The PPMP at a Glance

A newsletter for the members and pensioners of the Pension Plan of Management Personnel (PPMP)

NEW PPMP CONTRIBUTION RATESThe PPMP members’ contribution rate went from 12.30% to 14.38% last January 1st. The increase follows the plan’s actuarial valuation on December 31, 2011 done by the Commission administrative des regimes de retraite et d’assurances (CARRA)’s actuaries.

The actuarial valuation was presented to the Pension Committee last October. It concluded that the contribution rate needed to finance the members’ portion of the benefits (about half the benefits) should be set at 20.11% starting January 1, 2014. The main reasons for the increase are explained in the following section.

In conformity with the temporary measure established in 2012 to limit the contribution rates while avoiding the plan’s underfunding, the government and employers pay, in addition to their usual commitments, a compensation to the PPMP members fund. The compensation is intended to bridge the difference between the contributions paid by the members and the ones prescribed according to the most recent actuarial valuation. Therefore, for 2014 to 2016, the annual compensation is 5.73% (20.11% - 14.38%) of the salaries exceeding 35% of the Maximum Pensionable Earnings (MPE) of the Quebec Pension Plan.

March 2014

TO CONTACT USOn Internetwww.carra.gouv.qc.ca

By phone418 643-4881 ( Québec area) 1 800 463-5533 (toll free)

Persons with a hearing impairment 418 644-8947 (Québec area) 1 855 317-4076 (toll free)

By fax418 644-8659

In person or by mailIf you wish to meet with a staff member, we recommend that you phone to make an appointment. You can also write us or come to the reception desk at the following address:

Commission administrative des régimes de retraite et d’assurances 475, rue Saint-Amable Québec (Québec) G1R 5X3

You can also see your employer who will guide you through the process.

The information contained in this newsletter is of a general nature and does not supersede the legal provisions of the act that governs your plan or its regulations.

© Gouvernement du Québec, 2014

Printed on Rolland Enviro 100, contains 100% of post consumer fiber, certified EcoLogo and manufactured using biogas energy.

SUBSCRIBE TO CARRA’S ELECTRONIC MAILING LIST

Subscribe to CARRA’s electronic mailing list to receive news regarding the various pension plans. The mailing list is available on our website under “Mailing list” at the following add ress: www.carra.gouv.qc.ca/liste.

Jacques Racine PrésidentPatrick Bessette Ministère de la Santé

et des Services sociauxAnne-Marie Chiquette APER santé et services sociaux

Nadyne Daigle Regroupement des associations de cadres en matière d’assurance et de retraite

Réda Diouri Secrétariat du Conseil du trésor

Carole Doré Association des cadres supérieurs de la santé et des services sociaux

Guy Émond Ministère des Finances et de l’ÉconomieMarie-Pier Gagnon Secrétariat du Conseil du trésor

Gérard Grégoire Représentant des retraités

Audrey Greffard Secrétariat du Conseil du trésor

François Jean Association des gestionnaires des établissements de santé et de services sociaux

Josée Lamontagne Coalition de l’encadrement en matière de retraite et d’assurance

Isabelle Marcotte Secrétariat du Conseil du trésorLine Pineau Association des cadres

des collèges du QuébecCarole Roberge Alliance des cadres de l’ÉtatMartin Rhéaume Ministère de l’Éducation, du Loisir

et du SportMarie-Ève Simoneau Secrétariat du Conseil du trésor

The PPMP at a Glance

MEMBERS OF THE PPMP PENSION COMMITTEE

YOU WILL SOON RECEIVE YOUR STATEMENT OF PARTICIPATION…In a few weeks, CARRA will start sending the Statements of Participation. They will be sent to members according to the following schedule:

Education sector May 2014

Health and social services sector June 2014

Public sector July 2014

On your statement, you will find the details of your contributions to the PPMP for the year that ended December 31, 2012, based on the data provided by your employer. You will also find information about the benefits to which you could be entitled when you retire or at theend of your employment.

Don’t forget that your statement is a precious tool to help you plan your retirement! To find out more about the statement of participation, visit CARRA’s website at www.carra.gouv.qc.ca, under the Documentation tab, section Publications pour les participants.

