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Penad Announces New President

News Release *** FOR IMMEDIATE RELEASE ***
Kitchener, Ontario, Canada – March 21, 2017 – Penad Pension Services Limited today announced that both Frank Price, company founder, CEO, and Chairman, and Louise Price, company President and Director, are stepping down from day-to-day activities to begin a well-deserved retirement.

Stepping up to commence ongoing leadership is Matthew Price, who assumes his new position as President and Director. Matthew has been serving in the role of VP – Global Sales, Marketing, and Business Development since 2009. Prior to that, Matthew worked for Manulife Financial and Scotiabank.

“Now in its 34th year, Penad has been a labour of love from day one,” said Frank Price. “As an insurance company executive in the early 1980’s, I saw an opportunity to launch a new company to radically streamline the pension administration process. We programmed the very earliest IBM PC computers to automate pension administration from beginning to end. The result was that hundreds of pension plan sponsors handed us their third-party administration business, and we never looked back. Soon after, we got into the software game, as larger benefit plan sponsors preferred to lease our software for their in-house administration departments.

“And as they say, ‘The rest is history’. One day I plan to write a book about all the crazy and wonderful things we have seen. There have been over a million miles travelled by our various teams. I have personally spent time in over 100 airports. Over the years, we have had venture operations in Bermuda (Penad Bermuda) and Curacao (Penad Caribbean). Today we have clients in Canada and eight other countries. Penad has representatives in the Caribbean and in the GCC region. We have also done business in Europe, Africa, the Middle East, South America, and Asia. I guess you can see how proud I am of ALL our accomplishments. Quite spectacular for our team in little Kitchener, Ontario.

“That said, it has become abundantly clear that we need new energy and new leadership to meet the many challenges facing us in the coming years. It is with great confidence that I hand off the reins to my son, Matthew F. Price. I’m confident that Matt will do an excellent job as Penad’s President. He has the vision, energy, deep technical knowledge and corporate skills to take the helm and guide Penad to further growth, sustainability and success.

“Now Louise and I are putting 7-day workweeks in the rear-view mirror and getting up to speed to fully enjoy our extracurricular interests. Louise often says that if she had to do it all over again, she would have loved to pursue a career in the international wine industry. She has built up an extensive collection of rare wines and has the expertise of a professional sommelier, so now she is looking to build on this passion and who knows where this will take her. As for me, I would be more than happy if we ended up with a pied-à-terre in Paris or a cottage in Normandy (where we have been spending a lot of time of late). Louise could get me a job picking grapes in the autumn, and when not working in the fields, I will surely be indulging my interests in art, music, and writing. If you see a happy old couple touring around the backroads of Europe in a convertible classic MG, silk scarves flying in the wind, stop and say hello – that might just be us!”

Upon assuming his new role as President, Matthew Price issued the following statement:

“I am truly excited about the days ahead. Frank and Louise built Penad into a firm that is known for its technical excellence and devotion to client service. The company has served many hundreds of thousands of pension and benefit plan members over the years, and I believe our best days are ahead of us.

“Penad’s core management and engineering team has both the youthful energy and deep benefits experience to continue to build out our product offerings and open new market opportunities. Penad now earns over 80% of its revenue from software sales and related services, and we are currently working with clients to fill market gaps where benefit plan sponsors and administrators are looking to replace legacy systems held together with proverbial band-aids and binder twine. Our job in 2017 and beyond is to help benefit plan sponsors transition to proven technology systems and thereby better meet the needs of their respective stakeholders. We have the system products, engineering staff, and customer service people in place to make this happen and grow the firm in entirely new ways in the years to come.”

Penad Pension Services Limited was founded in 1983 with the mission to help pension and benefit plan sponsors streamline administration, reduce costs, and improve plan member communications while also reducing administration turnaround times. Today, the Company continues to serve pension and benefit plan sponsors across Canada and internationally with BPO services, consulting and administration software systems. Penad’s client-base includes Fortune 500 companies as well as unions, third-party administrators, multi-employer organizations, associations, banks, insurance companies, and government organizations.
– # # # –
Contact: Mr. Matthew Price, President
Penad Pension Services Limited
194 Weber Street East,
Kitchener, Ontario, N2H 1E4, Canada
Telephone: (519) 743-9000, Ext. 224


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80 Million People in Caribbean and Latin America at Risk of Poverty in Old Age if Pension Changes Not Made

Angel Gurria of the OECD launched the first edition of “Pensions at a Glance: Latin America and the Caribbean” at the Inter-American Development Bank (IDB) in Washington DC. The Pensions at a Glance report provides detailed comparative indicators of pension structures in 26 countries.

