January 18, 2020 GENMO Pension Committee Mtg. January 15, 2020
On January 15, 2020 GENMO members Tom Laurie and Mike Powell met with GM's VP of Finance Amy Martin and Dave Courtney, Manager of Employment Cost Analysis.
We reviewed the 2019 3rd. quarter and year to date salaried pension fund performance through September. Overall it has been a positive year for the pension plan. During the third quarter the salaried pension plan exceeded its benchmarks by .22% and showed a net return of 2.2%. The nine month year to date return was 12.1%, above the benchmark by 0.55%. These levels of returns exceed the liability discount rate assumption of 3.75% with the result that the solvency funding rate has improved.
As you will recall the solvency ratio at the end of 2018 was 100.7%. Even though there is not a new actuarial valuation to review it is evident that the solvency funding ratio of the pension plan has improved further and continues to be in excess of 100%. We are not sure of when the next actuarial valuation will be completed. At this time it appears that General Motors may have a window of 1 – 3 years for actuarial reporting.
We reviewed the asset mix which currently includes 76.3% fixed interest instruments. The target ratio for last year was 75%. Going forward the target has been upped to 80% fixed income investments with the continuing objective of de-risking the plan. The balance of the fund is invested in real estate, public equities and private equities/debt.
The bottom line is we retirees can continue to feel confident for the future of our pension plan.
Your GENMO Executive
Chère, Cher Important Membre,
Le 15 Janvier, 2020, les représentants de GENMO Tom Laurie et Mike Powell ont rencontré la VP Finance de GM, Amy Martin et Dave Courtney, Responsable de l’analyse des coûts main d’œuvre.
Nous avons repassé la performance du régime de pension pour le 3ième trimestre de 2019 et année à date jusqu’à fin septembre. En général il s’agit d’une année positive pour le fond de pension. Au troisième quart le fond de pension des salariés a dépassé sa cible par .22% ayant un résultat net de 2.2%. Année à date, après 9 mois le retour est de 12.1%, supérieur par .55% au résultat anticipé. Ces résultats dépassent par 3.75% les hypothèses de responsabilités du fond et ainsi améliore sa capitalisation.
On se souvient que le taux de solvabilité était de 100.7% à la fin de 2018. Même il n’y a pas eu de nouvelle évaluation actuarielle, il est évident que le ratio de solvabilité du fond a continué de s’améliorer et continue d’être plus haut que 100%. Nous ne savons pas quand un nouvel estimé actuariel aura lieu. Il semble que GM ait maintenant une fenêtre de 1-3 ans pour soumettre un rapport actuariel.
Nous avons revu la répartition des actifs qui sont composés à 76.3% d’investissements à taux fixe. La cible était de 75% pour la dernière année. En allant de l’avant la cible augmentera à 80% pour les investissements à taux fixe ayant pour but de minimiser encore plus le niveau de risque. Le reste des investissements sera fait dans de l’immobilier, et des actions publiques et privées.
En résumé, nous pouvons continuer à avoir confiance dans le futur de notre régime de pension.
L’Exécutif de GENMO
July 29, 2019 GENMO Pension Committee Mtg. June 6, 2019
On June 5, 2019, GENMO members Tom Laurie, Mike Powell and Garry Marnoch met with GM's VP of Finance Amy Martin and Dave Courtney, Manager of Employment Cost Analysis. The quarter ending December 2018 saw the Canadian dollar drop 5.7%, lowest since third quarter 2015. Interest rates were down 56 basis points, the worst in developed countries. Equities declined sharply although real estate and private equity markets were positive. Nevertheless, the salaried pension plan exceeded its benchmarks by C$87 million or 1.24%, and showed a total return of 3.6%. Calendar year return was 4.17%, above the benchmark by 0.83% We spent most of the meeting looking at the Actuarial Valuation as of December 31, 2018 which the actuaries Willis Towers Watson completed May 6, 2019. The plan is fully funded! The solvency ratio has moved to 100.7%. How has this come about? Of the participants in the most recent staff reduction, over 70% elected to take a commuted value rather than monthly pension payments; this was much higher than the usual rate of about 60%. These payouts lowered the value of the asset pool, but because these folks are now off the books, the liabilities of the plan have decreased more than the depletion; and our closed plan will gain no new members. Secondly, the actuaries have increased the discount rate slightly. The net effect is an improvement in the solvency ratio from 94.9% at the end of 2017. GMCC contributed C$38 million required by the calculations for the salaried plan for 2018, and in addition put in C$25 million to cover June-December 2019. If current assumptions for mortality rates and interest rates continue unchanged, GMCC will have to make no more contributions for 2020, 2021 and beyond. The asset mix currently includes 70% fixed interest instruments, which was the target ratio last year; going forward, the target has been upped to 75% bonds, with the rest in real estate, public equities, private equities/debt. If the fund stays at 100%, GM can choose to file an AV every three years. After three AV filings (6 years from now), it will qualify under Ontario's new rules to relax to 85% and it will be required to join Ontario's Pension Benefit Guaranty Fund, from which we have been excluded by the terms of the 2009 Buyout legislation. Removal of vehicle assembly from Oshawa will not affect our future pension receipts, because they are supported by sales. Our risk has moved from plan under-funding to the vehicle market. From all of this we retirees can feel confident for the future.
Your GENMO Executive
Le 5 Juin 2109, les représentants de GENMO, Tom Laurie, Mike Powell et Garry Marnoch ont rencontré le VP Finances de GM Amy Martin et Dave Courtney, Responsable des analyses de coûts de la main d’œuvre.
