The Provincial Judges Pension Board (the “Board” or “PJPB”) was established in 1992 and is continued by Ontario Regulation 290/13 as amended (the “Regulation”) under the Courts of Justice Act. The Board is the successor to the Provincial Judges Benefit Board established in 1984 by Ontario Regulation 332/84 under the Provincial Courts Act.

Members of the Board are appointed by the Lieutenant Governor in Council.

For the period April 1, 2015 through March 31, 2016, the Board’s members were:

Members of the Board

  Date First Appointed Current Term Expiry Date
Deborah Anne Oakley, Chair
Former Sr. Vice-President Corporate Affairs - OMERS Pension Plan		 October 22, 2009 November 14, 2018
Elizabeth Boyd, Member
Partner - Blake, Cassels & Graydon LLP		 April 10, 2013 April 10, 2019
Lisa Philipps, Member
Professor - Osgoode Hall Law School, York University		 February 26, 2014 February 26, 2017

The Board administered the Provincial Judges Pension Plan (the “Plan” or “PJPP”) and approved pension payments and refunds in accordance with the Regulation.

The Ontario Pension Board (“OPB”) provided pension administration and secretarial services to the Board in accordance with the Service Level Agreement.

The Board met five times during the period April 1, 2015 through March 31, 2016, four of which were regular Board meetings, and the remainder dealt with other Board business including, policy issues relating to Family Law that arose during the period and development of the annual business plan.

After the June 12th, 2014 election, the Government of Ontario completed a series of organizational changes affecting the governance of the Plan. The changes resulted in the creation of Treasury Board Secretariat (TBS) and the Ministry of Government and Consumer Services (MGCS). In its new role TBS became responsible for Sponsor related activities including those delivered by the former Ministry of Government Services. The Board now reports to the President of Treasury Board.

Cost of administration

Administrative support cost for the operation of the Board was subsumed in the estimates of the Employee Relations Division of TBS (formerly Human Resources Division, Ministry of Government Services).

The Chair and Board members are all private sector appointees and received per diem fees of $200 for the Chair and $150 for the members. Fees totalled just over $8,100 for attendance at Board meetings and preparation time. The Board incurred no other direct costs.

Plan activity

Plan membership and pensioner changes - Members

Members March 31, 2015 Increase Decrease March 31, 2016
Active 281 17 (17) 281
LTIP 5 2 (3) 4
Total membership 286 19 (20) 285

Plan membership and pensioner changes - Pensioners

Pensioners March 31, 2015 Increase Decrease March 31, 2016
Normal a 188 17 (10) 195
Survivors 72 6 (5) 73
Total pensioners 260 23 (15) 268

Plan membership and pensioner changes - Deferred Pensioners

  March 31, 2015 Increase Decrease March 31, 2016
Deferred Pensioners b 1 1 (1) 1

a.   Pensions and escalation adjustments calculated under Provincial Judges Pension Plan rules.

b. Pensions for former Provincial Judges Pension Plan members to be paid at a future date.

Description of the year’s activities

The year’s activities are described in the Analysis of Operational Performance under Section IV.

Analysis of financial performance

Financial statement - Deposits

Deposits 2016 ($ 000) 2015 ($ 000)
Contributions - Participants 4,419 4,285
Contributions - Province of Ontario (Note 4) 34,512 34,512
Interest earned 47,201 46,292
Totals 86,132 85,059

Financial statement - Payments

Payments 2016 ($ 000) 2015 ($ 000)
Pension payments and survivor allowances 37,837 35,463
Refund of contributions 13 196
Totals 37,850 35,659

Financial statement - Net increase in the fund

  2016 ($ 000) 2015 ($ 000)
Net increase in the Fund 48,282 49,430

Financial statement - Fund balance with the Minister of Finance

Fund Balance with the Minister of Finance 2016 ($ 000) 2015 ($ 000)
Beginning of year 848,490 799,060
End of year 896,772 848,490

See accompanying notes to the financial statement.

