2020/2021 Provincial Judges Pension Board annual report

Message from the Chair

When the new PJPB funding framework was enacted on January 1, 2020, the role and responsibilities of the Provincial Judges Pension Board (the Board) were dramatically transformed. Since then, the Board has worked diligently with our stakeholders to build a pension governance system that will support our new fiduciary and administrative obligations under the redesigned Plan.

Ontario Pension Board (OPB) agreed to continue acting as our agent, performing all aspects of the day-to-day administration of the Provincial Judges Pension Plan (PJPP). OPB was instrumental in implementing all major processes and systems required for a seamless transition to the new three-tiered pension benefit. As a result, the Board was able to: meet its payroll obligations; have trust funds in place to receive member and Sponsor contributions; and fulfill all regulatory requirements related to Registered Pension Plan and Retirement Compensation Arrangement set up and administration. Most importantly, the Plan was fully operational by January 1, 2020.

The redesigned funding framework required the Board to take on expanded fiduciary, management and regulatory responsibilities relating to the investment and operation of the 2 new trusts. The Investment Management Corporation of Ontario (IMCO) was engaged effective March 17, 2020 to provide investment management services to the Board. Work continued throughout 2020 to define the Board’s investment policy so that a quality draft would be available for feedback once the appointment of the AOJ Board representative was finalized and the Board fully constituted. In the meantime, plan assets would be held in money market accounts.

Along with the addition of new responsibilities for the oversight of fund investments, the Board’s size was expanded from 3 to 5 members. This was an important change since the Board composition would now require investment competencies. On February 27, 2020, we were delighted to welcome Gus Gatzios and then shortly after, Kevin Adolphe effective April 16, 2020. Both Kevin and Gus are highly skilled, professionals with investment expertise who would play key roles in developing the Board’s investment management structures and policy. Finally, on January 7, 2021, we welcomed Justice Thomas McKay, a member of both the Provincial Judges Pension Plan and the Association of Ontario Judges. With Justice McKay’s appointment, the Board was fully constituted and able to move forward with improved transparency on the plan redesign implementation.

After serving two terms as a valued member of the Board, Lisa Philipps decided against seeking reappointment for a third term. Lisa was an exceptional colleague and her insights and unselfish service over the past 6 years were deeply appreciated by all who worked closely with her.

We maintained our focus on effective plan governance, high quality service delivery, and strong stakeholder relations throughout 2020 and into 2021. Since the redesign became effective, the Board has made solid progress building a foundation of new structures and processes for good governance while improving service levels our members and pensioners. The Board continues to act on communication opportunities to explain the Plan changes, the impact on the member/pensioner and clarifying our role in delivering their pension promise. We always endorse a collaborative approach with our stakeholders, whether consulting on member communications content or best method of delivery.

This annual report chronicles the Board’s first full year and a quarter of operations, and it has been my distinct pleasure to serve as Chair during this extraordinary period. Thank you to my Board colleagues. Your diligence over this past year is appreciated and will be felt for years to come. On behalf of the Board, I want to acknowledge the professionalism and support delivered by staff at Ontario Pension Board and the Investment Management Corporation of Ontario during our inaugural year of operation. There is still more work to do to complete the implementation of the plan redesign, but we have accomplished a lot together since January 2020 and I look forward to building on that strong foundation over the coming year.

Deborah A. (Debbie) Oakley

Chair, Provincial Judges Pension Board
September 14, 2021

The year in review

Throughout 2020 and into 2021 the Board’s priority was to establish a sound governance framework for the administration of the Plan. Our steady progress over that period has been marked by the several achievements, including:

Seamless transition

By the time Plan redesign became operational January 1, 2020, PJPB had already adopted trust agreements for the Registered Pension Plan (RPP) and Retirement Compensation Arrangement (RCA). With the agreements and required financial controls in place, the Board was able to transition its operations seamlessly to the new 3 tier benefit design. All pension payments were made on time and the RPP and RCA trusts were able to receive and hold member and Sponsor contributions once they were deducted and remitted to the funds.

