The Ontario Teachers’ Pension Plan(Teachers’)focused on three main issues in its presentation to the Ontario Expert Commission on Pensions(OECP)on Oct. 23, 2007: funding, investment and administration.

From a funding perspective, Teachers’ believes that surpluses should be fairly allocated among those who assume the risk of funding defined benefit(DB)plans and that the current rules act as a disincentive to better DB plan funding. Teachers’ also takes the position that solvency rules should apply to private sector plans but not public sector plans, since they are inherently exposed to different types of risks.

Another interesting funding issue, notes Teachers’, is the conflict that plan actuaries often face. When an actuary gives advice on pension plan funding, is he or she acting on behalf of the plan sponsor or the plan beneficiary? Depending on which “hat” the actuary is wearing, the advice could be quite different.

Teachers’ also advocates for better guidance and more transparency around actuarial standards, particularly when it comes to the economic assumptions used in valuations. For example, Teachers’ notes that “a 1% swing in the real interest rate can affect liabilities on a funding basis by as much as 20%.”

On the investment side, Teachers’ supports the “prudent investor” rule without the existing qualitative and quantitative limits, noting that the current regulations make it difficult to attract investor partners globally and add unnecessary costs and complexity to the process. Notes Teachers’: “We believe that the “prudent investor” rule should be enough, especially for large, sophisticated pension funds that are able to properly manage the risks involved.”

When it comes to administration, Teachers’ is concerned about the existing portability rules in the Pension Benefits Act, as well as the lack of clarity around marriage breakdowns. For example, Teachers’ currently manages 500 pension splits on behalf of plan members. However, the formulas are not consistent, and the different methods of division create unnecessary expense and effort.

The overall message to the OECP is one of flexibility. “One size cannot fit all when it comes to pension plans in the province of Ontario,” comments Teachers’.

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