RESULTS OF THE PPMP’S ACTUARIAL VALUATIONEven if the financial situation is measured on December 31, 2011, it takes into account legislative changes adopted in 2012 (L.Q. 2012, c.6). In addition, the return for the year following the evaluation (2012) is known and taken into account. The previous table shows that the PPMP’s deficit went from 499 million dollars on December 31, 2008, to 1 930 million dollars on December 2011. That evolution is explained mainly by the negative return of 2008, which was recognized entirely in the December 31, 2011 evaluation, with the decrease of the expected return and the increase of life expectancy which is more important than expected.

PPMP CONTRIBUTION RATES

The PPMP’s contribution rate only applies on the portion of your salary that exceeds 35% of the Maximum Pensionable Earnings (MPE) of $52 500 prescribed by the Régie des rentes du Québec for 2014. Since you will not pay any contributions for the first $18 375 (35% of $52 500), the contribution rate of 14.38% does not apply to your entire salary.

For example, someone earning $80 000 will pay $8 862 in contributions, that is, 11.08% of his or her salary.

14.38% x ($80 000 - $18 375) = $8 862 / $80 000 = 11.08%

{Notice to the accessibility reader: This document is compliant with the Government of Quebec SGQRI 008-02 to be accessible to any disabled person or not. All records braces are alternative texts for images, or abbreviations to describe any other information provided by sensory perception that communicates information indicates an action solicits a response or distinguish a visual element. If you are experiencing technical difficulties, please contact the customer service at the following number: 1 8 0 0 4 6 3 - 5 5 3 3.}

{Notice to the accessibility reader: This document is compliant with the Government of Quebec SGQRI 008-02 to be accessible to any disabled person or not. All records braces are alternative texts for images, or abbreviations to describe any other information provided by sensory perception that communicates information indicates an action solicits a response or distinguish a visual element. If you are experiencing technical difficulties, please contact the customer service at the following number: 1 8 0 0 4 6 3 - 5 5 3 3.}

32

The PPMP at a Glance The PPMP at a Glance

Evolution of return from 2004 to 2013 (percentage)

The PPMP members fund performance during the last 10 years

From 2004 to 2013, the PPMP members fund showed an average return of 6.4% a year on its investments. Those investment results explain for the most part the growth of the members’ fund which passed from 5.5 B in 2004 to 8.7 B in 2013.

Evolution of fund 302 – PPMP (billion dollars)

The PPMP’s financial situation

Smoothing mechanism

In order to reduce the effect of the fluctuation of the fund’s performance on the contribution rate, the market value of the fund is adjusted upwards or downwards with the assistance of a smoothing mechanism which consists in gradually recognizing over a period of 5 years the gains and loss of performance against the hypothesis used in the actuarial valuations.

During December 31, 2008’s actuarial valuation, the application of the smoothing mechanism had the effect of establishing the value of the assets to an amount of 585 million dollars over their market value on that date. During December 31, 2011’s actuarial valuation, the situation was reversed and the application of the smoothing mechanism resulted in a downwards adjustment of 275 million dollars.

Valuation assumptions

The main changes made to the valuation assumptions concern the expected performance of the fund and the life expectancy of the pensioners and surviving spouses. The revision downwards of the performance hypothesis is mainly due to the decrease in performance expected of the fixed income asset categories while the increase in life expectancy is due to the experience observed with the PPMP during these last years.

The PPMP members’ contribution rate due to current service

The last actuarial valuation allowed to define the contribution rate needed to finance the benefits acquired by a member for one year of service, taking into account the PPMP’s administrative expenses. The rate is 12.88%. If there is no surplus or no deficit, that rate should be applied.

The rate of contributions needed, taking the deficit into account

The PPMP’s funding policy provides for the damping of the pension fund’s surplus and deficits over a period of 15 years. Therefore, the pension fund’s deficit of 1 930 million dollars should be amortized by 128.7 million dollars a year. That amortizing leads to an increase of 7.23% against the rate needed to finance the benefits acquired for a year of service. The contribution rate resulting from the actuarial valuation is thus established at 20.11% (12.88% + 7.23%).

