Summary Annual Report 2012 - IWA Forest Industry Pension Plan

MINIMUM FUNDING STANDARDS
Despite positive investment returns for the past 4 years (annualized
9.5% per annum), the Plan’s funding challenges remain, as they do
with many other pension plans. Low interest rates, historically low
contributory hours, higher than usual numbers of early retirements,
increases in life expectancy and investment losses in 2008 (as
experienced by most plans) have all combined to cause our Plan’s
funding shortfall.
The Plan must comply with the British Columbia Pension Benefits
Standards Act and its Regulations (the “Act”) which requires a pension
plan to file an actuarial valuation report for both solvency and going
concern at least once every three years. A “solvency valuation”
assumes that the Plan was terminated and all the benefits were
paid out on the date of the valuation. A “going concern valuation”
assumes that the Plan will continue operating indefinitely, which is
the expectation for the Plan. It must be stated clearly that the Plan
is not being wound up -- this calculation is a requirement of the Act
and has been for many years. The assumptions used by Actuaries
in these valuation calculations are mandated by the legislation and
cannot be altered by the Administrator of the Plan.
The December 31, 2009 valuation report, which was filed with the
Superintendent of Pensions, showed that the Plan had a solvency
deficiency. The solvency ratio at that time was 74%, indicating that
the Plan did not have sufficient assets to cover all the benefits that
had been promised as of that date, based on the “hypothetical”
scenario that the Plan wound up on December 31, 2009. On a
going concern basis however, the Plan had a funded ratio of 94%.
The actuaries have since performed an interim valuation showing
the solvency position had declined to 61.5% at December 31, 2011.
We are required to file the December 31, 2012 actuarial valuation in
September 2013. The Board will have until February 2014 to receive
this report and review the options available.
Based on the most recent filed actuarial valuation, the contributions
required under the collective agreements are not sufficient to make
the Plan solvent in accordance with the Act. In situations where
the negotiated contributions are not sufficient to make the Plan
solvent, the Act requires that the Trustees take action to safeguard
the pension security of all Plan members.
The Board of Trustees continues to work together to assess options
to safeguard the Plan’s viability and affordability. They have met
with representatives of the Superintendent of Pensions to explain
the Plan’s expected progress in future years. The Superintendent of
Pensions had granted the Plan a three-year moratorium for solvency
purposes based on the December 31, 2009 actuarial valuation. This
allowed for temporary suspension of solvency payments required
under Section 35(3)(c) of the Regulations. Without solvency relief,
the Plan would be required to either increase contributions or
decrease benefits. As noted above, the Board has until February
of 2014 to receive and review the next filed report and make their
recommendations.
CURRENT CONTRIBUTION RATES
Employee and employer contribution levels remained the
same last year at $1.625 and $2.675 per hour respectively.
DIRECT DEPOSIT
More than 90% of our pensioners have their benefit
electronically deposited into their bank account to ensure
they have their money on time. This is a free service.
Please ask the Plan office about direct deposit when you
retire.
INFORMATION CHANGE?
If you move or change banks please be sure to contact
the Plan office.
Phone: 604-433-5862
Toll Free: 1-800-913-0022
Collect: 604-433-6310
Fax: 604-433-0518
E-mail: pension@iwafibp.ca
Website: www.iwafibp.ca
Please take note of our new address!
Suite 2100 - 3777 Kingsway
Burnaby, BC V5H 3Z7
Our phone and fax numbers remain unchanged.
June 2013
IWA - Forest Industry
Pension Plan
Suite 2100 - 3777 Kingsway
Burnaby, BC V5H 3Z7
Summary Annual Report
2012
R
www.iwafibp.ca

TO ALL PLAN MEMBERS:
This is a summary of key financial and other information related
to the IWA - Forest Industry Pension Plan (the “Plan”) for the
year ended December 31, 2012.
BASIC FINANCIAL STATEMENT
Benefits under the Plan are provided from the Plan’s assets held
in trust. In 2012, the Plan received employer and employee
contributions of $88,919,159 and had an investment gain of
$270,558,180.
The Plan had total expenditures of $241,369,494 which
includes benefits paid to participants and beneficiaries of
$236,866,147, administrative expenses of $3,659,532 and
non-administrative expenses of $843,815. There were a
total of 69,670 members or beneficiaries of the Plan at the
end of the Plan year, although not all had yet earned the
right to receive a benefit.
$3,000,000,000
$2,500,000,000
$2,000,000,000
$1,500,000,000
$1,000,000,000
$500,000,000
$-
Financial Summary (2003 - 2012)
$2,068,648,797
Total Expenditures
2003-2012
$2,915,476,327
Total Plan Income
2003-2012
The value of the Fund increased by $118,107,845 during
2012. As a result, the net assets available to pay benefits
at December 31, 2012 equalled $2,827,878,439, compared
to $2,709,770,594 at December 31, 2011. This is the amount
available to continue paying pensions to current pensioners
and to provide future benefits for participants not yet retired.
Billions
$3.5
3.5
$3.0
3.0
$2.5
2.5
$2.0
2.0
$1.5
1.5
$1.0
1.0
$0.5
0.5
Market Value Asset Growth - 25 years
INVESTMENTS
With $2.83 billion in assets, the Plan earned a gross rate of
return of 10.7% for 2012, exceeding the benchmark of 8.8%.
The Plan’s sound investment results were achieved despite
the high level of financial market uncertainty that continues to
plague the global economy.
The sovereign debt crisis, which kept many European countries
in recession, a slowdown in growth in emerging markets which
in turn weakened demand for commodities, and the continued
threat of global recession all contributed to market uncertainty.
Despite these continuing challenges, the Plan has earned an
annualized return of 9.5% per annum in the four years since
the financial meltdown of 2008. This confirms our continued
emphasis on investing for the long term, not for year over year
results. Pension contributions made today may fund benefits
paid out over 30 to 40 years. During the last decade, the Plan’s
annualized rate of return was 7.7% per annum, a value added
of 0.6%, over and above the 10-year annualized benchmark.
Over 34 years, the Plan’s return has averaged 9.6% per annum.
The assets of the Plan have increased by $877 million since
2002. These results reflect our commitment to a clear longterm
investment strategy from which we have never altered
our course.
MEMBERSHIP
5.0%
$2.3 billion increase in
value since 1987
$0.0
1987 2012
Membership levels have shown a gradual decline over the
last twenty years, decreasing by more than 60%. This can
be attributed to a number of factors including the financial
meltdown of 2008, the weakened US housing market, greater
global competition, the rapid pace of technological change
and automation within the forest industry. The number of
pensioners has more than doubled in this same period. These
factors influence the Plan’s financial obligations, making
investment returns more important than contributions. On a
positive note, there was a slight increase in active membership
levels for the second staight year.
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
PENSIONS BY TYPE
Many of our members are choosing to retire earlier than the
normal retirement age (65) to take advantage of the subsidized
early retirement reduction rates. This benefit allows active
members to retire at age 55 or later without having their
pension actuarially reduced for their age.
Beneficiaries (both “pre” and “post” retirement) make up 16% of
our pensions in payment.
Beneficiaries -
Pre-retirement death
3%
Plan Membership
Pensioners &
Beneficiaries
Inactive
Members
Active
Members
1992 2012
Pension Types (2012)
Beneficiaries -
Post-retirement death
13%
Pensioners -
Vested Deferred
23%
Pensioners -
Normal (at age 65)
7%
Pensioners &
Beneficiaries
Inactive
Members
Active
Members
Limited Members
1%
Pensioners -
Subsidized Early
Retirement
53%