A Chat With CAAT's CEO on DBplus
CAAT continues to grow and diversify its membership, adding two new organizations to its growing roster of participating employers.First, let me thank Erin Whitton, Senior Communications Specialist, Growth & Public Affairs at CAAT Pension Plan, for reaching out and letting me know about these two new members.
As part of their new collective agreement, workers from the University of Saskatchewan and Federated Colleges Non-Academic Pension Plan, represented by CUPE 1975, joined DBplus on a go-forward basis effective September 1. As well, employees from Community Living Toronto joined the CAAT plan effective October 1st. Pending regulatory approval, Community Living Toronto will merge their prior defined benefit pension plan liabilities and assets into CAAT. Members of the Community Living Toronto pension plans consented to the merger, voting an overwhelming 93% in favour, with unionized members represented by their local CUPE 2191. The consent period concluded on September 30.
These two new employers add over 2,000 new members to DBplus – 700 from Community Living Toronto and 1,300 from the University of Saskatchewan. Members will pay into the DBplus plan at fixed contribution rates, with their respective employers matching dollar for dollar.
In the coming months, an application will be made to the Financial Services Regulatory Authority of Ontario (FSRA) for its consent to the transfer of plan assets and liabilities from Community Living Toronto’s plans.
The CAAT Pension Plan is open for growth in membership where it is mutually beneficial, from the public, private or not-for-profit sectors in Canada. This includes workplaces currently offering defined benefit pension plans, defined contribution plans, group RRSPs, and those with no current workplace retirement savings plan.
“I am grateful that our newest members from the University of Saskatchewan and Community Living Toronto have endorsed our DBplus plan. This innovative pension design provides secure, predictable retirement income for life at a fixed contribution rate – meeting essential needs and eliminating key risks for both employees and employers”
Chief Executive Officer and Plan Manager, CAAT Pension Plan
“The CAAT DBplus plan has proved to be a timely solution to the long-term financial sustainability challenge we were facing with our non-academic defined benefit pension plan. DBplus ‘ticked all the boxes’ for us as an employer in terms of cost certainty for our institution while providing our employees with a competitive pension plan. The team at CAAT has been there every step of the way through the implementation process and we are looking forward to working with them for years to come.”
Associate Vice President, People and Resources, University of Saskatchewan
“We are so pleased to be joining the CAAT DBplus plan. This will allow us to provide a sustainable, predictable retirement benefit for our employees and reduce the significant effort associated with providing our own plan.”
Chief Executive Officer, Community Living Toronto
Catholic Charities of the Archdiocese of Toronto and Participating Member Agencies voting to join the Plan
Catholic Charities of the Archdiocese of Toronto and Participating Member Agencies (“CCAT”) have entered into an agreement to merge their pension plan with the CAAT Pension Plan. As with previous mergers of this type, active members of the CCAT pension plan must consent to the merger through a voting process, with unionized members being represented by their local OPSEU 594 This voting process will conclude on December 29, 2019. If the merger proceeds, employees will start contributing to and earning a benefit under the CAAT Pension Plan as of January 1, 2020. The assets of approximately $35 million from CCAT’s existing defined benefit plan will be transferred and benefits will be replicated under the CAAT Pension Plan after approval from the Financial Services Regulatory Authority of Ontario.
FP Canadian Newspapers Limited Partnership voting to join the Plan
FP Canadian Newspapers Limited Partnership (“FPCNLP”) has entered into an agreement to merge its Winnipeg Free Press and Canstar Community News Pension Plan (“WFP/Canstar Pension Plan”) with the CAAT Pension Plan. As with previous mergers of this type, active defined benefit members of the WFP/Canstar Pension Plan must consent to the merger through a voting process, with unionized members being represented by Unifor Local 191. This voting process will conclude on December 29, 2019. If the merger proceeds, employees will start contributing to and earning a benefit under the CAAT Pension Plan as of January 1, 2020. The assets of approximately $56 million from the FPCNLP’s existing defined benefit plan will be transferred and benefits will be replicated under the CAAT Pension Plan after approval from the Manitoba Office of the Superintendent and the Financial Services Regulatory Authority of Ontario.
