most notably, interest rates have declined dramatically, and the prospect is that they will remain at historic low
levels as monetary authorities in Canada and abroad strive to stimulate the economy. The general decline in
stock markets and ongoing volatility since 2008 has been outlined previously, as has the fact that your plan has
been protected from the worst impact of that shift by its relatively conservative investment strategies.
Demographic changes, too, have a major impact on your plan; members are joining later in life and, generally,
living longer.
Given the ongoing press coverage of these issues, you're likely aware that most, if not all, pension plans and
other investors are stressed by these conditions. Indeed, recent surveys by two pension consulting firms
showed significant declines in the funding levels of most pension plans during 2011. 1
Recognizing that such fundamental changes cannot be ignored, the Board asked its Pension Plan Advisory
Committee to undertake the necessary research and make recommendations that would enhance the
sustainability of the plan. This work took over a year to complete, as the Committee examined every option
including converting to a defined contribution plan, increasing the retirement age, eliminating some ancillary
benefits, increasing contribution rates and reducing benefit accruals.
1 http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/funding-for-canadian-pension-plansplummets/article2291148/

Conversion to a defined contribution plan, under which contributions accumulate with investment earnings and
are used at retirement to provide whatever pension benefits can then be purchased, was rejected. It was felt
that the provision of a specified pension benefit, known in advance, and the protection of plan members from
the risk and volatility of investment markets provided by the defined benefit structure is very important to plan
members and to the church. Similarly, changes in the retirement ages or in ancillary benefits were rejected as
they would have a negative impact on the quality of the retirement benefit and would not have a significant
enough impact on the long term sustainability of the plan.
The Committee concluded the best option is to adjust the rates of contribution and benefit accrual. Many
different combinations of contribution and benefit accrual rates were examined before the Committee
recommended the changes which have been approved by the Board.
What do these changes mean in dollars?
For a member with pensionable earnings of $45,000 per year, the current and new contributions are as follows:
Current Contribution New Contribution(starting 2013)
Annual Monthly Annual Monthly
Employee $1,800.00 $150.00 $2,700.00 $225.00
Employer $3,150.00 $262.50 $4,050.00 $337.50
Since member contributions are deductible for income tax purposes, the reduction in take-home pay will be
less than shown, depending on individual circumstances.
The decrease of 0.3% in the accrual rate on a go forward basis will mean that the annual pension credited to
this member will be reduced by $135 to $630 per year of service ($52.50 per month) from January 1, 2013.
On an individual basis, the pension statement you will receive in June, 2012 will reflect this change in estimated
benefits earned for service in 2013 and later years.
What about future inflation?
Although the plan contains no provision to protect benefits against inflation, certain upgrades have been
granted periodically whenever funds are available. Such upgrades will continue to be a priority as financial
circumstances permit though, regrettably, the Board feels such upgrades will likely not be possible until
conditions improve.
Keeping the pension promise
While we cannot predict the future, the Board and its Committees believe these necessary changes will
enhance the sustainability of the plan and will facilitate the efforts of our volunteers and staff to ensure that
past, present and future pension promises can be fulfilled.
Our commitment to keeping you updated on the status of your plan continues. The Board and staff of the
Ministry and Employment unit welcome questions on any aspect of these changes. Please direct your questions
to the Ministry and Employment unit by phone: 1-800-268-3781, extension 3161 or by email at
PensionBoard@united-church.ca.
Sincerely,
Charles C. Black, FSA, FCIA
Chair, Pension Board of The United Church of Canada