Le trimestre se terminant fin décembre 2018, a subi une baisse de la valeur du $ Canadien de 5,7%, niveau le plus bas depuis le troisième trimestre de 2015. Les taux d’intérêt ont chuté de 56 points de base, le pire des pays développés. Le marché des actions a baissé de façon significative, mais le marché immobilier et le marché des entreprises privées étaient en gain. Malgré cela, le régime de pension des salariés a dépassé son objectif de $87cad Millions ou 1,24% et a produit un retour de 3,6%. Le gain pour l’année calendrier a été de 4,17%, dépassant la cible de 0,83%.
Nous avons passé la majeure partie de la réunion à analyser le rapport actuariel au 31 Décembre, 2018 qui a été produit le 6 Mai, 2019 par la firme d’actuaires Willis Towers Watson. Notre régime est complètement capitalisé! Le ratio de solvabilité est maintenant de 100,7%.
Comment est-ce que cela a pu se produire?
Suite à la dernière réduction de personnel, les participants ont opté à 70% pour un montant forfaitaire plutôt que pour une pension versée mensuellement; ceci est en hausse par rapport au taux habituel de 60%. Ces paiements ont baissé la part des actifs, mais du fait que ces individus sont maintenant hors du régime, les redevances du fond de pension ont diminué plus vite que les montants à payer à ceux qui restent; et notre plan n’aura plus de nouveaux membres.
Deuxièmement les actuaires ont un peu majoré le taux d’escompte. Il en résulte une amélioration de la solvabilité qui était à 94,9% à la fin de 2017.
GMCC a contribué C$38 millions nécessité par les calculs pour le plan des salariés pour 2018, et a en plus ajouté un autre C$25 millions pour couvrir la période de Juin-Décembre 2019. Si les hypothèses du taux de mortalité de même que pour les taux d’intérêt restent les mêmes, alors GMCC n’aura pas à faire de contributions additionnelles pour 2020,2021 et dans le futur. Les actifs sont composés à 70% d’instruments à taux d’intérêt fixe, objectif qui était ainsi l’an dernier : dans le futur l’objectif est d’y aller à 75% en obligations avec le restant dans l’immobilier, marché d’actions publiques, et actions privées/financement de la dette.
Si notre régime demeure à 100%, GM a le choix de compéter un AVaux trois ans. Après avoir complété trois rapports AV (dans 6 ans), ils se qualifieront selon les nouvelles règles de l’Ontario de bénéficier de capitaliser à 85% et ils devront se joindre au Fond de Garantie des Bénéfices de pension de l’Ontario, duquel nous étions exclus selon les termes de la Législation de Rachat en 2009.
La cessation d’assembler des véhicules à Oshawa n’affectera pas nos revenus de pension dans le futur car ils sont supportés par les ventes de véhicules neufs. Nous sommes passés d’un régime sous-capitalisé à un qui peut rencontrer ses obligations. Nous, retraités, pouvons maintenant être rassurés pour le futur.
Votre Conseil de Direction de GENMO
July 29, 2019 GENMO Pension Committee Mtg. June 6, 2019
On June 5, 2019, GENMO members Tom Laurie, Mike Powell and Garry Marnoch met with GM's VP of Finance Amy Martin and Dave Courtney, Manager of Employment Cost Analysis.
The quarter ending December 2018 saw the Canadian dollar drop 5.7%, lowest since third quarter 2015. Interest rates were down 56 basis points, the worst in developed countries. Equities declined sharply although real estate and private equity markets were positive. Nevertheless, the salaried pension plan exceeded its benchmarks by C$87 million or 1.24%, and showed a total return of 3.6%. Calendar year return was 4.17%, above the benchmark by 0.83% We spent most of the meeting looking at the Actuarial Valuation as of December 31, 2018 which the actuaries Willis Towers Watson completed May 6, 2019. The plan is fully funded! The solvency ratio has moved to 100.7%. How has this come about? Of the participants in the most recent staff reduction, over 70% elected to take a commuted value rather than monthly pension payments; this was much higher than the usual rate of about 60%. These payouts lowered the value of the asset pool, but because these folks are now off the books, the liabilities of the plan have decreased more than the depletion; and our closed plan will gain no new members. Secondly, the actuaries have increased the discount rate slightly. The net effect is an improvement in the solvency ratio from 94.9% at the end of 2017. GMCC contributed C$38 million required by the calculations for the salaried plan for 2018, and in addition put in C$25 million to cover June-December 2019. If current assumptions for mortality rates and interest rates continue unchanged, GMCC will have to make no more contributions for 2020, 2021 and beyond. The asset mix currently includes 70% fixed interest instruments, which was the target ratio last year; going forward, the target has been upped to 75% bonds, with the rest in real estate, public equities, private equities/debt. If the fund stays at 100%, GM can choose to file an AV every three years. After three AV filings (6 years from now), it will qualify under Ontario's new rules to relax to 85% and it will be required to join Ontario's Pension Benefit Guaranty Fund, from which we have been excluded by the terms of the 2009 Buyout legislation. Removal of vehicle assembly from Oshawa will not affect our future pension receipts, because they are supported by sales. Our risk has moved from plan under-funding to the vehicle market. From all of this we retirees can feel confident for the future.
Le 5 Juin 2109, les représentants de GENMO, Tom Laurie, Mike Powell et Garry Marnoch ont rencontré le VP Finances de GM Amy Martin et Dave Courtney, Responsable des analyses de coûts de la main d’œuvre.
