March 13, 2020 - Pension LEW Plan
March 13, 2020 - Unofficial Commentary provided by the LEW Pension Advisory Committee Regarding the Status of the LEW Salaried Pension Plan
The following is an unofficial commentary to the question “How bad has our pension plan be affected by the recent stock market events?”
Please note: No further comment/information will be available until after the next meeting with Morneau Shepell, to be scheduled sometime in mid April to review 2020 Q1 Plan Performance. A further update will be provided following that meeting.
The Lake Erie Pension Advisory Committee (PAC) had a planned conference call on Friday March 13th. with Morneau Shepell, FSCO/FSRA, our counsel at Koskie Minsky and the Investment management arm of Morneau Shepell that oversees the Plan’s assets. The purpose of the call was to update the PAC on the Plan’s results as of Dec 31st. 2019.
The Plan’s solvency status improved during 2019 from 89.2% to 95.3% as of Dec 31 st. The Plan’s assets were derisked during 2019 to have nearly 60 % placed in fixed income ( low volatile/ low risk) instruments. Early in 2020 the assets were further de-risked to put 70% of assets into fixed income instruments and leaving 30% in the equities markets.
The 2019 overall Plan performance is considered to be very satisfactory.
Morneau Shepell recognized the concern and questions that the PAC has received and offered the following commentary, emphasizing that any commentary the current state of market volatility is outside of their reporting requirements as Plan Administrator duties mandated by the Stelco Pension Regulation 255/17.
During this recent downturn in the stock market, the fixed assets (70%) have increase in value by approximately 1%.
The Equity assets (30 %) have decreased in value by approximately 10% .
The annuity purchase rate, which is used to test the solvency funded status of the Plan, has decreased from the Dec 31st value but that value is only used at certain points in time so it was considered inappropriate to comment on it’s value because it could be misleading.
The PAC has reviewed the information that Morneau Shepell has provided and we feel that as of Friday March 13th the LEW Salaried Pension Plan is about 89% funded.
Hopefully this will relieve the prevailing concern about any imminent danger of the Plan being wound up in an underfunded position. At this point in time the Plan is nearly 20% above the threshold for any such contemplated action of any windup.
Morneau Shepell has agreed to have another conference call with the PAC shortly after the 2020 Q1 results are tabulated (mid April) and we will report the relevant information.
The Hamilton Salaried Plan now remains unaffected by the current series of events because their assets are now immunized from the market volatility.