pension & benefits committee friday 10 november ......2017/11/10 · pension & benefits...

Board of Governors PENSION & BENEFITS COMMITTEE

Friday 10 November 2017 9:30 a.m. to 12:00 noon

NH 3318

OPEN SESSION ACTION

9:30

9:35

Decision

Information

Information

Information

9:40

10:10

10:20

10:30

10:40

10:50

Decision

Information Information

Decision

Decision

Information

Information

Information

1. Approval of the 6 October 2017 Minutes (Open Session)* and Business Arisinga. Approvals Given at Board of Governors for Actuarial valuation and for

Statement of Investment Policies and Procedures

2. Execution Against the Work Plan* [Grivicic]

3. Update on Government Pension Plan Initiatives [Shapira]

4. Holistic Benefits Review, Proposed Approach and Costing*[Hornberger, Scott Palmer of Aon]

a. Data re: Comparator Institutions (committee may proceed into confidential session to consider/discuss proprietary data)

b. 2005 Benefits Study*

5. Removal of Currency Overlay* [Huber]

6. Indexation of Plan Maxima – Health, Dental, Retiree Life* [Hornberger]

7. Prescription Drug Coverage - Generic and Brand Name Drugs* [Hornberger]

8. Employee and Family Assistance Program – Annual Utilization Report*[Hornberger]

9. Update on Registered Pension Plan Investment Subcommittee

10. Other Business

11. Proceed into Confidential Session

CONFIDENTIAL SESSION

12. Approval of the 6 October 2017 (Confidential)+ and Business Arising

13. Counselling Benefits Query+ [Hornberger]

Decision

Discussion and/or Decision

Next Meeting: Friday 8 December 2017 from 9:30 a.m. – 12:00 noonin NH 3318

*attached** to be distributed

+ distributed separately

6 November 2017 Mike Grivicic Associate University Secretary

Please convey regrets to Melissa Holst at 519-888-4567 x36125 or [email protected]

Future Agenda Items a. Pension Contribution for Members of LTDb. Level of LTD coverage vs. practical requirementsc. Discussion of $3,400 cap appropriateness, and potential RPP/PPP combination

PB 10 November 2017, page 1 of 51

mailto:[email protected]

University of Waterloo Board of Governors

PENSION & BENEFITS COMMITTEE Minutes of the 6 October 2017 Meeting

[in agenda order]

Present: Ted Bleaney, Monika Bothwell, Stewart Forrest, Mike Grivicic (secretary), Mary Hardy, Dennis Huber, Ranjini Jha, David Kibble, Alan Macnaughton, Michael Steinmann, Marilyn Thompson (chair), Mary Thompson

Regrets: Kathy Bardswick, George Dixon

Consultants: Linda Byron, Allan Shapira

Administration: Lee Hornberger

Guests: Nick DeLisi* (Aon Hewitt, 7), Bruce Gordon (1), Sarah Hadley, Barb Lomnicki* (Aon Hewitt, 7), Scott Palmer (Aon Hewitt, 5), Jackie Serviss *by phone

Organization of Meeting: Marilyn Thompson took the chair and Mike Grivicic acted as secretary. The secretary advised that a quorum was present. The agenda was approved without a formal motion.

1. UPDATE ON RESPONSIBLE INVESTING WORKING GROUPBruce Gordon provided detail on the group’s activities to date: terms of reference and membership; currently partway through the group’s work plan; invited Aon Hewitt and two investment managers to receive an overview ofthe diversity of best practices in this space; preparation of “straw man” paper outlining the group’s understandingof the subject and potential recommendations; it is planned that this committee as well as the Finance &Investment Committee would see the firmed up straw man paper before taking a recommendation to the Board ofGovernors; the group’s work has underscored the primacy of stakeholders and is cognizant of the fiduciaryresponsibility to pension plan members. Members discussed: issuing of communication to retirees; findings ofresearch in this space is mixed re: impact on investment returns.

2. APPROVAL OF THE 8 SEPTEMBER 2017 MINUTES (OPEN SESSION) AND BUSINESSARISINGIt was noted that item 10 should add “… investment decision and pension risk management”. A motion was heard to approve the minutes as amended. Jha and Bleaney. Carried. a. Communication to Retirees re: Stage 2 Solvency Funding Relief. Communication has not yet beenissued, and expertise from Aon would be sought to formulate communication that is well-suited to the audienceand includes appropriate content. Mary Thompson volunteered to further assist in this regard.

3. EXECUTION AGAINST THE WORK PLANThis item was received for information.

4. UPDATE ON GOVERNMENT PENSION PLAN INITIATIVESShapira observed: unlikely to get new legislation in time for the November meeting of the committee, and likely tosee new action taken within the Fall Economic Statement; working with Council of Ontario Universities toascertain impacts; JSPP appears to have conditional agreement, and the plan would aim to have a solvencyexemption; a JSPP could be wound up without winding up the sponsor.