Le trimestre se terminant fin décembre 2018, a subi une baisse de la valeur du $ Canadien de 5,7%, niveau le plus bas depuis le troisième trimestre de 2015. Les taux d’intérêt ont chuté de 56 points de base, le pire des pays développés. Le marché des actions a baissé de façon significative, mais le marché immobilier et le marché des entreprises privées étaient en gain. Malgré cela, le régime de pension des salariés a dépassé son objectif de $87cad Millions ou 1,24% et a produit un retour de 3,6%. Le gain pour l’année calendrier a été de 4,17%, dépassant la cible de 0,83%.
Nous avons passé la majeure partie de la réunion à analyser le rapport actuariel au 31 Décembre, 2018 qui a été produit le 6 Mai, 2019 par la firme d’actuaires Willis Towers Watson. Notre régime est complètement capitalisé! Le ratio de solvabilité est maintenant de 100,7%.
Comment est-ce que cela a pu se produire?
Suite à la dernière réduction de personnel, les participants ont opté à 70% pour un montant forfaitaire plutôt que pour une pension versée mensuellement; ceci est en hausse par rapport au taux habituel de 60%. Ces paiements ont baissé la part des actifs, mais du fait que ces individus sont maintenant hors du régime, les redevances du fond de pension ont diminué plus vite que les montants à payer à ceux qui restent; et notre plan n’aura plus de nouveaux membres.
Deuxièmement les actuaires ont un peu majoré le taux d’escompte. Il en résulte une amélioration de la solvabilité qui était à 94,9% à la fin de 2017.
GMCC a contribué C$38 millions nécessité par les calculs pour le plan des salariés pour 2018, et a en plus ajouté un autre C$25 millions pour couvrir la période de Juin-Décembre 2019. Si les hypothèses du taux de mortalité de même que pour les taux d’intérêt restent les mêmes, alors GMCC n’aura pas à faire de contributions additionnelles pour 2020,2021 et dans le futur. Les actifs sont composés à 70% d’instruments à taux d’intérêt fixe, objectif qui était ainsi l’an dernier : dans le futur l’objectif est d’y aller à 75% en obligations avec le restant dans l’immobilier, marché d’actions publiques, et actions privées/financement de la dette.
Si notre régime demeure à 100%, GM a le choix de compéter un AVaux trois ans. Après avoir complété trois rapports AV (dans 6 ans), ils se qualifieront selon les nouvelles règles de l’Ontario de bénéficier de capitaliser à 85% et ils devront se joindre au Fond de Garantie des Bénéfices de pension de l’Ontario, duquel nous étions exclus selon les termes de la Législation de Rachat en 2009.
La cessation d’assembler des véhicules à Oshawa n’affectera pas nos revenus de pension dans le futur car ils sont supportés par les ventes de véhicules neufs. Nous sommes passés d’un régime sous-capitalisé à un qui peut rencontrer ses obligations. Nous, retraités, pouvons maintenant être rassurés pour le futur.
Votre Conseil de Direction de GENMO
November 27, 2018 GENMO Pension Committee Mtg. October 16, 2018
On October 16, GENMO directors Tom Laurie, Mike Powell and Garry Marnoch met with Dave Courtney, Finance Manager, and Vice President of Finance Amy Martin. We covered performance to the end of June 2018.
Overall plan return on the assets of the salaried plan for the quarter was a modest 1.6%, slightly better than the benchmark asset basket of 1.4%. Year-to-date return at 1.9% underperformed the benchmark of 2.3%, largely because of weaker than expected real estate returns on commercial properties. We do not expect stellar returns because the prevailing management strategy is to de-risk, for our plan is closed to new members, but because of our age, we seek security over high returns with associated high risks. Our high-quality investment categories comprise 65% bonds, 35% return seeking assets, working toward a target of 70/30. Due to the fact that the Plan is well funded, it makes sense to further limit risk of the Plan assets.
To manage efficiently some outstanding financial matters, GM issued unsecured bonds. Among the issues addressed using the proceeds are the pension funds. In September, GMCC made a pre-payment into the hourly and salaried funds. This covers in advance the estimated obligatory payments for part of 2019 and all of 2020 and 2021. Therefore, after April 2019, GMCC will not have to put any more money into the funds during that time, if their forecasts prove accurate. Of interest to pensioners is the expectation that this will take the solvency ratio, all other things being equal, closer towards 100%.
As of December 31, 2017, the solvency ratio stood at 94.9%, up from the previous December calculation of 90.0%. GMCC is on track to attain full funding.
The next mandatory Asset Valuation will be submitted to Financial Services Commission of Ontario (FSCO) as early as April 2019 (but no later than September 2019), and will determine our plan’s worth as of December 31, 2018. If it attains 100% of obligations, and maintains that position for the next three years, GMCC will be able to apply to re-join the Pension Benefit Guarantee Fund for Ontario, from which it has been excluded by the terms of the 2009 bailout. (By recent legislation, GMCC would then be held accountable to fund the pensions to 85% solvency, and would not have to make any mandatory payments unless the ratio dropped below that calculation.)
Although this meeting discussed nothing startling, it was all good news for pensioners.
Your GENMO Executive
Le 16 octobre, Tom Laurie, Mike Powell, et Garry Marnoch, Exécutifs de GENMO, ont rencontré le Directeur des Finances Dave Courtney et la Vice-Présidente des Finances, Amy Martin. Nous avons analysé les résultats de fin Juin 2018.