Documenting the governance framework

In March 2020, the Board took a significant step forward, reaching agreement with IMCO on the terms of an Investment Management Agreement that would enable investment in low-risk money market instruments until the Board could adopt a longer-term investment strategy. With this and a new custodial services agreement in place, $421M was transferred from the Consolidated Revenue Fund to the RPP as part of the government’s initial funding allocation commitment.

With the reconstitution of the Board the existing Memorandum of Understanding (MoU) needed to be revised to reflect the new accountability relationships, clarify roles and responsibilities, and set out expectations including administrative and financial arrangements. The new MoU was rewritten in consultation with the Board and adopted by the Minister and the Chair in June 2020.

The Board is committed to creating a governance framework that clearly defines roles, responsibilities, and accountabilities for all participants in the governance process. In December of 2020, it adopted its first General By-Law to help achieve that clarity. The By-Law primarily codifies the Board’s operations and how it delegates its authority under the Plan, and it will be able to evolve over time according to the future needs of the Board as it fulfills its fiduciary obligations.

Ontario Pension Board (OPB) was named in the Plan provisions as the service provider to the Board. Negotiations began with OPB to reach agreement on services to be provided and a fee structure in respect ofthe redesigned PJPP. After considering its operational and governance requirements, the Board asked OPB to take on a larger role, than initially proposed, in supporting the operations and management of the Provincial Judges Pension Plan and its Funds. OPB advised the Board that it is agreeable to assuming a "management role" in the administration of the Plan however, OPB administration services and costs would need to be reevaluated. A revised draft of the original service agreement, consolidating feedback from earlier versions defining the roles and responsibilities of the parties including the scope of their accountability is circulating for comment. In the meantime, a temporary arrangement is in place to ensure OPB is properly remunerated until the agreement can be finalized.

There are continuing discussions between the Board, TBS, and the Association of Ontario Judges (AOJ) regarding the AOJ’s role in implementation of the redesigned plan and whether the government has additional obligations to consult with them under the Remuneration Commission process. As a result, completion of the Statement of Investment Policies and Practices and the strategic asset allocation was not finalized by March 31, 2021, as expected. Discussions among the parties are continuing.

Data validation letter

The mandate of the Board was expanded to include responsibility for providing pension services to and communication with sitting judges, and the maintenance of the data required to administer these pension entitlements. Historically though, data management for this group was not within the scope of the Board’s responsibilities as this was administered by the Ontario Government. The Board wanted to use verified data to mitigate risk to both, its reputation, and its ability communicate effectively with the Plan’s membership.

In the fall of 2020, OPB completed a member data validation exercise on behalf of the Board by providing all 292 plan members with their respective pension related data, received from Ontario Shared Services (OSS), and asking them to review for accuracy and any gaps.

Thereafter, data would be validated at least annually through the distribution of the APS. Members were advised of their role in maintaining current accurate data and in the absence of updates, the transferred data would be assumed to be accurate for the purpose of future service delivery including production of an Annual Pension Statement in 2021.

The project team was formed in May 2020 with OPB project management and business resources. With the support of key stakeholders (AOJ and CJO), OPB was able to act on their feedback to execute a coordinated communication plan that required five different communications to the membership promoting the need for member participation.

The option for electronic submission of the change/confirmation form, via the CJO was made available for a limited time. Thereafter members would have to follow a regular process to submit information changes via mail. An overall response rate of just over 81% of 292 members was achieved.

Operational performance

Delivery of pensions

For the period ending March 31, 2021, the PJPB continued delivering high-quality cost-effective services to 338 beneficiaries receiving pensions or survivor allowances from the PJPP and 295 full time sitting judges.

The Board conducted five regular quarterly meetings in that period to consider regular business (e.g., approval of pension payments, receive operational reports) and special approvals related to the redesign implementation. An additional 32 working meetings were convened to consider special business related to the implementation or facilitate briefings with key stakeholders. As the Board was dealing with transition to a new governance structure, this was a significant but not unexpected increase over prior years.

The Board monitors its service providers through regular reporting on pending and outstanding work at its regular meetings. The Board also relies on the quarterly presentation of the PJPP Call Activity Report to assess telephone service delivery performance. These reports facilitate Board oversight of service delivery relative to commitments within the service agreements.