Approved on behalf of the Board
D. A. Oakley
Chair

Notes to financial statement - March 31, 2016

Description and administration of the fund

The Treasury Board Secretariat is responsible for overall oversight of the Provincial Judges Pension Fund [Fund] including administration of all contributions to the funds and interest earned. The Provincial Judges Pension Board [Board], as originally designated by Ontario Regulation 67/92 of the Courts of Justice Act, is responsible for the administration of pension payments and survivor allowances.

On Oct 31, 2013, Ontario Regulation 67/92 was repealed and was replaced by Ontario Regulation 290/13 under the same legislation. The new Regulation splits the Provincial Judges Pension Fund into two plans, the Provincial Judges Pension Fund and the Provincial Judges Supplementary Pension Account.

The Fund is registered for income tax purposes and provides for pension benefits up to the limit permitted under the Income Tax Act. The Provincial Judges Supplementary Pension Account provides for pension benefits above the limit prescribed by the Income Tax Act for post-1991 service.

On December 20, 2013, a Court Order was issued, based on an agreement among parties to the litigation challenging the constitutionality of the Provincial Judges Supplementary Pension Account, that effectively ordered management to administer the Fund as one plan with the same administrative practices as were in place under Ontario Regulation 67/92, until the litigation is resolved (Memorandum of Agreement called the “Standstill Agreement”). Parties to this process have until June 30, 2016 to resolve the status of the Divisional Court application, seek to schedule the Application or reach an agreement to extend the deadline.  Pursuant to the direction of the Canada Revenue Agency, the administrative practices for the Provincial Judges Pension Plan were and continues to be to administer the Plan in a manner consistent with the requirements of the Federal Income Tax Act and related Income Tax Act Regulations.

As a result, this financial statement continues to be presented as one Fund.

The Fund is held within the Consolidated Revenue Fund of the Province of Ontario and is included as an employee future benefit liability within the consolidated financial statements of the Province.

The Fund is not subject to the reporting requirements under the Pension Benefits Act and Regulations.

The following brief description of the Fund is provided for general purposes only. For more complete information, reference should be made to the Regulations.

General

The purpose of the Fund is to provide pension payments to retired Provincial Judges who are members of the Plan or survivor allowances to the dependents of these Judges.

Funding policy

Participants are required to contribute 7% of their salary to the earlier occurrence of meeting their basic service requirement or attaining age 70 years.

The contribution required from the Province is determined by an actuarial valuation as described in note 4.

Pension payments

A pension payment is available based on the age and the number of years of full-time service for which the participant has credit upon ceasing to hold office and is based on the salary of a full-time judge of the highest judicial rank held by the participant while in office. The participant is entitled to these payments during his/her lifetime.

Disability pension payments

A full pension is available at age 65 for participants with a minimum of five years of full-time service who are unable to serve in office due to injury or chronic illness.

Survivor allowances

A survivor allowance equal to 60% of the qualifying judge’s pension payment is paid to the spouse during the spouse’s lifetime or to children who meet the age, custody, education or disability criteria defined by Regulation.

Death refunds

A death refund can be payable to the personal representative of a participant where there is no further entitlement to a survivor allowance. The amount of the refund is equal to the participant’s contributions in the Fund plus interest, less entitlements already paid out.

Withdrawal refunds

Upon ceasing to hold office for a reason other than death, participants not eligible to receive pension payments are entitled to receive a refund of their contributions to the Fund plus interest.

Annual inflationary escalation of entitlements
Judges Retired Before June 1, 2007

The annual inflationary increase for judges who retired before June 1, 2007 is based on changes in the Average Weekly Earnings published by Statistics Canada and subject to a maximum of 7% in any one year, and is effective on April 1 in every year. In addition, the pensions are adjusted based on the salary increases of sitting judges as recommended by the Provincial Judges Remuneration Commission.

Judges Retired On Or After June 1, 2007

The annual inflationary increase for judges who retired on or after June 1, 2007 and elected to be paid under the plan provisions effective on that date is based on changes in the Consumer Price Index, and is effective on January 1 in every year.

Interest revenue

Interest is credited to the account for the Fund, held in the Consolidated Revenue Fund of the Province of Ontario, at the average of the monthly Ontario Borrowing Rates for a 25-year maturity as follows:

  • on the net monthly increases to the account accumulating during the fiscal year at the interest rate for the fiscal year; and
  • on the net increases to the account for each of the preceding 25 years at the interest rates applicable to those years, providing the funds remain on deposit with the Consolidated Revenue Fund.