THE PPMP MEMBERS FUND PERFORMANCE IN 2013The PPMP members fund showed a return of 12.0% in 2013. That return is higher than the hypothesis of 6.0% expected in the most recent PPMP actuarial valuation. The fund’s assets are invested in the Caisse de depot et placement du Québec (CDP) in 12 different categories of assets such as bonds, real estate investment, Canadian stocks, etc.

Again this year, it is the stock markets that have obtained the best return. The United States’ stock, with a return of 41.3%, as well as the EAFO stocks (Europe, Australasia and the Far East), with a return of 31.5%, have surpassed the Canadian stocks (16.3%). The increase in interest rates during the last year has resulted in a return close to 0% for the bonds.

EVOLUTION OF THE MEMBERS AND BENEFICIARIES PROFILEThe comparison of the data used for the December 31, 2008 actuarial valuation with the December 31, 2011 actuarial valuation allow for the following observations:

• During the 3 year period, the number of active members passed from 26 898 to 27 978, an increase of 4%. Most of the 6 988 memberships in the PPMP during that period have been offset by retirements.

• The average age of PPMP’s active members has decreased slightly from 48.5 years old to 48.2 years old.

• The annual average salary of the PPMP’s active members has increased to almost 5%, from $82 102 to $86 240.

• The beneficiaries’ average annual pension increased from $28 326 to $33 065, which represents an increase of almost 17%.

• The number of beneficiaries increased by 21%, from 19 613 to 23 794.

• The number of active members against the number of beneficiaries went from 1.4 active member for 1 beneficiary to 1.2 active member for 1 beneficiary.

The ratio of number of active members against the member or beneficiaries decreased slightly less than expected due to the increase in the number of active members. Still, the evolution of the demographic profile represents a challenge in regards to the variability of the members’ contribution rate, since the gains and losses must be absorbed by the active members, who represent a decreasing proportion against the beneficiaries. The PPMP’s funding policy and investment policy are revised frequently to take that phenomenon into account.

8 active members 1 beneficiary

1990

2002

2014

2 active members 1 beneficiary

1 active member 1 beneficiary

Comparison of the PPMP’s financial situation on December 31, 2008 and December 31, 2011

(In millions of dollars)

2008 2011

Actuarial value of the pension fund 6 711 7 350

Actuarial value of the commitments paid by the members - 7 209 - 9 280

Stabilization fund 0 0

Surplus / Deficit - 499 - 1 930

32

The PPMP at a Glance The PPMP at a Glance

Evolution of return from 2004 to 2013 (percentage)

The PPMP members fund performance during the last 10 years

From 2004 to 2013, the PPMP members fund showed an average return of 6.4% a year on its investments. Those investment results explain for the most part the growth of the members’ fund which passed from 5.5 B in 2004 to 8.7 B in 2013.

Evolution of fund 302 – PPMP (billion dollars)

The PPMP’s financial situation

Smoothing mechanism

In order to reduce the effect of the fluctuation of the fund’s performance on the contribution rate, the market value of the fund is adjusted upwards or downwards with the assistance of a smoothing mechanism which consists in gradually recognizing over a period of 5 years the gains and loss of performance against the hypothesis used in the actuarial valuations.

During December 31, 2008’s actuarial valuation, the application of the smoothing mechanism had the effect of establishing the value of the assets to an amount of 585 million dollars over their market value on that date. During December 31, 2011’s actuarial valuation, the situation was reversed and the application of the smoothing mechanism resulted in a downwards adjustment of 275 million dollars.

Valuation assumptions

The main changes made to the valuation assumptions concern the expected performance of the fund and the life expectancy of the pensioners and surviving spouses. The revision downwards of the performance hypothesis is mainly due to the decrease in performance expected of the fixed income asset categories while the increase in life expectancy is due to the experience observed with the PPMP during these last years.

The PPMP members’ contribution rate due to current service

The last actuarial valuation allowed to define the contribution rate needed to finance the benefits acquired by a member for one year of service, taking into account the PPMP’s administrative expenses. The rate is 12.88%. If there is no surplus or no deficit, that rate should be applied.

