Administration September 6, 2005

Canadian Actuaries Push Back Rule Implementation

June 21, 2004 (PLANSPONSOR.com) - Canadian regulators have pushed back the effective data for instituting changes to the way pension funds make two important calculations.
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The Canadian Institute of Actuaries (CIA) announced last week that the new effective date for the changes in determining pension commuted values has been changed to February 1, 2005. Affected by the move are:

  • the determination of transfer values to those who leave a pension plan’s coverage
  • solvency calculations for funding and plan terminations.

“Most plan sponsors will want to know whether the 2004 standard will increase or decrease transfer values and funding costs,” consultant The Segal Company wrote in its report about the CIA’s move. “Overall CIA studies indicate that, under today’s market conditions, there will be relatively little difference for the plans that have no automatic indexing and perhaps some reduction for plans that have indexing.”

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Segal said implementation of the new rules would lead to greater volatility in plan calculations as well as bringing more complex plan administration.

Text of the rule is at  http://www.actuaries.ca/publications/2004/204007e.pdf . The group’s news release about the implementation delay is  here .

Administration September 5, 2005

STRS Board Approves Only $2 Million in Bonuses

May 21, 2004 (PLANSPONSOR.com) - While the 103 investment staffers of the Ohio State Teachers Retirement System (STRS) will get a total of $2 million in bonuses, the remaining 268 noninvestment workers will get nothing.
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Divided 5 to 4, the STRS Board of Directors decided against awarding the additional $1.7 million in bonuses that had been promised to the noninvestment staff for work done in the fiscal year that ended in June 2003.   This despite the legal opinion of Assistant Attorney General John Patterson, who told the board employees would probably win a lawsuit if they were denied the bonuses because they had been promised to them in written agreements, according to coverage provided by the Cleveland Plain-Dealer.

Patterson’s boss Ohio Attorney General Jim Petro though was not so sure about the definitiveness of a lawsuit victory for the other employees as Petro’s representative on the board was one of the five no votes.

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In large part the Board was haunted by incentive payouts of the past.   STRS had budgeted for bonus payouts to all staff members last fall.    However, the $54 billion pension fund suspended the program after controversy erupted over prior annual bonus payments when it was discovered the fund paid out $14 million in employee bonuses as the fund lost 21% of it value (See Ohio Pension Fund Hit for Lavish Spending Practices ).   The imbroglio went all the way to the top and eventually cost former executive director Herb Dyer his job (See Dyer Steps Down From Ohio STRS Post ).

The STRS board has since adopted a less generous bonus program, one that does not include bonuses for the noninvestment staff.   YetDyer’s successor,Damon Asbury, said STRS had a legal obligation to pay the bonuses owed under the old system and last week said he would ask the board to approve the bonuses for all staff members (See  New STRS Chief Approves Bonuses ).

The Board approved the investment staff bonuses by a margin of 7 to 2.   Bonus payments will range from $438 for a junior analyst to nearly $80,000 for the director of fixed income investments, the Plain-Dealer report noted.

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