One key finding is that 63 to 83 million people in the region will be at risk of living in poverty by 2050 due to inadequate savings and pensions, as a result of only 45 per cent of workers contributing to any kind of retirement plan.

IDB president Luis Alberto Moreno, speaking at the April 20, 2016 meeting, said that governments in the region must act now to take advantage of “a demographic dividend that cannot be missed. If we get more people to contribute to our pension systems, and if we adjust the systems to rising life expectancy, we will be able to provide adequate coverage to future generations.”

One key finding of Pensions At a Glance is that today there are eight people of working age for every person in retirement, but that rate will drop to 2.5 to 1 by 2050, which underlines the need for governments to act now to ensure that workers are steered into adequate schemes while there is still time.


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Solvency Information Return

Has your pension plan submitted its Solvency Information Return to OSFI in Canada? This is required for all defined benefit or combination-type pension plans in Canada registered under the Pension Benefits Standards Act, 1985.

This filing provides OSFI with information on contribution holidays and annual rates of return and is used by OSFI to calculate the Estimated Solvency Ratio and to monitor contribution holidays.

The filing, OSFI 575, is due on the later of 45 days after the plan year-end or on February 15.

Please contact a Penad pension administrator if you have any questions about this filing.


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Disclosure, Not Prescription: ESG Comes to Ontario DB Plans

As of January 1, 2016, all occupational defined benefit pension plans in Ontario are required to disclose any environmental, social and governance (ESG) factors that are incorporated in the pension fund’s investment policies and procedures.

This requirement is a first for Canada and was approved by the Ontario legislature in late 2014, after first being proposed in 2011. The UK, Germany, Sweden, France and Belgium also have similar regulations.

The amendment to the Ontario Pension & Benefits Act is supported by Ontario’s largest pension funds including the Ontario Teacher’s Pension Plan and OMERS, both of which have actively disclosed ESG since the 2000’s.

This new regulation is not prescriptive and does not require pension plans to adopt or promote any special ESG policies, but we expect that pension trustees will consider ESG investments more closely as a result of this requirement, as has happened in other jurisdictions. Several other provinces in Canada including BC, Alberta and Nova Scotia are considering following suit.


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Has Your Pension Plan Filed U.S. Form W-8BEN-E?

That’s right, there is now another filing for Canadian pension plan sponsors, this time having to do with American tax rules.

American citizens, unlike citizens of most other countries, are required to pay taxes on all income worldwide, regardless of where it is earned and regardless of where the citizen was living at the time. To track and enforce compliance, Uncle Sam passed the Foreign Account Tax Compliance Act (FATCA) as of July 1, 2014, which requires financial institutions worldwide to report on investment income credited to any of their clients who are US citizens.

As an aside, many financial institutions in Europe and elsewhere find this requirement so onerous that they have actually closed the accounts of US customers. Fortunately, registered pension plans in Canada are exempt from the requirement, but they are NOT exempt from filing exemption forms with EACH financial institution holding pension fund assets, where that institution is itself a “foreign financial institution” under FATCA.

Pension plan administrators must file Form W-8BEN-E with each such financial institution, including financial institutions located outside of Canada (such as investment managers based in France, for example). In addition, if any of the filing information changes, the plan administrator must notify all financial institutions where it has filed Form W-8BEN-E of any such changes within 30 days.

Because the pension plan administrator is certifying required information, we strongly advise that pension plan sponsors confer with their counsel to ensure they have met the requirements of FATCA. Contact Penad for more information on how to ensure you are in compliance with this requirement.


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US State Pension Shortfalls Get Worse

A new report from the PEW Charitable Trust shows that funding for public sector retirement plans in states across the US is getting worse, a situation which has been compounded by weak investment returns in 2015.

New Jersey, for example, has only set aside 38% of what it needs to meet its pension commitments. Because public sector workers’ plans are guaranteed by state constitutions, this means taxpayers will be on the hook for any future shortfalls. At current levels in New Jersey, this works out to USD $10,648 per person. Only two states in the union, South Dakota and Wisconsin, are in surplus positions. The other 48 states have a combined shortfall of approximately $1 trillion.

Compounding the problem is the fact that many states have also made commitments to cover retiree healthcare needs. These healthcare and other post retirement benefits get even lower funding priority than the retirement plans, generally, and unlike the retirement plans, post retirement benefits are not guaranteed by state constitutions. This means that pensioners could be left without coverage if states decide to rewrite the rules when they can no longer afford to pay the benefits.