5. HOLISTIC BENEFITS REVIEW, PROPOSED APPROACH AND COSTINGScott Palmer provided a presentation and noted that Aon anticipates three phases of review, outlining details of thecontent of each phase and the methodology of the review. Members discussed: benchmarking against other similarplans, and skew arising from payroll pension plan; able to ascertain value to employer and total value of offerings,similar to 2005 process; question of what particular benefits to include in the review, including pension, andpotential to mire the analysis by defining a scope that is too large; Aon will be able to break out facets of theanalysis for interpretation; tax efficiency of long-term disability coverage may merit particular examination; adecade has passed since going to market for benefits provided by GWL; taxable benefits likely are not the maincost drivers of the overall benefits package, and desirable to reduce carrier administration expenses; potential


Pension & Benefits Committee 6 October 2017 page 2 of 3

redesign of offerings could accentuate preventative aspects e.g. eye exams may promote early diagnosis of more serious diseases; communications to the community would likely mimic the compensation review; utilization of focus groups and surveys. By consensus, members agreed to defer decision on this item to the next meeting, and directed that Aon bring their proprietary information re: comparators to the meeting as well as the 2005 review for context.

6. ACTUARIAL VALUATION AS AT JANUARY 1, 2017Shapira discussed the valuation: written presuming approval of Stage 2 solvency relief; this version is mainly forthe benefits of the regulator. Members discussed: limited ability to transfer pension value into/out of plan; minortext amendments for inclusion in final submission to the Board of Governors. A motion was heard to recommendthe valuation to the Board of Governors, as amended. Jha and Huber. Carried.

7. AMENDMENTS TO STATEMENT OF INVESTMENT POLICIES AND PROCEDURES, ANDANNUAL REVIEW/APPROVAL FOR 2017Barb Lomnicki and Nick DeLisi observed: SIPP covers regulatory requirements and adopts new terminology tobring the document to current best practices; no change to what can be done with investments; generalizedlanguage away from specific mention of RPPI. Members clarified: addition of elements including asset-liabilitymatching and revisions to ESG language may occur once those issues are firmed up; no established target assetmix, instead only minimum and maximum allocations are contemplated by the SIPP; merit of assessing managerson cycles that mimic those considered in the SIPP; going forward, Huber will incorporate more information on feesin reporting. Members agreed to a number of minor text amendment to the document, which will be incorporatedinto the version submitted to the Board of Governors for approval. A motion was heard to recommend theamendments to the Statement of Investment Policies and Procedures, as amended. Kibble and Bleaney. Carried.

8. UPDATE ON REGISTERED PENSION PLAN INVESTMENT SUBCOMMITTEEJha noted that the working group has been meeting and that work is ongoing, including examination of how a newmodel would fit within the mandates of existing Board committees.

9. OTHER BUSINESSThere was no other business.

10. PROCEED INTO CONFIDENTIAL SESSIONWith no additional business in open session, the committee proceeded into confidential session.

NEXT MEETING The next meeting is on Friday 10 November 2017 from 9:30 a.m. – 12:00 p.m. in Needles Hall Room 3318.

5 November 2017 Mike Grivicic Associate University Secretary


D = deferred

Execution against Work Plan

Pension & Benefits Committee, Board of Governors, University of Waterloo

The below represents the annual responsibilities of the P&B Committee and has been prepared as an aid to planning only. The committee’s activities are much broader, however, and include: legislative changes, plan changes and improvements; selection of managers and service providers; and requests from the UW community regarding pension and benefits plans.

Task Frequency (Target month)

11 Nov 2016

9 Dec 2016

20 Jan 2017

24 Feb 2017

10 Mar 2017

19 May 2017

16 June 2017

8 Sept 2017

6 Oct 2017

10 Nov 2017

Approval of Actuarial Valuation Assumptions Annual (Jan)

Investment Status of PPP Annual (Jan)

Preliminary Valuation Results (RPP and PPP) Annual (Feb)

Cost-of-living Increase for Pensioners Annual (Feb)

Pensions for Deferred Members Annual (Feb)

Salaries for Pension Purposes for Individuals on Long-term Disability

Annual (Feb)

Actuarial Valuations (RPP and PPP) Annual (Mar)

Benefits Plan Premium Renewals Annual (Mar)

Indexing of Long-term Disability Plan Benefits and Maxima

Annual (Mar)

Review of Contribution and Protocol Caps (RPP and PPP)

Annual (Mar)

Annual Committee Self-Assessment Annual (Mar)

Budget Overview Annual (May) D

Previous Years’ Fees and Expenses Annual (May)

Annual Audit of the Pension Plan Fund Financial Statements

Annual (May)


Pension & Benefits Committee – Execution Against Work Plan

1 Most recent report was published in September 2015 for the 2014-15 year

Task Frequency 11 Nov 2016

9 Dec 2016

20 Jan 2016

24 Feb 2017

10 Mar 2017

19 May 2017

16 June 2017

8 Sept 2017

6 Oct 2017

10 Nov 2017

Benefits/Financial Analysis Report Annual (June) D

Indexing of Health and Dental Plan Maxima Annual (Nov)

Cost-of-living adjustment to payroll pension plan limit

Annual (Dec)