En résumé le retour sur actif du plan des salariés pour le trimestre n’a été que de 1.6% un peu mieux que le rendement moyen de 1,4% des paniers d’actifs. Année à date le retour a été de 1.9% et a sous-performé la moyenne de 2.3%, en raison de rendements faibles de l’immobilier sur les propriétés commerciales. Nous ne nous attendons pas à des résultats impressionnants étant donné la stratégie qui est de réduire le facteur de risque, étant donné que notre régime est fermé aux nouveaux membres, et en raison de notre âge, nous recherchons plus, la sécurité que les hauts rendements qui impliquent plus de risque. Nos investissements de haute qualité sont composés à 65% d’obligations et à 35% d’actifs à revenu, visant atteindre une répartition 70/30. Étant donné que le Régime est bien nanti il est raisonnable de continuer de limiter le risque des avoirs du Régime.
Afin de gérer efficacement certains dossiers financiers en cours, GM a émis des obligations non garanties. Notre Régime fait partie de ces dossiers qui bénéficieront de ces montants. En Septembre, GMCC a déposé un acompte dans le Régime des salariés et dans celui des employés à l’heure. Ceci couvre les montants obligatoires à payer pour une partie de 2019, et la totalité des paiements de 2020 et 2021. Ainsi, après Avril 2019, GMCC n’aura plus à faire de cotisations durant cette période, si leurs prévisions s’avèrent bien fondées. Bon à savoir pour les retraités, c’est qu’en faisant de la sorte, le ratio de solvabilité tendra vers 100%, toutes choses étant égales.
Au 31 Décembre 2017, le ratio de solvabilité était de 94.9%, en hausse sur le calcul de Décembre précédent qui était à 90.0%. GM se dirige vers la capitalisation complète.
La prochaine Évaluation obligatoire sera soumise à la Commission des Services Financiers de l’Ontario (CSFO) entre Avril 2019 et au plus tard Septembre 2019 et déterminera la valeur de notre Régime en date du 31 Décembre 2018. Si 100% des obligations sont atteintes et sont respectées pour les 3 prochaines années, alors GMCC sera en position de refaire partie du Fond de Garanti des Bénéfices de Pension de l’Ontario, fond dont elle avait été exclue suite au plan de redressement financier de 2009. (Suite à la nouvelle loi, GMCC n’aurait à financer le Régime qu’à raison de 85% de solvabilité, et n’aurait pas à faire de paiements à moins que le ratio tombe sous ces montants.)
Même si rien de très spécial n’est ressorti de cette réunion, il s’agissait de bonnes nouvelles pour les retraités.
Votre Conseil de GENMO
May 1, 2018 GENMO Pension Committee Mtg. April 25, 2018
Quarterly Pension Committee Meeting April 25, 2018
On April 25, Tom Laurie—incoming GENMO Director of Communications—joined Mike Powell and Garry Marnoch at CHQ to meet with VP and Chief Financial Officer Amy Martin and Dave Courtney who oversees the pension plans, to consider the status of the portfolio as of the quarter just ended. Spoiler alert: nothing to worry about; things are fine.
The annual Asset Valuation as of December 2017 has not been filed yet; probably this will occur late summer.
Filing is held pending study of the implications of regulations arising out of Bill 177 which modifies (one hesitates to say “reforms”) pension legislation in Ontario. General Motors of Canada Company is in the process of evaluating whether GMCC is excluded (The bill would drop the solvency target from fully funded to 85% and increase the Pension Benefit Guarantee Fund from a percentage of $1000 per month to a percentage of $1500 per month. The bailout of 2009 excludes GMCC pensioners from the guarantee fund, and likely keeps the target solvency ratio at 100%.)
Overall return for the quarter was 3.9% and for the year was 6.5%. High quality bonds and the “broadscope” investments underperformed their segment benchmarks, while real estate (about 10% of the fund) and managed equities outperformed their market segments. The overall plan was flat to its benchmarks in the quarter, and for the year beat them by 30 basis points which means active management is working. Also, the yield curve is flattening for the overall market.
Presently our plan is made of 35% managed equities and other return seeking investments, and 65% fixed investments such as high quality bonds, of which 70% is hedged. We plan members have not the time horizon needed to take advantage of high-yield placements that carry high risk, but prefer certainty each month. Therefore, the de-risking strategy is working for us.
GENMO Executive
Réunion Trimestrielle du Comité sur la Pension, le 25 Avril 2018
Le 25 avril, Tom Laurie –nouveau directeur des communications de GENMO – s’est joint à Mike Powell et Garry Marnoch au CHQ afin de rencontrer le VP et le Contrôleur Amy Martin et Dave Courtney responsables du Fond de Pension, afin de voir les résultats à la fin du premier trimestre. Fausse alerte : rien à craindre; les choses vont bien.
L’estimation des actifs fin Décembre 2017 n’a pas encore été soumise : ça aura probablement lieu vers la fin de l’été.
On attend les résultats des effets qui auront lieu site au Projet de loi 177 qui modifie (on n’ose pas dire ‘améliore’) la loi dur les pensions de l’Ontario. La Compagnie General Motors du Canada en est à vérifier si GMCC en est exclue (Ceci aurait comme résultat de baisser la capitalisation du régime de pension, de complétement capitalisé à 85% capitalisé et de faire passer le Fond de Garanti sur les Pensions d’un % de $1000 par mois à un % de $1500 par mois. L’aide financière apportée en 2009 excluait les retraités de GMCC du fond de garantie, et devrait aussi garder la capitalisation du régime à 100%.)
