HRM Pension Plan Town Hall Information Sessions November 21 & 22, 2012

1. HRM Pension PlanTown Hall Information Sessions November 21 & 22, 2012 “Meeting funding challenges”

2. Disclaimer • Please note that the information provided in this presentation is based on estimated data and current plan provisions. • A formal Actuarial Valuation at December 31, 2012 will be prepared when the required member and financial data is available in late spring of 2013. slide #2

3. Background • HRM Pension Plan (HRMPP) is a multi-employer plan governed jointly by the stakeholders: HRM, ATU, CUPE, HRPA, IAFF, NSUPE, NUMEA, and retiree representation • Pension Committee is responsible for the administration of the plan, including the results of the Actuarial Valuation: • Reviews the adequacy of the HRMPP's funding • Recommends contribution rate changes • Recommends benefit changes slide #3

4. The Benefit / ContributionRelationship • A Pension fund is a net accumulation of: *Contributions *Pension Benefits *Investment *Expenses income slide #4

5. Solvency Exemption - Still waiting on the Province! • Estimated Financial Position at 31-Dec-2011 (Solvency) • Actuarial value of assets$1,175,502,000 • Present value of accrued benefits1,844,618,000 • Solvency deficit $ 669,116,000 • Funded ratio64% Estimated anticipated contribution rates, including Solvency Deficit payment: Current Service Going ConcernSolvencyTotal 16.1% 4.3% 24.6% 45.0% (shared 50/50) slide #5

6. HRM Master Trust Returns as of September 30, 2012 *Effective September 2012, the Policy Benchmark is 8.05 % S&P/TSX Index + 7.40% S&P/TSX 60 + 2.75% S&P 500 Index ($CAN) + 6.55% S&P 500 Index($USD) + 8.35% MSCI EAFE Index ($CAN) + 4.50% MSCI World Index ($CAN) + 4.55% MSCI Emerging Markets (CAN$) + 0.45% MSCI China A-shares Index ($CAN) + 45.20% Canadian Bonds + 12.20% Min. Target Return . Effective Sept 30, 2012, the Canadian Bond Policy was 40.30% DEX Universe Bond Index, 45.10% DEX Long Government Bond Index and 14.60% 3-month Canadian Banker Acceptances. slide #6

7. Estimated Going Concern Deficit slide #7

8. What Does this Mean? • Current member and employer contribution rates (approximately 20.7% of pensionable earnings) are sufficient to fund future benefits and part of the deficit: Potential deficit at 31-Dec-2012$267,325,000 Less: Portion of the deficit funded by current contribution rates $127,991,000 Additional deficit to be addressed $139,334,000 slide #8

9. How to Close the Gap? The additional deficit of approximately $139,334,000 needs to be addressed How? • Two options to address the additional deficit: • Increase contributions • Reduce future service benefits and increase contributions by a smaller amount slide #9

10. Meeting Funding Challenges If the gap is to be closed by contribution increases only: • Employee contribution rates would increase by approximately 2% of earnings • Employer contribution rates would increase by approximately 2% of earnings slide #10

11. Meeting Funding Challenges • Gap could be decreased by reducing future service benefits.Possible benefit reductions explored: PSO = Public Safety Occupation (police officers and firefighters) *Rule of 85 with a minimum retirement age of 55 or Rule of 80 with a minimum retirement age of 50 slide #11

12. Meeting Funding Challenges • Proposed benefit changes will not affect your pension earned for past service • None of the proposed changes to unreduced early retirement will affect you if, on the effective date of the amendment,: • you have reached your Normal Retirement Date (age 60 for PSO members/age 65 for non-PSO members); • you already meet the Rule of 85 (employment service + age) and you are 55 years of age or older; • you are a Rule of 75 PSO member with more than 80 points and you are 50 years of age or older; or • you are a non-PSO member age 60 or over with 15 years of credited service. slide #12

13. Meeting Funding Challenges - Decision • Increase contribution rate by approximately 2% of pensionable earnings, OR • Increase contribution rate by less than 2% of pensionable earnings and reduce benefits: • 5 year best average earnings • Unreduced pension at: • Age 60 or Rule of 85 (Rule of 80 for current Rule of 75 PSO members), or • Age 60 with min 10/15 years service or Rule of 85 (Rule of 80 for current Rule of 75 PSO members) slide #13

14. MEETING FUNDING CHALLENGES slide #14

15. MEETING FUNDING CHALLENGES slide #15

16. MEETING FUNDING CHALLENGES Note: removing the minimum early retirement age would reduce the contribution savings from 0.5% to 0.45% and require a contribution rate increase of approx. 1.55% slide #16

17. MEETING FUNDING CHALLENGES Note: removing the minimum early retirement age would reduce the contribution savings from 0.6% to 0.55% and require a contribution rate increase of approx. 1.45% slide #17

18. MEETING FUNDING CHALLENGES Note: removing the minimum early retirement age would reduce the contribution savings from 1.0% to 0.95% and require a contribution rate increase of approx. 1.05% slide #18

19. Meeting Funding Challenges • Implementation of a benefit change • Final service calculations will be split between current benefit rules and the amended benefit rules slide #19

20. Calculation Example slide #20

21. Next Steps • Stakeholder unions vote if there is a benefit reduction proposed; • If a benefit reduction is accepted by all stakeholder unions* and HRM; then • HRM Council needs to approve benefit reduction; then • Approval by regulators; then • Implementation *If one union or HRM does not approve the proposed benefit reduction, the default is contribution increases slide #21