Indexation of Retiree Life Insurance Annual (Dec)

Total Fund Overview (provided under reports from RPPI)

Quarterly

Investment Manager Review (provided under reports from RPPI)

Semi-annually

Approval of the Statement of Investment Policies and Procedures (SIPP)

Annual

Annual Report to the Community1 Annual

Actuarial Filing Minimum every three years

Most recent filing in 2017


Presentation to University of Waterloo

Prepared by Aon Hewitt

Pension and Benefit Plan Benchmarking November 10, 2017


TCOR

AON Empower Results®

Proprietary & Confidential | November 10, 2017 2 Aon Hewitt

Background

At the May 2017 Pension & Benefits Committee meeting, HR received a mandate to develop a proposal for a holistic benefits review

The proposed holistic benefits review would incorporate the following phases: – Phase 1 – Plan Benchmarking (pension and benefits) – Phase 2 – Benefit Plan Redesign – Phase 3a – Marketing of LTD, Health, and Dental insurance carrier – Phase 3b – Marketing of Sick Leave Early Referral Assessor

Today we are here to discuss Phase 1 and decide on a comparator list for the plan benchmarking exercise




Recap: What is a Benefits Index Study?

Background

Aon’s Benefit Index© benchmarking tool provides a quantitative analysis for the salaried plans of a specific comparator group of companies to determine competitiveness of total plan value and employer paid value – This tool would benchmark UW’s current pension and benefit programs

(active and retiree) – The specific comparator group used in the study is selected by UW from

Aon’s Benefit SpecSelect© database, which contains the salaried plan designs of hundreds of organizations in Canada across various industries

A Benefits Index© study measures relative economic value of program, not perceived value or cost

Core benchmarking analysis can include up to 15 comparators If UW wishes to benchmark its plan against an organization that is not in Aon’s

SpecSelect© database, Aon would need to solicit that organization’s plan

information, which would require additional time in the project plan




Recap: What is a Benefits Index Study? (continued)

Sample Output

Information regarding Employer and Total Value, including relative rank in the comparator list, is provided individually for: – Pension: DB, DC, Total – Benefits: Life Insurance, Sick Leave/STD, LTD, Medical, Dental – Pension and Benefits combined

Value >100 = plan is richer than average comparator plan

Value <100 = plan is less rich than average comparator plan

e.g. value of 102.6 indicates plan is 2.6% richer than average comparator plan


Employer Value

108.9 100 = Average of Comparator Group

Range of Employer Values Range of Total Values

Total Value

102.6

§-



Historical Benchmarking Results

2005 and 2012 Benefit Index

The University of Waterloo performed a benchmarking analysis in 2005 againstthe following universities:– McGill University– University of Alberta– University of British Columbia– University of Guelph– University of Laval

The University of Waterloo last performed a benchmarking analysis in 2012against the following comparator organizations:– Manulife Financial– McGill University– McMaster University– Research in Motion– Sun Life Financial

– University of Montreal– University of Ottawa– University of Toronto– University of Western Ontario– University of Windsor

– University of Alberta– University of British Columbia– University of Toronto– University of Western Ontario– Wilfred Laurier University




Historical Benchmarking Results (continued)

2005 and 2012 Benefit Index Results – Pension & Benefits Combined

Total value: – 2005 results: ranking between the 3rd and 4th comparator – 2012 results: ranking between the 8th and 9th comparator

Employer-Paid value: – 2005 results: ranking between the 2nd and 3rd comparator – 2012 results: ranking between the 5th and 6th comparator

102.9

106.2

– 2005 BI results

– 2012 BI results


Employer-Pa id Va lue Value

' '




2005 and 2012 Benefit Index Results - All Post-retirement Benefits*

Total value:

– 2005 results: ranking higher than the 1st comparator – 2012 results: ranking between the 6th and 7th comparator

Employer-Paid value: – 2005 results: ranking higher than the 1st comparator – 2012 results: ranking between the 3rd and 4th comparator

108.8

113.3

155.7

* Includes pension and postretirement benefits coverages

– 2005 BI results

– 2012 BI results


Employer-Pa id

' '

Value Value



Historical Benchmarking Results

2005 and 2012 Benefit Index Results – Pension* Total value:

– 2005 results: 108.9, ranking higher than the 1st comparator Employer-Paid value:

– 2005 results: 110.2, ranking higher than the 1st comparator Pension-only results were not provided separately in the 2012 BI * Includes both DB and DC plans





2005 and 2012 Benefit Index Results - All Pre-retirement Benefits*

Total value: – 2005 results: ranking between the 4th and 5th comparator – 2012 results: ranking between the 8th and 9th comparator

Employer-Paid value: – 2005 results: ranking between the 7th and 8th comparator – 2012 results: ranking between the 7th and 8th comparator

* Includes all active benefits coverages

96.8

99.0

– 2005 BI results

– 2012 BI results


Employer-Pa id Va lue

' '

Value




2005 and 2012 Benefit Index Results – Disability Benefits*

Total value: – 2005 results: ranking between the 7th and 8th comparator – 2012 results: ranking between the 1st and 2nd comparator