The PJPB met or exceeded its client service standards over the period of this report, no application for pension or other benefit from the Plan, or pension estimates, take longer than 60 days in total to process.

Once again there were no requests for adjudication or appeals of decisions made during the reporting period.

At its regular quarterly meetings, PJPB reviewed and approved 18 new annual pensions and survivor allowances, all under the new plan provisions that require calculation of the three­ tiered pension benefit entitlement. In the reporting period ending March 31, 2021, there were no applications for lump sum payments in respect of family law settlements, however the Board approved 1 refund of contributions on resignation.

The corresponding annual value of new pensions and survivor allowances approved by the Board for payment was $4.13 million. All pension payments commenced on time and within service commitments.

Annual cost of living adjustments

The PJPP provides for annual cost of living increases calculated using two different methods. Depending on the judge’s eligibility, they may receive either a Consumer Price Index (CPI) adjustment every January 1^st or an adjustment based on the Industrial Aggregate Index (IAl) (Canada) given to sitting judges each April 1^st. These payments are approved each year by the Board and there are two adjustments made in a fiscal year.

In 2020, the Board approved escalation adjustments to 150 pensions and survivor allowances to reflect the annual IAI salary adjustments under the Framework Agreement on Judges’ Remuneration. Effective April 1^st pensions for affected retired provincial judges or their survivors were increased by 3.35%. Salary adjustments for 2020 were released by the Plan Sponsor in August and the adjusted pensions and retroactive amounts were paid on schedule in October.

For 2021 the CPI escalation was calculated as 1% and applied to a total 197 pensions and survivor allowances effective January 1, 2021. The Board approved payment of the COLA adjusted pensions from each of the respective funds and the adjusted pensions went into pay on January 22^nd. Each affected pensioner and survivor received a communication advising of their increase and providing a brief explanation of the COLA calculation.

Sensitivity of judges’ data

Personal information belonging to sitting and retired judges is extremely sensitive and if accidentally disclosed could have a serious effect on the privacy and personal safety of the individual judge. The Board recognizes the special circumstances that apply to judges and requires that OPB ensure personal information is adequately secured and especially prior to transmission by mail or electronic means.

Member communications containing personal information (e.g., Data Validation) have been deployed according to OPB’s well-established privacy and disaster recovery policies, as a result the Board was able to successfully mitigate the risks associated with a privacy breach.

Financial performance

Since its inception, the Provincial Judges’ Pension Plan has operated as an unfunded plan, with contributions held by, and pension payments made from the Province’s Consolidated Revenue Fund (the CRF). With the Fund redesign, effective January 1, 2020, two components of the plan, being the Registered Pension Plan ("RPP") and the Registered Compensation Arrangement ("RCA") became funded pension arrangements, with assets being held and invested under newly created trusts. In effect, these became entities separate from the Province and require financial statements, which are audited by the Auditor General of Ontario. The third component of the plan, the Supplementary Plan (SUPP) will continue to be funded from the Province’s CRF.

On March 23, 2020 approximately $421M was transferred from the CRF to the RPP as part of the government’s initial funding allocation commitment. Those funds are now invested with IMCO and are being held in low-risk money market instruments until the Board can formally adopt a longer-term investment strategy.

Regular member contributions continue to flow into the RPP and RCA. The Province is contributing just under $3M per month to the RCA as a special funding payment. Fifty percent of these special payments, along with the member contributions are sent to a Refundable Tax Account with the Canada Revenue Agency. No money is currently being contributed to the Supplemental Pension Plan by the Province.

An initial actuarial valuation was prepared for the Provincial Judges Registered Pension Plan as at January 1, 2020, for the purpose of establishing the Plan’s contribution requirements in accordance with the Income Tax Act, until the next actuarial valuation is performed. The valuation was filed with Canada Revenue Agency (CRA) and the actuary’s recommendations for employer contributions to the Plan were approved. The RPP is exempt from Ontario’s Pension Benefits Act, so the valuation is not filed with the Financial Services Regulatory Authority of Ontario (FSRA). The RCA and SUPP Plans are not registered plans, so while the funding obligations are prepared by the Plan actuary there is no similar requirement to file a valuation with either CRA or FSRA.