Significant Accounting Policies

Basis of accounting

The financial statement is prepared by management in accordance with the Memorandum of Agreement between the Ontario Conference of Judges and the Lieutenant Governor in Council, the then-Minister of Government Services and the Provincial Judges Pension Board (the Standstill Agreement). The basis of accounting prescribed by the Standstill Agreement is consistent with both the repealed Regulation 67/92 and the current Regulation 290/13 under the Courts of Justice Act and consists of contributions and money paid, transferred or credited to the Fund, less money paid out, except for the fact no Supplementary Pension Account was established.

Administrative expenses

Administrative expenses are paid by the Province of Ontario and are not reflected in this financial statement.

Liability for Future Benefits

The Provincial Judges Remuneration Commission (Commission) was established under the Courts of Justice Act to conduct an independent review of the salary, pension and benefits for all provincial judges. The Commission’s salary and non-pension benefits recommendations are binding; recommendations on pension benefits are non-binding. The most recent report of the Commission was the Eighth Provincial Judges Remuneration Commission released on November 12, 2013, covering the period April 1, 2010 to March 31, 2014. The report did not recommend any salary increases in addition to the annual inflationary increases already received. A new Commission, once appointed, is expected to issue recommendations covering the period from April 1, 2014 to March 31, 2018.

The Province is responsible for the unfunded liability of the Provincial Judges Pension Fund and funds this liability in amounts recommended by periodic actuarial valuations of the Plan. The Provincially determined contribution for fiscal 2016 was $34,512,000, which maintained contributions consistent with recommendations in the March 31, 2011 actuarial funding valuation, as a current actuarial valuation had yet to be performed. Any required adjustments to contributions, as a result of performing a current actuarial valuation when the litigation is resolved, will be accounted for in the period the valuation is performed.

Significant assumptions in the March 31, 2011 actuarial funding valuation, the most recent valuation conducted, are as follows:

Assumption March 2011 Valuation
Expected Return on Plan Assets 4.60%
Discount Rate on Future Cash Inflows 4.60%
Salary Rate Increases 4.00%
Age of Retirement graduated scale from age 60 to 75
Method of Valuation Aggregate Cost Method

Analysis of Operational Performance

Delivery of Pensions

  • In the 12 months ending March 31, 2016, the PJPB continued delivering high quality cost effective services to 268 beneficiaries receiving pensions or survivor allowances from the PJPP.
  • The Board conducted four regular meetings in that period to consider applications for approval of payments from the Fund. The Board also conducted several ad hoc meetings to address Board business and emerging issues with critical timelines (e.g. disability applications, policy matters and preparation of the business plan).
  • The Board monitors its service performance through reports on outstanding work at its regular meetings. This combined with detailed presentation of facts supporting pension applications ensure timely and high quality service.
  • The PJPB met or exceeded its client service standards over the period of this report which were that no application for pension or other benefit from the Plan, or pension estimates, take longer than 60 days in total to process.
  • There were no requests for adjudication or appeals of decisions made during the reporting period.
  • At its regular quarterly meetings, PJPB reviewed and approved 23 new annual pensions and survivor allowances, representing one less application when compared to the prior year.
  • The corresponding annual value of new pensions approved for the year was just over $3.76 million.
  • All pension payments commenced on time.
  • The PJPB also approved payments totalling just over $293K representing a retroactive 2.7% cost of living increase under the “old plan” rules for Provincial Judges and slightly over $17.3K under a 1.3% CPI adjustment.

Accurate Payments and Entitlement Calculations

  • Calculation materials and entitlement information were provided in a timely manner by OPB to PJPB for its review and approval at PJPB meetings.
  • OPB staff was available at all PJPB meetings to clarify and explain payments when necessary. All calculations bare evidence of managerial review and verification by OPB staff.
  • The Fund is audited annually by the Office of the Auditor General of Ontario (the Provincial Auditor). There were no findings in the current audit relating to either pension payment accuracy or entitlement calculations.