Employer-Paid value: – 2005 results: ranking between the 6th and 7th comparator – 2012 results: ranking between the 5th and 6th comparator

* Includes Short-Term and Long-Term Disability

95.8

86.2

– 2005 BI results

– 2012 BI results


Employer-Paid Value

' '

Value




2005 and 2012 Benefit Index Results – Pre-retirement Health*

Total value:

– 2005 results: ranking between the 6th and 7th comparator– 2012 results: ranking below the 10th comparator

Employer-Paid value:– 2005 results: ranking between the 5th and 6th comparator– 2012 results: ranking between the 7th and 8th comparator

* Includes active Medical and Dental

116.7

92.9

– 2005 BI results

– 2012 BI results


Employer-Pa id

' '

Value Value



2017 Benchmarking – Comparator Options

Comparators

Aon’s SpecSelect database contains hundreds of salaried plan designs fromemployers across all industries

A few employers included in the SpecSelect database in industries that may beinterest to UW are shown over the next few slides:

* Not currently in SpecSelect, but we expect to be able to obtain it easily

Industry Local to K/W Region GTA Head Office Other

Education (Universities)

Guelph Western Wilfred Laurier*

York Toronto*

Carleton McGill Mount Royal Nipissing Simon Fraser Trent British Columbia Laval Ottawa Saskatchewan




2017 Benchmarking – Comparator Options (continued)


Government / Crown

City of Brampton City of Burlington City of Markham City of Mississauga Region of Peel Town of Oakville Town of Richmond Hill York Region

Insurance / Finance

Economical Insurance Manulife Financial Sun Life Financial

Allstate Insurance Travelers

Aviva Intact Financial

Communica-tions

Blackberry Rogers Telus Bell




2017 Benchmarking – Comparator Options (continued)


Banks / Trusts BMO CIBC Citi Scotiabank

HSBC

Accounting / Consulting

Aon KPMG

BDO

Automotive TMMC




Next Steps

P&B Committee to confirm comparators to include in 2017 Plan Benchmarking analysis




Appendix – Holistic Benefit Review Timelines

Phase Activities Estimated Timing

1 Plan Benchmarking Oct2017 – Jan2018 2 Benefit Plan Redesign Spring to Winter 2018

3a Marketing of LTD, Health, and Dental insurance carrier

Spring to Fall 2019; Implementation from Fall 2019 to May 1, 2020

3b Marketing of Sick Leave Early Referral Assessor

Notes:

Objective is to have new benefit plans go into effect May 1, 2020 with the new insurance carrier / sick leave assessor




Legal Disclaimer

© 2017 Aon Hewitt Inc. All Rights Reserved. This document contains confidential information and trade secrets protected by copyrights owned by Aon Hewitt. The document is intended to remain strictly confidential and to be used only for your internal needs and only for the purpose for which it was initially created by Aon Hewitt. No part of this document may be disclosed to any third party or reproduced by any means without the prior written consent of Aon Hewitt.




Benefit Index-Overview

t.; What ltM~~sures ... _., . .·- . j ~11.&.;~f-~~~/;J.,~Lf'i~~~~'~f::t;t\;,._ ~ 7~t ~-:'..-;!,..':';A,_·_::.:-, :...::C:_~·_.-;,,r,,.2:,._,,:.=_:£:i1

~ Total program value and employer-paid value for:

~ Retirement Benefits (DB, DC) ~ Death Benefits ~ Disability Benefits ~ Health Care Benefits ~ Time Off

Hewitt Associates

. What It's Used For ... b.;,~~~-~-....__,L__ ___ ~--~J-•-~L ~ -~----~....__._ .. _..,. ________ ~

~ Measure relative "value" and competitiveness of benefit programs

~ Align with organizational objectives

~ Model proposed plan changes

~ Communicate with management and employees

so Total Value

Employer-Paid Value

100 Average

104.1

. Methodology . . . . . 1~ •• ~, -'L..:.--;._,i.. __ ._,!-, ·;(,, ____ .,·._. _ ·h:.. ______ - ___ ,_. -- _.~_ ... _ ___ .:,,.. _____ -1

~ Value-not cost

~ Benefits applied to standardized population

~ Typically compared to 8 to 12 organizations

U of Walcrloo.PPT/AS/sh/20 06/24/2005 2



• Study measures relative economic value of benefit program ... not perceived value

- Perceived value reflects plan design as well as utilization, understandability, and delivery

• Study measures relative economic value of benefits program ... not cost

- Value reflects plan design

- Cost reflects plan design and other factors

Hewitt Associates U of Watcrloo.Pl'T/AS/sh/20 06/24n005 3



Value Versus Cost

Hewitt Associates

Differences in index value reflect:

Plan design

Neutralized

Neutralized

Neutralized

Neutralized

Neutralized

U of Watcrloo.Pl'T/AS/sh/20 06/2412005 4


Benefit Index-Methodology

General Premise

• Methodology must give a reasonable comparison of the value of the different types of plans within a benefit area

- A reasonable comparison of a final pay pension formula versus a defined contribution approach requires an assumption about pay increases