The rate of contributions needed, taking the deficit into account

The PPMP’s funding policy provides for the damping of the pension fund’s surplus and deficits over a period of 15 years. Therefore, the pension fund’s deficit of 1 930 million dollars should be amortized by 128.7 million dollars a year. That amortizing leads to an increase of 7.23% against the rate needed to finance the benefits acquired for a year of service. The contribution rate resulting from the actuarial valuation is thus established at 20.11% (12.88% + 7.23%).

THE PPMP MEMBERS FUND PERFORMANCE IN 2013The PPMP members fund showed a return of 12.0% in 2013. That return is higher than the hypothesis of 6.0% expected in the most recent PPMP actuarial valuation. The fund’s assets are invested in the Caisse de depot et placement du Québec (CDP) in 12 different categories of assets such as bonds, real estate investment, Canadian stocks, etc.

Again this year, it is the stock markets that have obtained the best return. The United States’ stock, with a return of 41.3%, as well as the EAFO stocks (Europe, Australasia and the Far East), with a return of 31.5%, have surpassed the Canadian stocks (16.3%). The increase in interest rates during the last year has resulted in a return close to 0% for the bonds.

EVOLUTION OF THE MEMBERS AND BENEFICIARIES PROFILEThe comparison of the data used for the December 31, 2008 actuarial valuation with the December 31, 2011 actuarial valuation allow for the following observations:

• During the 3 year period, the number of active members passed from 26 898 to 27 978, an increase of 4%. Most of the 6 988 memberships in the PPMP during that period have been offset by retirements.

• The average age of PPMP’s active members has decreased slightly from 48.5 years old to 48.2 years old.

• The annual average salary of the PPMP’s active members has increased to almost 5%, from $82 102 to $86 240.

• The beneficiaries’ average annual pension increased from $28 326 to $33 065, which represents an increase of almost 17%.

• The number of beneficiaries increased by 21%, from 19 613 to 23 794.

• The number of active members against the number of beneficiaries went from 1.4 active member for 1 beneficiary to 1.2 active member for 1 beneficiary.

The ratio of number of active members against the member or beneficiaries decreased slightly less than expected due to the increase in the number of active members. Still, the evolution of the demographic profile represents a challenge in regards to the variability of the members’ contribution rate, since the gains and losses must be absorbed by the active members, who represent a decreasing proportion against the beneficiaries. The PPMP’s funding policy and investment policy are revised frequently to take that phenomenon into account.

8 active members 1 beneficiary

1990

2002

2014

2 active members 1 beneficiary

1 active member 1 beneficiary

Comparison of the PPMP’s financial situation on December 31, 2008 and December 31, 2011

(In millions of dollars)

2008 2011

Actuarial value of the pension fund 6 711 7 350

Actuarial value of the commitments paid by the members - 7 209 - 9 280

Stabilization fund 0 0

Surplus / Deficit - 499 - 1 930

The PPMP at a Glance

A newsletter for the members and pensioners of the Pension Plan of Management Personnel (PPMP)

NEW PPMP CONTRIBUTION RATESThe PPMP members’ contribution rate went from 12.30% to 14.38% last January 1st. The increase follows the plan’s actuarial valuation on December 31, 2011 done by the Commission administrative des regimes de retraite et d’assurances (CARRA)’s actuaries.

The actuarial valuation was presented to the Pension Committee last October. It concluded that the contribution rate needed to finance the members’ portion of the benefits (about half the benefits) should be set at 20.11% starting January 1, 2014. The main reasons for the increase are explained in the following section.

In conformity with the temporary measure established in 2012 to limit the contribution rates while avoiding the plan’s underfunding, the government and employers pay, in addition to their usual commitments, a compensation to the PPMP members fund. The compensation is intended to bridge the difference between the contributions paid by the members and the ones prescribed according to the most recent actuarial valuation. Therefore, for 2014 to 2016, the annual compensation is 5.73% (20.11% - 14.38%) of the salaries exceeding 35% of the Maximum Pensionable Earnings (MPE) of the Quebec Pension Plan.