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Letter to Canada Post: How to Pull $8.1 Billion Out of Thin Air

The federal government initiated a Canada Post review soon after coming into power in 2015. The review committee plans to hold hearing across the country but has already identified many of the issues that need to be addressed.

A big problem for the Corporation is the high cost of providing services. By its very charter, Canada Post is committed to providing door-to-door delivery to virtually every address in Canada, five days per week. Add to that the commitment to keep open 3,700 rural post offices which may or may not be financially self sufficient (many require subsidisation). Next, add the high cost of labour and the inability to outsource services to parallel providers such as Purolator due to collective agreements.

And the biggie, as seems to be the case with many large legacy organizations, is the cost of meeting pension funding requirements to avoid future shortfalls. But this last point is where the story has an interesting twist.

The Canada Post pension plan has a solvency deficit of $8.1 billion. That sounds bad, and it is bad because current law requires the Corporation to make payments to erase that deficit. The solvency measure calculates how much would be needed to meet all pension obligations if the plan were to be wound up immediately. For the Corporation to make up this shortfall, it is impossible to balance the annual budget, even if they find ways to cut costs and increase revenue (they are working on both of these). Because of this situation, the federal government gave Canada Post a break from making solvency payments from 2013-2018 to try to sort things out.

But here is where things get interesting.

Does Canada Post really need to make up the solvency deficit? After all, they are a crown corporation and therefore they will never need to wind up the plan, unless the government itself goes out of business.

By another measure, the Pension Benefits Standards Act assesses the funding of a pension plan as a “going concern”. This calculation assesses the financial cost of operating a pension plan indefinitely. By this measure, Canada Post actually has a $1 billion surplus. Therefore, some people are arguing that the rules need to be changed so that Canada Post is no longer bound by the solvency rule and instead can operate by the going-concern rule.

Will those people be heeded? Stay tuned …


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Gold-Plated MP Pensions?

Now that Stephen Harper has retired, the Canadian Taxpayer Federation calculates that he will receive approximately $5.5 million in pension payments if he lives to age 90 (he is currently 58). Jason Kenney, who is currently 49, will receive around $6.3 million to age 90. That is $331,578 for every year he was an MP.

Both Harper and Kenney ran on the platform that the MP pension plan was “gold plated” and should be seriously reformed or eliminated. Harper did in fact bring in reforms during his time in government that will reduce his pension by nearly $2 million from the $7 million he would have otherwise received under the old rules.


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Canada Pension Plan Touts $14B Gain Last Year. Now What?

Assets in the CPP grew from $264.6 billion to $278.9 billion in the year ending March 31, 2016, reported the Canada Pension Plan in May.

That doesn’t sound like much, when you consider the fund grew by $45.5 billion or 18.3 per cent in the previous 12 months. However, keep in mind that a large portion of CPP assets are invested outside of Canada, and in 2015 things were not too rosy in the international investment world. The Dow for example lost 2.2% in 2015, and the S&P 500 was down 0.7%. That makes the CPP’s 3.4% rate of return (net nominal) look pretty good, by comparison.

But is it? Remember that a large portion of CPP assets are invested outside of Canada. This means that the value of those assets rise when the Canadian dollar declines against foreign currencies where the CPP holds investments. Because the Canadian dollar had one of its worst years ever in 2015, any CPP gains from actual investments would be therefore negligible at best.

But that is all water under the bridge. We are coming up to the close of the current fiscal year and should find out in a few months where things have landed. Considering the run up in the US stock market, can we expect a good year?


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New Report Says that Investment Returns Will Stay Low for Decades

Prior to the 2007 financial crisis, investment managers could reasonably expect to obtain returns above 8% over the long-term, using a mix of investments. After 2007, while some investment managers have made excellent returns on the 2007 stock price rebound and then the energy run-up, the basic structure of the investment world has changed for the worse.

And it may well not get better for a long time.

According to a new report issued last week by Steve Ambler and Craig Alexander of the C.D. Howe Institute, the fact of an ageing global population is resulting in slower growth worldwide. This creates a cascade effect that will make it very difficult to get returns above 4% in the coming decades.

This of course can effect the viability of pension funds to pay out their defined benefit obligations. For people who have their principal investments in defined contribution type plans, they face a related problem in that their retirement projections may be way off, which could require them to work much longer than planned or scale back on their retirement plans and budgets.

You can read the full report, “One Percent? For Real? Insights from Modern Growth Theory
about Future Investment Returns” by clicking this link (which will open the report in a new window) …


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