- A comparison of the value of medical benefits should not depend on whether the benefits are insured or self-insured

• Methodology must give a reasonable comparison of the value of the overall program, recognizing that certain parts of it are more valuable than others

Hewitt Associates U or Wa1crloo.Pl'T/AS/sh/20 06/24/2005 5



General Approach

• Apply the comparator group benefits programs to standard population

- Use of standard population neutralizes demographic differences

- Salaried employee group-variety of combinations of age/service/pay

- Not your population ... focus of study is on relative value

• Use consistent valuation assumptions

• Ignore differences in funding/accounting approaches

Hewitt Associates u of Watcrloo.PPT/AS/sh/20 06/24noos 6



Valuation Approaches

Hewiu Associates

Postretirement Benefits:

• Actuarial calculations

• Present value of projected benefits

• Allocated over working career

• One-year allocation expensed as a percentage of pay

U ofWatcrloo.rPT/AS/sh/2006/24/2005 7


Sample Calculation

Probability of Event

Occurring X

Lump-Sum Value of

Payments --

Benefit Index Value

Example: Group life plan benefit is two times base pay Value for a male, age 55, earning $80,000 is:

1 % X (2 X $80,QQQ) = $1,600

Similar calculation performed for all employees in standard population and all organizations in study

Hewitt Associates U of Watcrloo.Pl'T/AS/sh/20 06/24/2005 8


Benefit Index-Results

Retirement: Defined Benefit

Pension Defined Benefit

and Defined Contribution

Retirement: Defined Contribution

Time Off With Pay All Death

Hewitt Associates

Holidays Vacations

Special Provisions

Medical

Dental

Vision, Hearing, Spending Accounts

All Preretirement Health Care

All Security Benefits (All Benefits Except Time Off)