March 2014

TO CONTACT USOn Internetwww.carra.gouv.qc.ca

By phone418 643-4881 ( Québec area) 1 800 463-5533 (toll free)

Persons with a hearing impairment 418 644-8947 (Québec area) 1 855 317-4076 (toll free)

By fax418 644-8659

In person or by mailIf you wish to meet with a staff member, we recommend that you phone to make an appointment. You can also write us or come to the reception desk at the following address:

Commission administrative des régimes de retraite et d’assurances 475, rue Saint-Amable Québec (Québec) G1R 5X3

You can also see your employer who will guide you through the process.

The information contained in this newsletter is of a general nature and does not supersede the legal provisions of the act that governs your plan or its regulations.

© Gouvernement du Québec, 2014

Printed on Rolland Enviro 100, contains 100% of post consumer fiber, certified EcoLogo and manufactured using biogas energy.

SUBSCRIBE TO CARRA’S ELECTRONIC MAILING LIST

Subscribe to CARRA’s electronic mailing list to receive news regarding the various pension plans. The mailing list is available on our website under “Mailing list” at the following add ress: www.carra.gouv.qc.ca/liste.

Jacques Racine PrésidentPatrick Bessette Ministère de la Santé

et des Services sociauxAnne-Marie Chiquette APER santé et services sociaux

Nadyne Daigle Regroupement des associations de cadres en matière d’assurance et de retraite

Réda Diouri Secrétariat du Conseil du trésor

Carole Doré Association des cadres supérieurs de la santé et des services sociaux

Guy Émond Ministère des Finances et de l’ÉconomieMarie-Pier Gagnon Secrétariat du Conseil du trésor

Gérard Grégoire Représentant des retraités

Audrey Greffard Secrétariat du Conseil du trésor

François Jean Association des gestionnaires des établissements de santé et de services sociaux

Josée Lamontagne Coalition de l’encadrement en matière de retraite et d’assurance

Isabelle Marcotte Secrétariat du Conseil du trésorLine Pineau Association des cadres

des collèges du QuébecCarole Roberge Alliance des cadres de l’ÉtatMartin Rhéaume Ministère de l’Éducation, du Loisir

et du SportMarie-Ève Simoneau Secrétariat du Conseil du trésor

The PPMP at a Glance

MEMBERS OF THE PPMP PENSION COMMITTEE

YOU WILL SOON RECEIVE YOUR STATEMENT OF PARTICIPATION…In a few weeks, CARRA will start sending the Statements of Participation. They will be sent to members according to the following schedule:

Education sector May 2014

Health and social services sector June 2014

Public sector July 2014

On your statement, you will find the details of your contributions to the PPMP for the year that ended December 31, 2012, based on the data provided by your employer. You will also find information about the benefits to which you could be entitled when you retire or at the end of your employment.

Don’t forget that your statement is a precious tool to help you plan your retirement! To find out more about the statement of participation, visit CARRA’s website at www.carra.gouv.qc.ca, under the Documentation tab, section Publications pour les participants.

RESULTS OF THE PPMP’S ACTUARIAL VALUATIONEven if the financial situation is measured on December 31, 2011, it takes into account legislative changes adopted in 2012 (L.Q. 2012, c.6). In addition, the return for the year following the evaluation (2012) is known and taken into account. The previous table shows that the PPMP’s deficit went from 499 million dollars on December 31, 2008, to 1 930 million dollars on December 2011. That evolution is explained mainly by the negative return of 2008, which was recognized entirely in the December 31, 2011 evaluation, with the decrease of the expected return and the increase of life expectancy which is more important than expected.

PPMP CONTRIBUTION RATES

The PPMP’s contribution rate only applies on the portion of your salary that exceeds 35% of the Maximum Pensionable Earnings (MPE) of $52 500 prescribed by the Régie des rentes du Québec for 2014. Since you will not pay any contributions for the first $18 375 (35% of $52 500), the contribution rate of 14.38% does not apply to your entire salary.

For example, someone earning $80 000 will pay $8 862 in contributions, that is, 11.08% of his or her salary.

14.38% x ($80 000 - $18 375) = $8 862 / $80 000 = 11.08%