Strengthening Stakeholder Relations

  • The Board continued its efforts to find opportunities to engage key stakeholders in discussion about issues affecting the Plan. Regular update meetings with senior leadership of the Sponsor began at the end of 2015. The Board also met with Ontario‘s Chief Justice and the Association of Ontario Judges (formerly the Ontario Conference of Judges) to obtain their perspective on the service needs of sitting judges.
  • These consultations contributed to greater transparency around the Plan and its operations, and reinforced the Board’s status as a trust agency that performs its role independently and in the best interests of the Plan’s beneficiaries.
  • Stakeholders are supportive of the Board’s efforts to build stronger relations. In the past, circumstances such as the on-going litigation and leadership changes have affected the timing of meetings. The Board has adopted a more proactive approach to manage these challenges.

Communications with Pensioners and Stakeholders

  • Either the PJPB or Chair continues to approve all Plan communications prior to distribution.
  • The bulk of the Board’s communications with Plan beneficiaries are prepared to convey information about personal entitlements. Communication highlights for 2015/2016 include:
    • 336 letters describing annual escalation adjustments
    • 45 pension estimates
    • 17 initial communications to individual retirees
  • The Board will continue to look for opportunities to improve communications to pensioners and advise on communications to other key stakeholders.

Performance Targets

The Board has established the following performance targets for the fiscal year 2015-2016.

Implement Internal Audit Recommendations

In its previous annual report, the Board noted that implementation of two of the three improvement opportunities identified in the most recent internal audit was complete. The remaining opportunity suggested the Board consider whether some form of automation of pension calculations would reduce risk and improve efficiency.

Assessing the risk and cost effectiveness of a system solution required an external consultant be engaged through a competitive procurement process to complete a cost benefit analysis. The first stage of the process was completed in 2014 and the final report (the CBA) was presented to the Board at its Quarterly meeting on December 3, 2015.

The CBA developed a range of options for automation, each with unique financial and IT resource requirements to achieve implementation. The Board has asked OPB to assess the possibility of leveraging its IT system infrastructure to deliver a viable solution. A report is expected in 2016 and will form the basis of our recommendations to the Sponsor.

Improve Service and Reduce Cost

The Board believes that it can achieve improvements in risk mitigation quality and cost effectiveness through process and calculation automation. In order to ensure an objective assessment the Board engaged a consultant to prepare a a cost/benefit analysis to determine if an automated system for pension calculations would increase the effectiveness of pension calculations and prevent or limit access to confidential information, The consultant assessed the feasibility of several proposals including leveraging OPB’s systems to take advantage of economies of scale and proven IT infrastructure to support plan administration. Since the project would require a commitment of OPB resources it is necessary that they review the implications. A report will be made to the Board at the end of 2016.

Governance Framework Roles and Responsibilities

All key recommendations made in the Deloitte report have been integrated into the Plan’s administration and those remaining are considered a low priority for the Board.

One of the remaining recommendations was to establish a clear communication channel for Plan beneficiaries. The Board is preparing to launch a new telephone system developed by OPB that offers improved service to clients by providing a direct line so the caller has direct access to trained staff and does not have to be redirected. The communication plan and templates were approved by the Board and implementation will take place in 2016.

In October 2015 the Board met to complete a strategic review of its objectives and risks as a part of its business planning process. The session was productive, allowing the Board to discuss and then set its priorities with contributions from the service provider. This was the first time the Board met to exclusively consider strategic planning and it was agreed the review would become part of our annual planning process, providing important input for our annual business plan.

The Board’s service provider, OPB, continues to actively identify issues requiring policy clarification. During the period under review OPB sought policy clarification regarding the administration of the survivor allowance for a disabled child of a judge. In addition to clarifying and documenting the administrative procedure, OPB has developed template communications and a form to ensure a high quality client experience.

These services are vital to ensuring the Plan is administered consistently and the Board will seek to ensure they are included in the amended Service Agreement.

Renewal of the Service Level Agreement

As the Board’s service provider, OPB has identified several new and on-going services that will have an impact on the fees it charges and will need to be included in any revision to the Service Level Agreement. For example there is a growing need for services relating to governance, agency compliance and policy development that were not contemplated in the earlier agreements. In addition the Board has accepted specific obligations within its most recent Memorandum of Understanding with the Sponsor that require added administrative effort.

