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Employers should take note of new drug plan changes that recently took effect in Saskatchewan, according to a Mercer Communiqué.

The province has introduced a new Children’s Drug Plan for children under the age of 14. Under the plan, children will pay a maximum of $15 per prescription for drugs listed on the Saskatchewan formulary.

“The impact of the potential cost reductions to the employer plans is expected to be small and will depend on the number of dependent children claiming drug benefits,” the Communiqué says.

Also, seniors who have not enrolled in the new Seniors Drug Plan will no longer be eligible to receive provincial drug benefits.

“This means that employer sponsored plans that provide drug plan coverage may be required to absorb the full cost of drugs for those seniors not enrolled in the government program,” says the Communiqué. “The cost impact of this change is expected to be fairly small, but is dependent on the number of active or retired plan members who are age 65 or older and whether the plan provides post-retirement benefits.”

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New Compensation Disclosure Rules Coming

The rules governing how and what Canadian companies disclose on their proxy circulars about executive compensation are changing.

It is anticipated that the Canadian Securities Administrators will approve final changes by the end of this year, so that the revised Form 51-102F6 rules can apply to the 2009 proxy season.

The goal of the revisions is to provide more complete and transparent disclosure of executive compensation.

“While there are significant benefits to the transparency provided by the new guidelines,” says a note from Watson Wyatt, “they will require substantial changes to the methods of both calculating and recording executive compensation for many employers, both large and small.”

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CalSTRS, CalPERS Post Losses

The California State Teachers’ Retirement System (CalSTRS) investments took a 3.7% hit in the fiscal year ending June 30, 2008—its first loss in six years.

Still, that was slightly better than the benchmark return of -3.8%.

“I look at single-year returns as a one-mile measurement within a marathon,” says Christopher Ailman, chief investment officer of CalSTRS. “ It’s a long race and we’ve just had a slow mile.”

Despite the single-year loss, the longer-term returns continue to exceed the 8% average return necessary to meet projected benefit obligations. The return over three years is 9.7% and over five years, it’s 11.5%

Meanwhile, the California Public Employees’ Retirement System (CalPERS), estimates it will incur an overall loss of 2.4%.

“It was difficult for any investor to make positive returns in stocks this past year, but we realized gains in other areas, ending the year in good financial shape,” says Anne Stausboll, the interim chief investment officer at CalPERS. “Private equity returns led the way in gains. Fixed income and our new inflation-linked asset class were also in positive territory.”

On a five-year basis, returns remain strong—at 11.4%—well above the 7.75% return objectives to finance liabilities. It has enjoyed a positive return for 21 out of the last 25 years.

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Institutions Adjust Fixed-Income Strategies

A Greenwich Associates study finds that institutional investors in the United States are making fundamental changes to their fixed-income investment strategies in response to the turmoil in global credit markets, and they are preparing to shoulder a bigger part of the burden when it comes to researching fixed-income investments.

More than half of the institutional investors participating in the 2008 U.S. Fixed-Income Investors study say they changed or plan to change their fixed-income investment strategies in the wake of the global credit crisis. Among those doing so, more than 60% say they are shifting their investments to higher quality fixed-income securities and nearly 55% say they are tightening risk-management policies.

Another one-third of these institutions say they are unwinding under-performing fixed-income positions, and an equal number say they are taking advantage of investment opportunities in illiquid securities.

Among institutions saying they need to unwind underperforming positions, about 30% are looking to unload asset-backed securities and/or investment grade credit bonds, and about a quarter are seeking to unwind positions in mortgage-backed securities.

At 47%, institutions with more than US$50 billion in annual fixed-income trading volume—the most active traders in the country—are much more likely than other institutions to say they plan to unwind underperforming positions in coming months. “The market’s biggest traders are still dumping problem securities, not buying,” says Greenwich Associates consultant Tim Sangston.

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Sceptre Forms Venture

Sceptre Investment Counsel is teaming up with New York-based Fairfield Greenwich Group (FGG) to provide alternative investment solutions to institutional and high net worth investors.

Sceptre will advise Canadian investors on their alternative investments and distribute FGG’s fund of hedge funds products.

“After an extensive search process, we are very please to name FGG as our alternative asset management partner,” says Richard Knowles, Sceptre’s president and CEO. “FGG manages some of the industry’s finest funds of hedge funds and other alternative asset products.”

FGG was founded in 1983 and has approximately US$16.6 billion in client and firm assets under management.

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PSPIB Takes ABCP Write-down

The Public Sector Pension Investment Board (PSPIB) has taken a $450 million write-down on its asset-backed commercial paper (ABCP) holdings, according to its annual report.

At the end of March, PSP Investments $1.97 billion worth of ABCP with a fair value of $1.52 billion.

It also took a write-down of $470 million on its collateralized debt obligations (CDOs).

The investment losses related to ABCP and the CDOs are unrealized as at March 31, 2008, and generally reflect deteriorated credit market conditions and related mark downs.

“There are very little, if any, credit losses in both ABCP and CDOs and the possibility of recovering the nominal investment value in a subsequent period is probable if general credit conditions improve,” says the report.

The write-downs reduced the pension fund’s rate of return by 2.4 percentage points and its rate of return was -0.3%, which was 1.5 percentage points below the policy benchmark rate of return of 1.2%.

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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