Retiree Health Care

Retiree Dental Care

All Postretirement Health Care

All Benefits

Short-Term Disability

Group Life

Survivor Income +Pension

Death Benefit

All Preretirement Death

Long-Term Disability

Postretirement Death

U ofWatcrloo.PPT/AS/sh/2006/2412005 9


Comparator Universities

• McGill University

• University of Alberta

• University of British Columbia

• University of Guelph

• University of Laval

• University of Montreal

• University of Ottawa

• University of Toronto

• University of Western Ontario

• University of Windsor

Hewitt Associates U of Wa1crloo.Pl'T/AS/sh/20 06/24/2005 I 0


Distribution of Employer-Paid V aloe

Comparator Universities Health Care

13.9%

Disability 20.0%

University of Waterloo Health Care 17.2%

Hewitt Associates

-OisabiHty 16.2%

Retirement 54.1%

Retirement 56.2%

or Watcrloo.Pl'T/AS/sh/20 06/24/2005 11


All Security Benefits

Hewitt Associates

50 Total Value

Ranking Among Plans in Study

First

Fourth

Seventh

Tenth

Your Position Relative to the Base Universities

Index

Ranking

100 Average

Employer-Paid Value

Employer-Paid Index

107.9

103.7

98.7

85.5

Employer-Paid Value

106.2

2nd/3rd

150

Total Index

108.8

100.3

98.8

89.1

Total Value

102.9

3rd/4th

U ofWa1crloo.PrT/AS/sh/2006/241200S 12


All Postretirement Benefits 100 Average

:> Defined Benefit/ Defined Contribution Pension

:> Postretirement Death Benefits

:> Postretirement Health Care

50 Total Value


First

Fourth

Seventh

Tenth

Your Position Relative to the

Employer-Paid Value

Base Universities

Index

Ranking

Hewitt Associates

Employer-Paid Index

109.8

105.0

93.4

87.8

Employer-Paid Value

I 13.3

Above 1st

150

Total Index

108.5

104.6

95.9

85.2

Total Value

108.8

Above 1st

U of Wa1crloo.Pl'T/AS/sh/20 06/241200~ 13


All Preretirement Group Benefits

:> Group Life Insurance

:> Short-Term Disability

:> Long-Term Disability

:> Medical

:> Dental

:> Vision/Hearing

:> Spending Accounts

Hewitt Associates

50 Total Value

Ranking Among Plans in StudI

First

Fourth

Seventh

Tenth


Index

Ranking

100 Average

Employer-Paid Value

Employer-Paid Index

I I 1.2

105.1

99.4

78.3

Employer-Paid Value

99.0

7th/8th

150

Total Index

120.9

101.4

93.5

91.3

Total Value

96.8

4th/5th

U or Watcrloo.Pl'T/AS/~h/20 06/24nOO~ 14


Defined Benefit and Defined Contribution Pension

Hewitt Associates

50 Total Value


First

Fourth

Seventh

Tenth


Index

Ranking

100 Average

Employer-Paid Value


Base Universities

110.0

107.2

95.1

82.8


Base Universities

110.2

Above 1st

150


Base Universities

107.4

104.4

102.0

84.2


Base Universities

108.9

Above 1st U of Watcrloo.PPT/AS/,h/20 06/24n<XJ5 15


Preretirement Death

:> Group Life Insurance

:> Survivors' Income

Hewitt Associates

50 Total Value


First

Fourth

Seventh

Tenth


Index

Ranking

100 Average

Employer-Paid Value

Employer-Paid Index

128.7

119.0

100.7

48.1

Employer-Paid Value

95.0

7th/8th

150

Total Index

137.2

97.1

90.2

76.7

Total Value

90.3

6th/7th U orWatcrloo.rPT/AS/sh/2006/24/2005 16


All Disability

:> Short-Term Disability

:> Long-Term Disability

Hewitt Associates

so Total Value


First

Fourth

Seventh

Tenth


Index

Ranking

100 Average

Employer-Paid Value

Employer-Paid Index

125.8

109.5

84.3

59.4

Employer-Paid Value

86.2

6th/7th

150

Total Index

116.5

104.0

96.6

75.1

Total Value

95.8

7th/8th

U of Walcrloo.l'l'T/AS/sh/20 06/24/2005 17


All Preretirement Health Care

:> Medical

:> Dental

:> Vision/Hearing


Hewitt Associates

50 Total Value


First

Fourth

Seventh

Tenth


Index

Ranking

100 Average

Employer-Paid Value

Employer-Paid Index

144.4

128.9

86.1

45.8

Employer-Paid Value

116.7

5th/6th

150

Total Index

114.9

104.9

92.5

85.2

Total Value

92.9

6thnth U or Wa1crloo.l'l'T/AS/sh/20 06/24/2005 18


All Postretirement Health Care

:> Medical

:> Dental

:> Vision/Hearing


Hewitt Associates

50 Total Value


First

Fourth

Seventh

Tenth


Index

Ranking

100 Average

Employer-Paid Value

187.1

Employer-Paid Index

221.4

116.7

68.7

0.0

Employer-Paid Value

187.1

2nd/3rd

150

Total Index

146.8

132.0

85.4

0.0

Total Value

I 14.0

4th/5th U orWatcrloo.Pl'T/AS/sh/2006/24/2005 19


All Health Care

:> Preretirement Health Care

:> Postretirement Health Care

Hewitt Associates

50 Total Value


First

Fourth

Seventh

Tenth


Index

Ranking

100 Average

Employer-Paid Value

Employer-Paid Index

153.1

116.0

100.8

48.3

Employer-Paid Value

130.9

1st/2nd

150

Total Index

117.9

IOI.I

93.9

86.4

Total Value

98.1

4th/5th

U orwa1crloo.PPT/AS/sh/2006/24/2005 20

Report to the Pension & Benefits Committee Currency Overlay November 3, 2017

Recommendation: The Pension & Committee approve the unwinding of the currency overlay currently in place for the registered pension plan.

Background: - The currency overlay was initially implemented for the pension and endowment investments

during the second quarter of 2011- The currency overlay hedges the four major currencies (US$, Euro, JPY, and GBP) to the Cdn$- The average currency overlay over the period was $218 million across the four currency- The one year return ending September 30, 2017 was 1.95%- The return since inception ending September 30, 2017 was -2.34%

- The Finance & Investment Committee has discussed the currency hedge over several meetingsand concluded that the currency overlays for both the endowment and pension fund should beunwound given:

Lack of capacity by the internal staff to provide tactical advice on hedges Overall difficulty for investment professionals to accurately forecast currency

movements Execution costs are largely negligible (based on administrative fee rather than

currency spreads) Hedging based on the location of the public company’s head office is typically

incongruent with where the company earns the majority of its revenue A wide range of approaches are taken among pension plans Academic literature is mixed as to whether there are long term benefits to

hedging the Canadian currency

- The currency overlay for the endowment was unwound in October 2017

Dennis Huber


1 | P a g e P & B C o m m i t t e eN o v e m b e r 1 0 , 2 0 1 7

Extended Health and Dental Benefits Indexation of Maxima effective January 1, 2018

The plan design for healthcare benefits at the University of Waterloo is subject to an annual cost of living adjustment for the plan maxima.

Indexing Model The adjustment to the maxima has been calculated as in previous years and the impact is identified in the table below. Aon Hewitt has advised that to increase the benefit maxima for January 1, 2017 based on 1 year inflation results in a $50,700 annual on-going cost.

Provision Current Maxima Proposed Maxima (1 Year Inflation) Change

Paramedical/Hearing Aids $671 $701 4.48%1

Private Duty Nursing $20,331 $21,242 4.48%1

Out of pocket max: Single $124 $127 2.51%2

Out of pocket max: Family $250 $256 2.51%2

Dental Basic $2,150 $2,193 1.98%3

Dental Major $3,242 $3,306 1.98%3

Dental Orthodontia $3,242 $3,306 1.98%3

Total Additional Annual Cost of Indexing: $50,7004

1 Percentage increases are calculated from Stats Can Other Health Care index rates for each year that the inflation is applied.

2 Percentage increases are calculated from Stats Can Medicinal and Pharmaceutical index and Other Health Care index rates for each year that the inflation is applied based on 60%/40% weighting.

