In consultation with the Investment Committee, the Board documents the investment policies for the Public Service Pension Plan (the Plan) Fund in the Statement of Investment Policies and Procedures (SIP&P). The SIP&P addresses key matters including the Fund governance, investment objectives and beliefs, philosophy, asset mix policy, risk management, permitted types of investments, and the responsible investing strategy. To learn more about our investment policies and procedures, visit provident10.com/investments.

Improving the Plan’s Funded Status and working toward full funding is a key focus for the Board and a requirement of the Joint Sponsorship Agreement (JSA).

FUNDED RATIO OVER TIME

While the first few months of 2020 were characterized by considerable declines for most asset classes, the remainder of the year saw an extraordinary reversal and significant returns despite the negative impact of the pandemic on global economies.

The Fund finished 2020 with approximately $10.9 billion in assets (including promissory note) versus a $10.8 billion liability. In its oversight of the Plan, Provident10 closely monitors financial markets and other factors that impact Plan funding levels. As a result of these assessments, the Fund’s future return expectations is reflected in a lower discount rate of 5.85% (see PSPP Financial Statements note nine.)

Despite a $0.6 billion increase in the liability directly resulting from a change in the actuarial assumptions, the funded ratio of 101.0% has remained comparable to the previous year’s101.6% ratio. Over the past ten years, the Plan has improved its financial condition and has achieved funded ratios exceeding 100% in the past two years.

Planning for the next 10 years, investment returns are expected to be moderate. Uncertainties related to the ultimate direction of interest rates, changes in inflation expectations, high overall levels of equity market valuations, and heightened global volatility may well signify periods of difficulty for the Plan’s ability to maintain its fully funded status. Moreover, Plan member demographics such as aging population combined with a decline in active participants could have a future impact on the Fund.

The Plan regularly reviews its risk and return profile and monitors global market conditions, mindful of the accrued benefits of the members. Provident10 believes the asset mix adjustments planned for 2021 and beyond offer greater overall Plan resilience and downside protection for the Fund to achieve its expected performance. Additionally, in 2020 the organization initiated a strategic undertaking to better assess the Plan’s vulnerability to unforeseen negative market events. The purpose of the project is to better understand the types of market environments that may impact the security of member benefits. The result of the analysis will help to guide discussions and decisions on the condition of the Plan.

 

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