Les résultats trimestriels étaient de 3,9% et de 6,5% pour l’année. Des obligations de haute qualité et les investissements en général ont sous performés par rapport à leur secteur du marché, alors que l’immobilier (10%) du fond et les actifs gérés ont dépassé leur secteur du marché. Le résultat total du régime était aligné à la moyenne pour le quartile et l’a dépassé de 30 points de base pour l’année, ce qui veut dire que la gestion active fonctionne bien. De même que la courbe des résultats qui s’aplatit pour le marché en général.
Notre régime est composé à 35% dans la gestion d’actifs et autres investissements à rendement, et à 65% d’investissements stables tels des obligations à haut rendement dont 70% sont de type fond composé (hedgefund). Nous, comme membres de ce régime n’avons pas un horizon de temps suffisant pour prendre avantage de placements à haut rendement qui comportent un risque élevé, mais préférons la certitude de mois en mois. Ainsi, la stratégie de diminution du risque fonctionne bien pour nous.
Executif de GENMO
January 1, 2018 Pension Committee Meeting December 19, 2017
Pension Committee Meeting- December 19, 2017
On Tuesday December 19 at headquarters on Colonel Sam Drive, Mike Powell and Garry Marnoch met with Amy Martin, Vice President of Finance and Chief Financial Officer since July 2017, and David Courtney, who oversees our salaried pension plan as well as the hourly plan.
As you know, our plan suffered in the 2008-9 financial crisis because of the large proportion of investment in stocks. Since then, a policy of de-risking has been judiciously implemented. This past March saw approval to increase the fixed income categories to 65% from the previous target of 60%. De-risking makes sense for our defined benefit plan which is closed; that is, no new members, and at this stage in our lives, we value protection from loss more that opportunity for future gains. High quality bonds now make up 61.2% of our portfolio.
The rising interest rate has improved the funded status of our plan. As rates rise, the obligation falls but the assets in fixed income (bonds) fall as well. The net position improves but leads to lower asset returns. To that point, our year-to-date return is 2.5% overall. All asset classes outperformed their benchmarks except for "broad scope mandate" (high growth but high risk; 3.1% of total plan) and real estate (9.8% of assets), resulting in the portfolio beating benchmarks by 28 basis points. The last quarter returns were slightly negative, but still exceeded the benchmarks. The less risky classes did better than the more volatile investments.
After having the plan's assets evaluated as of September 2016, General Motors arranged for another Actuarial Valuation as of December 31, 2016, to allow valuation comparisons to be made more easily. Although a date has not yet been set, it is expected that the next AV will be as of December 31, 2017.
GM issued a two-page Progress Report to pensioners after the September 2016 AV but not after the December AV, because regulations require only one a year. A similar update will follow the December 2017 Actuarial Valuation, probably by end of summer.
So, there are no startling developments, nothing alarming. We can proceed into Christmas in relative peace.
May 30, 2017 Pension Committee Meeting- May 12, 2017
Pension Committee Meeting- May 12, 2017
On May 12, 2017, GENMO’s Pension Review Committee—represented by Garry Marnoch—met with Dave Courtney, the financial analyst for our plan, and Ines Craviotto, Vice President of Finance and Chief Financial Officer for GMCC, to review the performance of the plan for the quarter ended December, and for the 2016 year.
Background to the discussion was the cheery thought that GMCC had its best sales year since 2008, which put us into a good mood.
The deck of information did not have the charts that display payments to pensioners versus contributions and earnings; however, the net was positive. This info is helpful and we hope to see it again in future. At the end of May the Actuarial Valuation for September 1, 2016 will be filed, and is expected to be a percent or so higher than the funded level of 85% for 2015. Although FSCO regulations allow actuarial valuations to be filed only every three years when 85% funding is maintained, GM is filing back to back years.
The salaried plan de-risking target is 60% high quality fixed investments, and its actual is almost there, at 59% bonds. There is an intention to introduce some flexibility into the ratio by hedging bonds to de-risk higher than the 60% target as discretion suggests.
Our fund returned 3.3% for the year, ahead of its benchmark 3.1%. However, in the final quarter it declined 2.3%, when its benchmark was negative 2.5%. Interest rates rose 33 basis points over the year, and 73 basis points in the fourth quarter. When interest rates go up, bond values decline, and we have 59% of our assets in high quality fixed investments. Although the fixed portion of our portfolio rose 2.9% over the year, it declined 5.6% in the final quarter. But when interest rates rise, the plan’s liabilities decline, all 100% of them. So the plan is better off.
A tenth of our plan is invested in real estate, and that did poorly, dragging down the overall performance. You may ask, how can one lose on Toronto real estate? But this is temporary; the loss is on valuation only, not real sales, and will rebound when the properties return to profitable uses.
The other asset classes outperformed their benchmarks, and the fund is in good shape.
November 9, 2016 Pension Committee Meeting October 28 2016
On October 28, Mike Powell and the writer met with Ines Craviotto, Chief Financial Officer and Vice President of Finance, and Dave Courtney, financial analyst for our pension plan, at GMCC's headquarters, to review the status of our pension plan for the quarter, in this case as of June 30, 2016. Also present was Kevin Tighe of Willis Towers Watson, actuarial consultant to GMCC. Though Hallowe'en was only three days away, the information was not very scary.