The Board is responsible for the administration of the Plan and investment of its funds but has no employees to carry out its responsibilities. Both OPB and IMCO have personnel, facilities, systems, and processes in place to administer all aspects of a pension plan and fund. OPB and IMCO have been named to play key roles in supporting the Board and are providing defined services to the Board on a cost recovery basis. Plan expenses related to RPP and RCA administration are paid from the respective funds. Expenses relating to the SUP are paid directly by the Province.

Mandate achievements

The Minister’s mandate letter was received in October of 2019. The Board was asked to focus on the following three priorities:

1. "Supporting and facilitating the ongoing implementation of the new Plan governance structure resulting from the new funding design, including assisting in providing communications to plan members regarding the new structure"

Comments

The Board identified 22 priorities required to implement the new funding design and establish operations. As of March 31, 2021, 14 priorities have either been completed or resolved. The remaining priorities are composed of both Investment and Plan Administration objectives. These objectives have been affected by on-going discussions between the Board, Treasury Board Secretariat (TBS representing the Sponsor), and the Association of Ontario Judges (AOJ) regarding the AOJ’s role in implementation of the redesigned plan. As a result, progress on the completion of certain priorities (e.g., Statement of Investment Policies and Practices and the strategic asset allocation) has been slower than expected.

The Board’s mandate was expanded under Plan redesign to include responsibility for member communications. OPB is supporting the Board mandate by developing priority communications that raise the Board’s profile with the membership, deliver value and establish the Board as a trusted source of Plan information. Recent communication initiatives included:

1. Notice of tax slip changes — with the introduction of the RCA, members and pensioners were receiving new tax slips for the 2020. In consultation with the AOJ, OPB created and delivered multiple communications explaining the tax slip changes so the membership could adapt to the change. On February 4^th, the notices were mailed to retirees and posted electronically with the AOJ for sitting judges.
2. Virtual pre-retirement seminar— on January 14, 2021, OPB presented a plan overview to 40 judges expecting to retire in the next few years. Judges attending the seminar received a pension estimate and a copy of the slide deck for future reference. As part of a training initiative a small contingent of OPB Client Service Staff attended the presentation as well.
3. Template renewal — Pension estimate and family law template letters have been revised to integrate the redesigned plan. Entitlements under each benefit tier are reported to support effective decision—making by the member. Forms were also refreshed so they align with the redesigned plan.
4. Welcome letter for new plan members —A letter from the Chair of the Board now introduces newly appointed judges to the Plans key features and provides information on how to get service. The welcome letter is expected to encourage a personal long—term client relationship.

2. "Completing a data validation for sitting Judges to enhance the accuracy and quality of member data that will be used to create a personalized pension statement for delivery the following year, and"

Comments

OPB completed the data validation project in 2020. The initiative enabled almost 300 sitting judges to review and correct their pension related personal information for the first time.

Data validation is expected to improve the quality of member data and value of PJPP service offerings, including the delivery of their first annual pension statement in 2021.

Plan members began receiving their Data Validation packages on September 18, 2020. The package provided members with their basic personal information that was transferred from Ontario Shared Services and asked them to review and confirm accuracy through a special information change form. This form was temporarily available on—line through the Chief Justice Office.

By the end of the project OPB has confirmed data for 237 or 81% of sitting judges.

3. Preparing your annual business plan based on the expanded duties of the Provincial Judges Pension Board that result from the new funding design.

Comments

With the appointment of Justice Thomas McKay, the Board was finally fully constituted in January 2021. Up until that point, the Board was very concerned that proceeding with the 2020 business plan and establishing the governance framework, in the absence of the fully appointed Board, was not in the best interests of the beneficiaries of the Plan. The Board, in consultation with TBS, instead focused on a list of implementation priorities with the intention of deferring long term commitments until the Board was fully appointed. The Annual Business Plan for 2021—2024 was prepared based on the expanded mandate of the new Plan. We intend to take the same approach with the business plan for next 3—year Business Plan commencing 2022.

Board of directors

Financial statements

January 1, 2020 to March 31, 2020

April 1, 2020 to March 31, 2021