3 Dental Maxima increases based on the increase to the dental fee guide with a 2 year lag built in as per UW’s plan design.

4 These costs are above the annual total claims costs projected based on UW’s claims experience from January 2017 to September 2017 (annualized). These are not a one-time cost, but will be additional costs to claims experience on an on-going basis. This amount does not include any increase to the non-pension postretirement benefits liability or annual expense related to the plan amendment created by improving the ongoing retiree benefits design.

Action Required: Decision



Retiree Life Insurance Indexation of Coverage effective January 1, 2018

Employees with 10 years of continuous regular service are eligible for a University paid life insurance benefit at retirement as long as they elect an immediate pension at their date of retirement. Eligible employees who retired prior to January 1, 1997 received coverage based on a percentage of earnings; however, eligible employees who retired on or after January 1, 1997 have been eligible for a flat benefit amount with changes occurring January 1st if applicable, as follows:

Note: Eligible retirees receive the life insurance coverage in effect as at their date of retirement; the volume is not subject to change during their retirement.

The retiree life plan design at the University of Waterloo is subject to an annual cost of living adjustment to the flat benefit amount for future eligible retirees. This provision was reinstated last year (retroactively to 2015) after several years of a freeze. A decision was made last year to increase the retiree life benefit from $4,600 to $5,100, $5,200, and $5,300 for eligible individuals who retired in 2015, 2016, and 2017, respectively.

Indexing Model The proposed adjustment to the flat benefit amount for eligible individuals who retire on or after January 1, 2018 has been calculated based on indexing over the last year.

Effective Date Retiree Life Insurance Coverage

For eligible individuals who retire on or after January 1, 2018 Current Proposed

January 1, 2018 $5,300 $5,4001 1 Based on the Consumer Price Index (Stats Can All Items) from September to September, rounded to the nearest $100 of benefit.

Action Required: Decision

$3,500

$4,600

$5,100

$5,200

$5,300

$3,000

$3,500

$4,000

$4,500

$5,000

$5,500

1995 2000 2005 2010 2015 2020

Retiree Life InsuranceFlat Benefit Amount (since January 1, 1997)


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Prescription Drug Coverage Generic and Brand Name Drugs

Background

The main theme of the August 6, 2017 New York Times article entitled “Take the Generic, Patients Are Told. Until They Are Not.” is that some insurers in the U.S. are placing preferential treatment on the brand name drug over the generic equivalent due to the brand name drug manufactures providing discounts to pharmacy benefit managers and insurers. Since brand name drugs are more expensive, the impact of this practice is rising healthcare costs for plan sponsors. Human Resources was asked to confirm that the University’s contract with Great-West Life includes provisions to prohibit this practice.

Current Arrangements

The contract with Great-West Life places a focus on the less expensive generic medication as the extended health benefit provides coverage up to the lowest cost generic available, unless the doctor indicates “no substitution” on a plan member’s prescription. The specific contract provision is as follows:

The covered expense for interchangeable products is limited to the cost of the lowest priced item in the applicable generic category plus a professional fee, unless the prescription has been written by brand name and directed by the prescriber not to be interchanged. If it has, the actual expense will be considered eligible for payment under the Health Disciplines Act - Pharmacy regulations as long as the prescription bears the notation "DO NOT PRODUCT SELECT", "NO SUB", or "NO SUBSTITUTION" on the actual script in the prescriber's own handwriting.

Additional Information

Great-West Life has confirmed that they do not accept any rebates from drug manufacturers. They do negotiate lower prices and private listing agreements (e.g. lower cost agreements for biologics where a generic cannot exist, such as Remicade when Inflectra, a Subsequent Entry Biologic entered the market); these are apparent at the point of sale, resulting in a lower cost per prescription which benefits both the University and members paying a coinsurance. Great-West Life has advised that there is no intent to start offering U.S. style healthcare programs that negotiate rebates for the benefit of the provider/insurer.

Great-West Life has suggested that the University might consider implementing their Enhanced Generic provision which provides an even stronger focus on generic medications. With Enhanced Generic, reimbursement is always based on the lowest cost generic available even when the doctor has indicated “no substitution”. An exception process exists to provide coverage for the brand name where an adverse reaction is experienced to the generic – although these situations are reportedly rare.

Action Required: None


https://www.nytimes.com/2017/08/06/health/prescription-drugs-brand-name-generic.html

https://www.nytimes.com/2017/08/06/health/prescription-drugs-brand-name-generic.html


Employee and Family Assistance Program – Annual Utilization Report for the September 2016 to August 2017 period

The Employee and Family Assistance Program (EFAP) was implemented with Homewood Health effective September 1, 2016 with a 3-year renewable contract at an employer paid cost of $2.50 per employee per month. Employees within the University of Waterloo as well as the University Colleges who are enrolled in the full benefits program are eligible for the EFAP along with their eligible dependents.