Not scary, but not exciting either. Although the plan return was positive overall, it fell short of the benchmark. The favourable performances within our portfolio were offset by Public Equities and Real Estate for the quarter and the two previous quarters. The fund managers are monitored on a regular basis to ensure they are meeting the fund's objective and turnover does occur. There are six asset classes in our plan, and fixed-income makes up 61% of the current asset mix. We are basically at the target of our de-risking strategy that has been pursued for four years. Return-seeking funds account for 39% of the whole. Low interest rates for the quarter continues the trend for the year, which increases liabilities, however, our de-risking strategy of high fixed income is helping to reduce the impact.
We sought clarification about some topics that have arisen in the meeting with GMCC executives August 25 or in conversations with GENMO members.
PYCB Prior Year Credit Balance
People outside GM including some politicians thought that when the governments bailed out GM with 4 billion dollars, the hourly and salaried plans must then be fully funded. Kevin detailed the use of the PYCB (Prior Year Credit Balance) from its inception in 2009 until it was used up by 2015. A deficit in any one year must be made up over the next five years. But a deficit in the next year has five years to be made good; and so on. The sponsoring company must make a minimum payment each year to work toward that target and is also allowed to use PYCB to offset funding obligations. To help GMCC through the financial turmoil, and provide cashflow certainty as pension contributions can vary greatly year to year, the governments negotiated that each minimum payment would come partly from GMCC and mostly from the PYCB for five years. The benefit of the up-front $720 million allowed growth in assets rather than spreading out that contribution over several years. All gone now; the PYCB has provided $720,200,000 and now GMCC makes the full annual minimum contributions.
Pension Benefit Guarantee Fund
Ontario backstops crumbling pension plans to a maximum of $1000 per month. But as part of the bailout negotiations, our salaried and hourly plans were excluded from this insurance plan. This saves GMCC about $14 million in annual premiums, based on the September 1, 2015 valuation results. The premiums would decrease over time as the funded status of the plans improves. To re-acquire this coverage, our plans have to reach full solvency funding for three consecutive year, which is highly unlikely to happen.
GM Canada Profitability
At the August 25 meeting, GMCC stated that GMCC managerially gets consolidated under GM North America (GMNA). As reported in GM's financial statements, GMNA's costs and breakeven point have been lowered and profits increased since the meltdown. But because GMCC is not a public company but part of a global corporation, there are no public documents that display performance for the Canadian subsidiary.
Sources of Pension Contributions
GENMO has been concerned about future contributions to the pension funds if manufacturing in Canada winds down. It was explained that contributions are made by GMCC and the business has three sources of revenue. The vast majority of GMCCs profits come ultimately from Marketing, the sale of vehicles. However, other activities receive "profit" from the Corporation as markups on their costs. Manufacturing and Engineering generate income on a cost-plus basis. These markups are arms' length returns and benchmarked on an annual basis.
June 21, 2016 Additional 2015 AV Information
Additional September 1, 2015 Actuarial Valuation Information
The expected lifetime of a participant who is aged 65 is 89.4 for a female and 86.9 for a male. There will be an update in the mortality assumptions in the next actuarial valuation.
There are 1,101 actives in the plan verses 1,139 in 2014 and 1,331 in 2013.
The number of participants receiving benefits in the plan is 7,174 in 2015 verses 7,306 in 2014. Their average ages are 75.0 and 74.3 respectively.
The average lifetime annual pension of the above is $22,963 in 2015.
It is assumed that 80% of the actives will take the commuted value when retiring.
We will be receiving a future actuarial valuation no later than September 1, 2016.
Information complémentaire au rapport de la valeur actuarielle du 1er septembre, 2015
L’espérance de vie d’un participant ayant 65 ans est de 89.4 pour une femme et de 86.9 pour un homme. Les valeurs d’espérance de vie seront ajustées dans le prochain rapport actuariel.
Il y a présentement 1,101 participants actifs dans le plan vs 1,139 en 2014 et 1,331en 2013
Le nombre de participants recevant des bénéfices en 2015 est de 7,174 vs 7306 en 2014. Leur âge moyen est de 75.0 et de 74.3 respectivement.
La pension à vie annuelle moyenne était de $22,963 en 2015.
On pense que 80% des futurs retraités prendront le montant la valeur actuarielle lors de leur pension.
Un autre rapport actuariel nous sera soumis au plus tard le 1er Septembre 2016.
May 15, 2016 Pension Committee Meeting May 4 2016
On May 4th, GENMO members Mike Powell and Garry Marnoch met with Dave Courtney, financial analyst for our pension plan, and Ines Craviotto, Chief Financial Officer and Vice President of Finance, at GMCC's headquarters. We reviewed charts as of the end of the fourth quarter 2015 summarizing performance of the several asset categories.
In keeping with the strategy to derisk the pension plan there were modest gains in most investments offset by real estate resulting in modest overall yields for the quarter, but below benchmarks. Five-year returns at 9.3% are good and exceed the benchmark.
The overall performance was encouraging in that the combined pension contributions and performance exceeded the payout from the plan in the period.
Although more than half of new retirees take commuted value—to the detriment of plan funding—there are far fewer of them since the full health-care coverage window closed last June.
By the end of the year, the salaried funded status had improved vs. 2014. So the tone of our meeting was positive throughout.
Mise à jour de notre Régime de Pension- Mai 2016
Le 4 Mai, Mike Powell et Garry Marnoch, membres de GENMO, ont eu un entretien avec Dave Courtney, analyste financier pour notre régime de pension, et Ines Craviotto, responsable des finances et Vice-Président finances, au siège social de GMCC. Nous avons repassé les tableaux à la fin du quatrième trimestre 2015 illustrant les résultats des différentes catégories d’actifs.