The Service Level Agreement between the Board, TBS and OPB is currently in a period of automatic renewal. All service gaps have now been identified and costed for the Sponsor and the Board. Service level targets have also been revised and will provide the Board with new service standards for performance measurement.

Implement Income Tax Act (ITA) Compliant Plan Provisions

Shortly after the Plan provisions were amended in October 2013, the Association of Ontario Judges began court proceedings to revert to the former Plan provisions. The Board has retained independent legal counsel to represent it in the matter.

As a result of the Standstill Agreement (the Agreement) between the parties, the Board is not able to fully implement new administrative arrangements to support the revised provisions. The terms of the Agreement have been extended with our agreement on a couple of occasions and are currently set to expire at the end of 2016. While the Agreement has been in effect the Board has protected the Plan’s registered status by ensuring pensions continue to be paid in accordance with the Canada Revenue Agency’s requirements until the litigation is resolved.

While we are coping with increasing administrative complexity due to the current situation, we continued to ensure pensions and other Plan entitlements were paid in accordance with applicable legal and regulatory requirements and that the Plan was administered in the interim in accordance with the Agreement. During the review period the Board also monitored its legal costs and the status of litigation through regular updates with independent counsel.

Remuneration Commission Recommendations

The 8th Remuneration Commission completed its hearings and made its recommendations to the government in late 2013. The Board reported last year that with the exception of a plan amendment to provide for the division of asset on marital breakdown the Board has implemented all of the pension related recommendations.

In March, 2016 the Board was advised that the Plan was amended by O.Reg. 57/16 to introduce new rules for Family Law. The Board is proceeding with development of its Family Law policy and clarifying its procedures to ensure a smooth transition to the new requirements. In the meantime, we continue to closely monitor emerging Family Law issues within the Plan, seeking legal advice when necessary to ensure we properly discharge our obligations as plan administrator.

Chair’s Comments

The Board is responsible for administering the pension and survivor allowance benefits provided under the Provincial Judges Pension Plan. As a trust agency of the Crown, the PJPB oversees the delivery of an annual pension payroll that now exceeds $37.8 million. As a board, we are committed to delivering cost effective high quality service to the plan’s beneficiaries. A summary of some of last year’s achievements appears in Section IV.

The Board expresses its appreciation for the assistance rendered to the Board by the management and staff of the Total Compensation Strategy Branch of Treasury Board Secretariat, the Pay and Benefits Operations Branch of the Ministry of Government and Consumer Services, and the Ontario Pension Board and staff.

Appendix: Independent Auditor’s Report

To the Provincial Judges Pension Board and to the Minister of Finance

I have audited the accompanying Statement of Changes in Fund Balance of the Provincial Judges Pension Fund as at March 31, 2016, and a summary of significant accounting policies and other explanatory information (together the “financial statement”). The financial statement has been prepared by management in accordance with the financial reporting provisions prescribed by the Memorandum of Agreement between the Ontario Conference of Judges and the Lieutenant Governor in Council, Minister of Government Services and the Provincial Judges Pension Board (the Standstill Agreement) dated December 20, 2013.

Management’s Responsibility for the Financial Statement

Management is responsible for the preparation of this financial statement in accordance with the financial reporting provisions prescribed by the Standstill Agreement, and for such internal control as management determines is necessary to enable the preparation of a financial statement that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

My responsibility is to express an opinion on this financial statement based on my audit. I conducted my audit in accordance with Canadian generally accepted auditing standards. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statement.

I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion

In my opinion, the financial statement of the Provincial Judges Pension Fund as at March 31, 2016 is prepared in accordance with the financial reporting provisions of the Standstill Agreement.

Basis of Accounting

Without modifying my opinion, I draw attention to Note 2 to the financial statement, which describes the basis of accounting. The financial statement is prepared to assist the Provincial Judges Pension Fund to meet the reporting requirements of the Standstill Agreement, and as a result the financial statement may not be suitable for another purpose.

Susan Klein, CPA, CA, LPA
Assistant Auditor General
June 8, 2016
Toronto, Ontario