The EFAP can be accessed on a 24/7/365 basis through a toll-free number or by calling collect if the individual is located internationally (note: some services are not available outside of Canada and/or North America). There are five key components of the EFAP; the first three are accessed by individuals confidentially and directly whereas the latter two are coordinated centrally, as follows:

• Counselling Services – unlimited number of sessions within a short-term outcome basedmodel; services are available in person, by telephone, or online

• Life Smart Coaching Services – a series of work-life balance services available bytelephone including:

o Life Balance Solutions – childcare, parenting, elder and family care, relationshipsolutions, financial consultation, legal advisory

o Health Smart Coaching – smoking cessation, Jumpstart your Wellness, nutritionalcounselling

o Career Smart Coaching – career coaching/counselling, pre-retirement planning,shift worker support

• Online Services – e-learning courses, busy family, health library, health and wellnessassessments

• Crisis Management Services – onsite counselling assistance for individuals and/or groupsin the event of termination or traumatic event

• Wellness Sessions – 10 workshops are included in the contract (any sessions scheduledoutside of regular work hours or with an audience in excess of 35 individuals is subject toa surcharge); workshops in excess of 10 per year are available at an additional charge

The first annual utilization report for the September 1, 2016 to August 31, 2017 period was recently provided by Homewood Health.



Overall Utilization In total, there were 671 cases opened in the first year of the program, reflecting an overall utilization rate of 15.28%. The distribution of these cases is illustrated below:

This utilization rate of 15.28% is significantly higher than the contracted utilization rate of 10%; however, Homewood has advised that this is a common trend following implementation. For comparison purposes, Homewood provided their benchmark on an overall basis (10.32%) as well as the higher education sector (15.91%). The University’s utilization is slightly under the sector but higher than the overall benchmark. The current rate of $2.50 per employee per month is guaranteed for the first three years of the contract and the subsequent renewal calculation will consider actual utilization.

Female, 491

Male, 180

Distribution of Cases by Gender

CUPE, 31

Faculty, 82

Staff, 402

Family Member,

141

Unknown, 15

Distribution of Cases Across Population

Dependent, 72

Employee, 530

Spouse, 69

Distribution of Cases by Relationship

20 and Under, 69

21-30, 49

31-40, 20041-50, 163

51-60, 164

61 and Over, 26

Distribution of Cases by Age Group


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Counselling Services 542 cases representing 80.8% of the service utilization corresponded with counselling services. The University’s usage of reactive services is higher than both of Homewood’s benchmarks which indicate 79.6% on an overall basis and 77.8% for the sector. Homewood indicated that 75% is the ideal target.

Of 542 cases, 51.4% correspond with psychological issues; this proportion is higher than both of Homewood’s benchmarks (i.e. overall at 45.1%, sector at 49%). Other significantly present categories include marital/relationship, family, and work issues.

Within the Psychological category, the leading presenting psychological issues are anxiety (29%), depression (22%), and stress (19%).

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Life Smart Coaching Services 129 cases representing 19.2% of the service utilization corresponded with life smart coaching services. The University’s usage of preventative services is lower than both of Homewood’s benchmarks which indicate 20.1% on an overall basis and 22.1% for the sector. Homewood indicated that 25% is the ideal target.

Of 129 cases, 32.6% correspond with Legal Advisory Services (59.5% of which correspond with family/divorce/custody issues); 32.6% is aligned with the sector benchmark of 32.7% but lower than the overall benchmark of 40.2%. Other significantly present categories include childcare/parenting services, nutritional counselling, and career coaching.

Online Services A total of 38 service counts occurred in the first year; 8 Busy Family locator, 14 Health Risk Assessments, and 16 e-courses (i.e. most popular was “Taking Control of Your Money” with 5 cases, followed by “Taking Control of Your Mood” with 3 cases).

The Homeweb.ca website has been used by 284 individuals with 537 sessions. In total, there were 4,478 page views, 8.34 pages per session, and average time on the site of 6 minutes and 28 seconds.

Crisis Management Services There were eight Crisis Management Service cases utilized in the first year (2 employee deaths, 6 terminations/suspensions). These services are not included in the cost of the program and are charged at an hourly rate.

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Distribution of Life Smart Services by Category


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Wellness Sessions The allocation of 10 wellness sessions for the first year was utilized as follows:

• April 5 and 6, 2017o Staff Conference – Stress Busters twice (extra charges applied due to large

audience)o CUPE – Respectful Relationships in the Workplace twice (extra charges applied due

to large audience and evening time)• April 26, 2017 – Advisors Conference – The Art of Relaxation (extra charges applied due

to large audience)• July 25, 2017 – EAP, HW Committees – The Science of Happiness• October 6, 2017 – CUPE – The Science of Happiness – 2pm and 4pm (utilized the 4

remaining to avoid extra charges)

So far for the second contract year, the following 3 wellness sessions have occurred or will soon be scheduled:

• Keeping Well at Work on October 17, 2017:o The Science of Happinesso Managing Your Time and Energyo The Art of Relaxation

• Science of Happiness for Renison University College (date to be determined)• The remaining 6 sessions will be scheduled prior to August 31, 2018 (managed by the

EAP Committee as defined in Policy 67)

Action Required: None


pension & benefits committee friday 10 november ......2017/11/10 · pension & benefits...

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