Suite à notre stratégie de minimiser les risques pour notre régime de pension, de faibles gains ont été enregistrés pour la plupart des investissements, mais réduits par les biens immobiliers, résultant en de faibles gains pour le 4ième trimestre, mais sous les objectifs. Les résultats sur 5 ans à 9.3% sont bons et dépassent l’objectif.
L’ensemble des résultats est encourageant du au fait que la somme des contributions au régime et les résultats des investissements dépassent les montant payés par le plan pour la même période.
Même si plus de la moitié des nouveaux retraités prennent le montant actualisé – au détriment de la capitalisation du régime – il y a beaucoup moins de ceux-ci depuis que la couverture médicale complète a cessé en Juin dernier.
Par la fin de l’année, le taux de capitalisation s’était amélioré vs. 2014. Ce qui a fait que notre réunion s’est déroulée sur une note positive.
April 27, 2016 Candidates for GENMO Director - 2016 to 2018
(4 positions available)
Denise Cay (current Director)
Alanna Lyczba (current Director)
Mike Black (current Director)
Mike Powell (current Director)
May 25, 2015 Pension Update May 2015
Dave Courtney, of GMCL Finance met with Mike Powell and Garry Marnoch of GENMO on May 13, 2015 to consider fund performance in the last quarter of 2014. Joining us for the first time was the new Vice President of Finance and Chief Financial Officer, Ines Craviotto.
The quarter ended as it began. Interest rates have been predicted to rise, but have not, which impacts the size of pension liabilities, but asset returns have been good, at 4.11%, so the funding status is stable.
2014 was a good year. In 2013, benefits payouts (including commuted value acceptances) exceeded income, but in 2014 asset returns more than offset the payouts, so the market value of the fund is higher than at the opening of 2013. Almost all the fund categories in the salaried portfolio outperformed their benchmarks, for a combined performance 33 basis points above the combined benchmark; this offset impact resulting from continuing low interest rates. (Our salaried plan outperformed the benchmark for 9 of the last 10 quarters, and 14 of the last 20.) "Emerging Markets" was slightly negative, but we are divesting this category. Canadian Equities was down 0.8% for the quarter, but for the year was positive 9.1%.
The Annual Valuation will be completed by the end of May. Since the financial crisis, our fund has moved to a more conservative investment profile, from about 80% invested in equities to around 45% currently. This means that we will not realize flashy gains as the market recovers, when compared to other plans. But we are a closed group; there will be no new members receiving defined benefit pensions from GMCL. So the important thing is to maintain the ability to meet the pension payments owed to members of this group, not to strive for overly risky returns that could imperil current payouts.
GMCL continues to make its required contributions to the fund, and plans to do so after the Prior Year Credit Balance (provided by the governments during the Bailout) gets used up. This commitment was stated again by Steve Carlisle at the General Motors Salaried Pensioners Association meeting May 12, at which he was the featured speaker.
November 12, 2014 Pension Update November 2014
Quarterly Review of Retirement Plan with GMCL Financial
On Friday November 7, 2014 Mike Powell and Garry Marnoch met with Dave Courtney at GMCL Headquarters to review the status of the pension plan for the quarter ending June 30, 2014.
Assets in the plan increased slightly since December 31, 2013, and stand at $11.3 billion. Payouts were higher than last year because of the number of folks who opted for retirement by June to capture benefits in retirement, who also chose commuted value instead of pension payments. The remainder of the year will see much less of that, so payouts will trend down to a normal rate.
Overall fund performance for the quarter was 2.8% overall return, slightly less than the benchmark; most of the folders in the portfolio were similar. Calendar year-to-date was quite good, and one-year performance was excellent at 12.9% return for the salaried plan (and favourable to the benchmark). Five-year returns look good, now that the awful year of 2008 has fallen off the chart. For the seven quarters prior to this last, the fund managers taken together have bettered the benchmark One underperforming management firm has been dropped.
The GMAM policy for asset mix that was approved in February was completed by October. To date the salaried and hourly plans have shared the same asset mix, which minimizes management fees. However, the salaried plan is closed, there will be no new participants, so we anticipate asset mix differences in the future in keeping with the now less risky profile of the Salary plan.
Interest rates have for some time been unhistorically low; at some point they will have to rise. Dave showed a graph which displayed how a small increase in the prevailing rate increases by hundreds of millions of dollars the ability of our fund to meet its future commitments.
In summary, a weak quarter but a good year.
September 21, 2014 USSC Restructuring
You may have heard that US Steel Canada (was STELCO) filed to restructure September 16. Their filing provides an excellent example of what is wrong with the Ontario Pension Benefit Act and the Federal Business and Insolvency Act (BIA) and the Companies' Creditors Arrangement Act (CCAA). It is, unfortunately, a scenario that we may be facing in the next few years.
The following message has been delivered to the people GENMO members have been meeting with over the last year; including all three levels of government, the Ministry of Finance and the media.
With US Steel Canada (USSC) filing for restructuring under the Companies' Creditors Arrangement Act (CCAA) this week after apparently attempting to shed pension obligations through the Canada Business Corporations Act (CBCA) this summer, it is timely to recap our concerns.
USSC faced decline sales, lack of modernization investment and significant “legacy costs” such as pensions and benefit programs. The very issues we outlined to you that GM Canada faces.
Both USSC and GM Canada are wholly owned subsidiaries of US companies; the shares of the companies are US shares. Early reports show USSC shares have increased 10% which leads one to believe the US markets see restructuring or bankruptcy of foreign subsidiaries to shed legacy costs to be good business strategy.
