2008 Annual Meeting ● Assemblée annuelle 2008 Québec

1. Total Career Benchmark Process 2008 Annual Meeting ●Assemblée annuelle 2008 Québec

2. Why does Canada need TCBP To Increase Fairness Person to Person Employer to Employee Public Sector to Private Sector 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

3. Why does Canada need TCBP? (cont.) To Increase Benefits by Reducing Costs Reduce Bureaucracy Standardize Administration and Benefits Take Maximum Advantage of Modern Technology 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

4. Why does Canada need TCBP (cont.) To Make the System Sustainable Reasonable and consistent sharing of risks and rewards Reduce demographic risk Focus on primary purpose of a retirement system – guaranteed lifetime income 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

5. Why does Canada need TCBP (cont.) Keep the Good; Eliminate the Bad Keep employees AND employer contributions Eliminate the “hidden tontine” in DB plans Eliminate the super complex bureaucratic requirements 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

6. What does TCBP do? Increases Fairness Everyone has the chance to attain the “ideal” pension Differences from Employer to Employer will be by “quantity” not by “design” Maximizes flexibility available to individuals both before and after retirement Allows a carry forward of both contribution and benefit room in a fair way Recognizes government sponsored benefits in determining targets 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

7. What does TCBP do? (cont.) Maximizes Benefits by Reducing Costs Provides clear benchmarks for projecting and appreciating retirement benefits Makes Standardized Administration possible Transfers professional time from bureaucratic tasks to creative solutions 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

8. What does TCBP do? (cont.) TCBP Makes System Sustainable Changes the way in which tax-sheltered funds are accrued such that: Financial risk is reduced Employee understanding is increased The “asymmetry” between employer and employee is eliminated Bureaucracy and complexity are reduced Reduces demographic risk for plan sponsors Focuses on a guaranteed lifetime income 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

9. What does TCBP do? (cont.) Keeps the Good Employees and employers both contribute By using their “Personal Account” employees can accrue early retirement benefits survivor benefits benefits based on best 5 consecutive years earnings post retirement health funds 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

10. What does TCBP do? (cont.) Eliminates the Bad Eliminates the “hidden tontine” in DB plans No cross subsidization of members Plan sponsor’s costs are minimally affected by any employee decisions The administrative requirements for almost all plan sponsors will be no greater than any other payroll deduction 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

11. What is the TCBP process? Complex behind the scenes but very simple for end-users TCBP terminology will become common lingo like the Richter Scale DB plans will have the same design but can vary by accrual rate. The accrued benefit will be life only but will be indexed before and after retirement like the CPP. 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

12. What is the TCBP process? (cont.) Centralized Retirement Accounts including a Lifetime Account and a Personal Account The CPP methodology of expressing a member’s annual earnings as a multiple of the YMPE will be used to track pensionable earnings The annual factor will be called the Annual Retirement Factor (ARF) and will drive the entire TCBP process 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

13. The Quiz For all questions assume that the year is 2015, the YMPE is $50,000 and all answers are in current 2015 dollars. Q1: Jordan has an ARF of 1.400. What are Jordan’s Pensionable earnings? 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

14. What is the TCBP process? The target lifetime accrual will be a career average pension indexed like the YMPE and CPP before and after retirement During the Designated Pension Accrual Period (from Age 30 to Age 65) the maximum target lifetime accrual will be 70% of career average earnings The annual DB benefit limit will be based on 2% of the YMPE times a maximum ARF of 3.000. 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

15. The Quiz Q2: What is Jordan’s DB limit for 2015? Q3: Jordan’s twin sister earns $200,000 in 2015. What is her maximum DB limit for 2015? 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

16. The Quiz Q4: Jordan has just turned 45 and has 15 years in the Designated Pension Accrual Period. Jordan’s total ARF’s to date are 16.000. What is Jordan’s Accrued Target Lifetime Pension? 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

17. What is the TCBP process? The annual tax-sheltered limits will be derived from the value of the annual target lifetime accrual. There will be separate limits for the Lifetime and the Personal Accounts The Lifetime component drives the total value As age and career advances the proportion of total value allocated to Lifetime vs Personal will change 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

18. What is the TCBP process? TCBP includes adjustment tools which allows the use of the Personal Account to provide for a. Periods of non-participation in the work force b. An adjustment from “career average earnings” to “best 5 average earnings” c. Ancillary benefits such as spousal survivor benefits, early retirement benefits, bridge benefits, post-retirement health benefits etc. d. An increase in Income Replacement Ratio by recognizing service prior to the Designated Pension Accrual Period 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

19. The Quiz Q5: If over the next 20 years Jordan’s ARFs total 34 what is Jordan’s Career Target Lifetime Pension? 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

20. The Quiz Q6: If over Jordan’s best 5 consecutive years the average ARF is 2.000 how much can Jordan’s Career Target Lifetime Pension be increased to move from Career Average Earnings to Best 5 Average Earnings? 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process

21. Conclusion The TCBP Process is a fundamental first step in redefining Canadian Pension Plans. Much work would need to be done for the initial setup. The end result will be a system which is consistent with both modern technology as well as individual needs and goals. 2008 Annual Meeting Assemblée annuelle 2008 Total Career Benchmark Process