United Way of Greater Toronto voting to join the Plan
August 14, 2019 - United Way of Greater Toronto has entered into an agreement to merge its pension plan with the CAAT Pension Plan. As with previous mergers of this type, active members of the United Way of Greater Toronto pension plan must consent to the merger through a voting process, with unionized members being represented by their local COPE Ontario (Local 343). This voting process will conclude on November 12, 2019. If the merger proceeds, employees will start contributing to and earning a benefit under the CAAT Pension Plan as of January 1, 2020. The assets of approximately $25 million from United Way’s existing defined benefit plan will be transferred and benefits will be replicated under the CAAT Pension Plan after approval from the Financial Services Regulatory Authority of Ontario.
In July, CAAT's DBplus grew its membership with the addition of three organizations — Postmedia Network Inc. (“Postmedia”), London Cross Cultural Learning Centre (“CCLC”), and The Canadian Press (“CP”).
Last October, Torstar Corporation and its applicable subsidiaries became the first new employers to join CAAT using the DBplus plan design.
You can read more about CAAT's award-winning DBplus here.
Erin Whitton was kind enough to set up a call yesterday with Derek Dobson, CEO of the CAAT Pension Plan.
I thank Derek for taking the time to talk to me. It was probably the second time we spoke and he's extremely nice and really knows his subject matter. In fact, I think it's worth posting his profile here:
Derek W. Dobson, Chief Executive Officer and Plan ManagerWhen you're talking to an actuary who studied at the University of Waterloo, you'd better be on your A game and try to keep up, they really know their stuff.
Since joining as CEO in April 2009, Derek has applied his expertise in funding, risk management, strategic planning, governance, and stakeholder relations to strengthen the CAAT Plan, and more recently, guide its growth. In addition to leading one of Canada’s model pension plans, he plays an active role in various industry groups, notably as Co-Chair of the Canadian Public Pension Leadership Council, as a member of the Board of Directors for the Association of Canadian Pension Management, and as a founding faculty member of the Masters of Trust Management Standards of the International Foundation of Employee Benefits and Pensions. Derek’s pension management expertise and engaging presentation style make him a sought-after speaker in Canada and abroad on a variety of topics, including the need for national aging and retirement strategies. Derek is an Associate of the Canadian Institute of Actuaries with a degree in mathematics from the University of Waterloo.
Anyway, Derek told me he wanted to get the message out of CAAT's DBplus to "raise awareness" and also "dispel some misconceptions". He told me there is "a growing awareness on what CAAT offers employees and employers."
The biggest misconception of DBplus is that it's a target benefit plan. It isn't, it's a defined benefit plan based on an agreed contribution rate between CAAT and the employer and it offers a low cost approach to adopting a defined benefit plan.
Derek referred me to this section for prospective employers where you can read the following:
DBplus by the CAAT Plan combines the cost certainty of a DC arrangement with the advantages of the lifetime pensions and survivor benefits from a traditional DB plan. DBplus offers the advantages of both, without the downside risks of either model. DBplus is simple, secure, stable and sustainable.Prospective employers are also invited to download this booklet to really understand DBplus and all its advantages.
The key point to remember is DBplus is an innovative defined benefit (DB) pension plan design from the CAAT Pension Plan that provides lifetime pensions at fixed contribution rates. It provides more value, simplicity, security and certainty – for both employers and employees – in comparison to other workplace retirement plans.
The booklet refers to the 2018 study The Value of a Good Pension, published by the Healthcare of Ontario Pension Plan, showing that Canada-model pension plans such as CAAT provide on average $5.32 in retirement income for each $1 in contributions, compared to large Group RRSP and Defined Contribution plans, which provide on average $2.58 for each $1 contributed.
And as Derek noted, CAAT's investment team has delivered great results, 9.9% net over the last ten years (8.7% net over last five years), placing it among the top tier performers:
booklet and below:
The key I want to emphasize is that backed by $11 billion in assets, the jointly governed CAAT Pension Plan stands 120% funded on a going-concern basis, with a funding reserve of $2.6 billion, based on its latest actuarial valuation as at January 1, 2019.
The other thing Derek spoke to me about is because CAAT Pension is jointly sponsored, the focus is on the long term and the asset mix represents this long investment horizon.
Interestingly, I asked him how are they going to handle growth if DBplus becomes hugely successful? He told me they have five growth scenarios and are planning out "people. processes and technology" for each of these.
I also mentioned a recent comment I posted on the insurance industry talking up the supposed failure of the corporate DB model, and told him it didn't cross my mind that CAAT DBplus is a viable, low cost solution for corporations which want to continue their DB plan for employees instead of "de-risking" and transferring the risk over to an insurance company.