As with GM Canada’s pension plan USSC’s pension plan is underfunded; reportedly USSC by $838.7 million, GM Canada by $3.5 billion.
USSC puts at risk some 14,000 pensioners, pensioners now facing reductions in their monthly pension cheques; even though their pension is considered deferred earnings. GM Canada puts at risk some 45,000 pensioners.
The impact of reduced pensions is felt Municipally, Provincially and Federally. Solving the problems is the responsibility of the Provincial and Federal governments.
The Ontario Pension Benefits Act needs to be strengthened to protect the pension plan members. Simply put, plan members are entitled to their deferred earnings and it is the responsibility of the government to ensure this through legislation. The widespread underfunding of pensions demonstrates that this current legislation and enforcement is not accomplishing this. Companies must be induced to fully fund their pension plans. We have outlined some proposals to address this.
There is a need to add options for the treatment of pensions abandoned through restructuring and bankruptcy. Today, they must be annuitized. We know from the NORTEL experience that the Canadian annuity market is simply not large enough to handle these large numbers. Estimates are that it will take five to seven years to annuitize the NORTEL pensions; some 12,000 pensioners. Adding 14,000 USSC pensioners to this limited market is not likely practical. Adding 45,000 GM Canada pensioners would be catastrophic. We have outlined some proposals to address this.
As more large companies restructure the exclusion of GM Canada pensioners from the Ontario Pension Benefits Guarantee Fund (PBGF) becomes very troubling. Recently Algoma and USSC have filed, we have explained our concerns with GM Canada. Note that these were three of the companies that took advantage of Regulation 5.1; “Too big to fail”. GM Canada pensioners should be covered by the PBGF.
The federal Bankruptcy and Insolvency Act (BIA) and CCAA prioritize pension solvency deficiencies so low as to virtually ensure there are no assets to fund them. GENMO, as a member of the Canadian Federation of Pensioners has provided input to the Industry Minister’s review of the BIA and CCAA covering four points; Give effect to the pension deemed trusts created under federal and provincial legislation in all insolvency proceedings, Grant pensioners priority over secured creditors to amounts covered by a deemed trust, no matter when the security was granted to the lenders, Ensure the pension deemed trusts are given effect even if the plan is wound-up after the insolvency proceedings have commenced and If Parliament is unwilling to make such changes, extend the secured priority ranking that currently applies to unpaid normal costs today to all amounts owing to the plan.
The CCAA filing of USSC should compel governments to address the pension issues, and act as a warning of what could happen in the future.
August 20, 2014 Pension Update August 2014
Dear GENMO Member:
You recently received an “Update to Members regarding Plan Funding” from General Motors of Canada. This note applies to everyone’s pension. No matter when you retired, no matter what program, no matter whether you were in the class for the benefits law suit or not; the pension issues apply to you.
GENMO continues to represent you and your pension issues with politicians, government agencies, and GM. No one else does.
Unfortunately the message has not changed very much since last year.
Just as last year the message is: • Your pension is underfunded • GMCL does not have a plan to fully fund the pension • GMCL is committed to paying the lowest amount possible into the plan
Our pension's wind up ratio has improved to 82.6% from 75.4%. The windup ratio is the percentage of pension obligations the plan could cover if the plan ceased operations; this is the key ratio to focus on. Another important point is that while the wind up ratio is 82.6% if there was a restructuring or bankruptcy there would be additional costs that would reduce that number.
Certainly good news, but as we discussed at the Annual General Meeting on May 22, 2014, better isn't good enough. As part of the bailout agreement we lost Pension Benefit Guarantee Fund (PBGF) coverage. The PBGF is an Ontario government pension insurance program. If we were covered, the PBGF would pay us $200 - 300 per month to offset some of the reduction in a bankruptcy situation. To regain coverage, our pension has to be 100% funded for three consecutive years.
Further, GM has committed to making only the minimum pension contribution since 2009. This has resulted in our pension experiencing solvency deficiencies four of the past five years.
The note refers to changes GM Canada negotiated in 2009 with the Province of Ontario as part of the bailout. Changes that were largely detrimental to us and with no participation from the salaried retirees; we had no voice.
Once again we would like to clarify a couple of points here.
First the $200 million annual payment was negotiated as GM Canada’s maximum pension contribution from operations to the two pension plans; hourly and salary. The calculated minimum contribution is much higher.
Second, the difference has been funded from that $720.2 million mentioned (the $720.2 is the portion allocated to the salary plan of the total $4 billion Prior Year Credit Balance created in 2009). The Prior Year Credit Balance will be essentially $0 at the end of this year at which time GM Canada will have to rely on operations for the full pension contribution to both plans.
In the memo there is a statement "If the Plan were wound-up, GMCL would be required to fully fund the wind-up liabilities ..." This does not mean that our pension is safe should GMCL go bankrupt. What is left out of this statement is that it assumes GMCL would have cash and/or assets to fully fund at wind-up. Right now the wind up ratio is 82.6%. As the NORTEL retirees have experienced, there is usually no money left when it comes to dealing with a pension shortfall.
GENMO continues to advocate addressing our pension issues.
If you know GMCL salaried retirees who are not members of GENMO, please send them this note. They too need to understand how fragile our pension is.
No one else is protecting our pension. We need to.
If you have any questions, please direct them to info@genmo.ca
Your GENMO Executive
Brian Rutherford, Mike Powell, Lynn McCullough, Jan O’Neill, Mike Black, Denise Cay, Garry Marnoch, Alanna Lyczba