Derek told me corporate interest is perking up and he referred me to the Torstar merger:
The CAAT Plan is pleased to share an update on the merger process with Torstar Corporation. On June 21 (2018), the CAAT Plan entered into an agreement to merge Torstar’s eight registered defined benefit pension plans, effective October 1, 2018.As I stated above, on October 1st, 2018, Torstar Corporation and its applicable subsidiaries became the first new employers to join CAAT using the DBplus plan design.
Members of the Torstar pension plans will have 90 days to vote on the merger. Ontario pension regulations require that at least two-thirds of active members consent to the merger, while no more than one-third of retired members vote against it. Final consent of the transfer of assets for past benefits rests with Ontario’s pension regulator.
There are about 3,000 members of the Torstar defined benefit pension plans. If approved, this will be the third merger of a single-employer, defined benefit pension plan with the CAAT Plan. The Youth Services Bureau of Ottawa joined at the beginning of 2018, while the Royal Ontario Museum pension plan merged with the CAAT Plan in 2016.
“We’re excited about the possibility of the merger with the Torstar pension plans,” says Derek W. Dobson, CEO of the CAAT Plan. “With the signing of the agreement, the approval process is now in the hands of about 3,000 Torstar plan members. Our focus will remain on educating members to ensure they are informed before voting on joining DBplus.”
Torstar businesses include the Toronto Star, Canada’s largest daily newspaper, six regional daily newspapers in Ontario including The Hamilton Spectator; English-language Metro newspapers in several Canadian cities; more than 80 weekly community newspapers in Ontario; flyer distribution services; and digital properties including thestar.com, wheels.ca, save.ca, toronto.com, a number of regional online sites and eyeReturn Marketing.
I'm sure others will join them. For example, Derek told me the Canadian Bar Insurance Association and Lawyers Financial are taking a closer look at DBplus for their members and their staff.
Derek told me instead of winding down a defined beenfit plan, corporations should absolutely consider CAAT's DBplus as a secure, cost-eefective option for maintaining a DB plan.
Now, at this point, you might be confused and ask yourself why is CAAT offering DBplus to prospective employers? Why not? It's offering a defined benefit solution, growing its asset mix, offering employers and their employees a secure and low cost solution to continue offering an existing DB plan or a brand new one.
Employers offering DBplus will be able to attract and retain employees who understand the value of safe, secure defined benefit pension. As Derek said: "It's a win, win, win all around."
Derek and I briefly discussed the new joint pension plan merging Queen's University, University of Toronto and the University of Guelp's pension plans.He told me this decision was made before th eintroduction of DBplus and it is moving along nicely.
Lastly, I couldn't resist putting my two cents on the investment front and told Derek flat out that I think CAAT Pension should be among the anchor investors seeding Andrew Claerhout's new infrastructure platform.
Andrew is the former Head of Infrastructure and Natural Resources at OTPP and one of the best infrastructure investors in the country with a long track record. He's also one of the nicest professionals in the industry and a stand-up guy who deserves a huge break.
In fact, let me stick my neck out publicly and openly state AIMCo, IMCO, HOOPP, CAAT and OPTrust should each commit $100 million to Andrew's Infrastructure platform and stick with it over the long run.
Anyway, I thank Derek Dobson for taking the time to chat with me yesterday and Erin Whitton for setting up the call and following up with some case studies.
Below, Derek Dobson, CAAT Pension Plan CEO and Plan Manager, talks about what makes Modern Defined Benefit (DB) pension plans unique. In the video, Derek talks about the funding policy and joint governance - two of the hallmarks of a Modern DB plan - that ensure the CAAT Plan will stay strong when challenges arise.
Also, the CAAT Pension Plan is introducing a second defined benefit plan design called DBplus which provides flexibility to accommodate the needs of employers and employees from various sectors. DBplus is a valuable Defined Benefit (DB) design that’s simple, secure, stable and sustainable.
Third, Canadians are attracted to a workplace that offers a valuable defined benefit pension. Watch to learn more about how employers benefit from DBplus.
Lastly, learn about the advantages beyond the secure, defined benefit pension that DBplus provides to members.
The success of DBplus might spur other large DB pensions to offer their services to the broader public and that's a good thing (OPTrust is offering a DB plan solution for Ontario's non-profits and broader public sector).