June 17, 1999

BOARD OF TRUSTEES, METROPOLITAN TORONTO

POLICE BENEFIT FUND:

I am enclosing for your information and any attention deemed necessary, Clause No.28 contained in Report No.6 of The Corporate Services Committee, headed "Actuarial Valuation Results- Metropolitan Toronto Pension Plan and the Metropolitan Toronto Police Benefit Fund", which was adopted, as amended, by the Council of the City of Toronto at its meeting held on June 9, 10and11,1999.

May I draw your attention to the amendment by Council found at the beginning of the Clause.

for City Clerk

J. A. Abrams/csb

Encl.

Clause sent to:Chief Financial Officer and Treasurer

Chairman, Toronto Police Services Board

Board of Trustees, Metropolitan Toronto Police Benefit Fund

Board of Trustees, Metropolitan Toronto Pension Plan

c.:Administrator, Administration Committee

Actuarial Valuation Results - The Metropolitan

Toronto Pension Plan and the Metropolitan

Toronto Police Benefit Fund

(City Council on June 9, 10 and 11, 1999, amended this Clause by striking out and referring Recommendations Nos. (2) and (3) embodied in the report dated May 11, 1999, from the Chief Financial Officer and Treasurer, to the Toronto Police Services Board for consideration and report thereon to Council, through the Administration Committee, viz.:

"(2)an employee and employer contribution holiday be granted in the Metropolitan Toronto Police Benefit Fund for the period January 1, 1999, to December 31, 2000, with the plan to review and report annually on the feasibility of extending the contribution holiday; and

(3)the basic percentage for spousal survivor pensions in the Metropolitan Toronto Police Benefit Fund be increased to 66 2/3 percent from 60 percent for all active members, effective July 1, 1998;".)

The Corporate Services Committee recommends:

(1)the adoption of the following report (May11, 1999) from the Chief Financial Officer and Treasurer; and

(2)the amendment of By-law No. 15-92 and By-law No. 181-81 in accordance with the draft amending By-laws appended to this Clause:

Purpose:

To comment on the recommendations of the Actuary relating to the actuarial valuation as at December 31,1998, of the Metropolitan Toronto Pension Plan and the Metropolitan Toronto Police Benefit Fund. In addition to report that the consultation process with the Police Services Board regarding the request from the Board of Trustees of the Metropolitan Toronto Police Benefit Fund to improve survivor benefits and contribution rates in the Metropolitan Toronto Police Benefit Fund has been completed.

Funding Sources, Financial Implications and Impact Statement:

Not applicable.

Recommendations:

It is recommended that:

(1)the December 31, 1998, actuarial reports be received and the recommendations to increase pensions be approved;

(2)an employee and employer contribution holiday be granted in the Metropolitan Toronto Police Benefit Fund for the period January 1, 1999, to December 31, 2000, with the plan to review and report annually on the feasibility of extending the contribution holiday;

(3)the basic percentage for spousal survivor pensions in the Metropolitan Toronto Police Benefit Fund be increased to 66 2/3 percent from 60 percent for all active members, effective July 1, 1998; and

(4)the existing contribution holiday in the Metropolitan Toronto Pension Plan be extended to December 31, 2000.

Background:

(1)Metropolitan Toronto Police Benefit Fund:

The Corporate Services Committee had before it at its April 19, 1999 meeting, a request from the Board of Trustees of the Metropolitan Toronto Police Benefit Fund recommending that:

(1)the plan should be converted to a non-contributory plan subject to annual review, effective January 1, 1999;

(2)the basic percentage for spousal survivor pensions be increased to 66 2/3 percent from 60percent for all active members, effective July 1, 1998; and

(3)the authority be granted for the introduction in Council of the necessary Bills to give effect to Recommendation No. (1).

As these improvements affect active police officers and could be deemed to fall within the collective bargaining process, the recommendations were deferred originally from the May 25, 1998, Corporate Services Committee until such time as consultation with the employer, the Police Services Board took place.

Staff and the Board of Trustees met with the Police Services Board and received their concurrence with the proposed changes.

The Boards of Trustees of the Metropolitan Toronto Police Benefit Fund at their meetings on April30, 1999, considered recommendations made by the plans' Actuary arising out of the plans' annual actuarial valuations as at December 31, 1998.

The pension plan experienced actuarial gains in 1998 that contributed to an increase in the "Indexation Reserve". The Reserve represent the difference between actuarial liabilities and actuarial assets. These gains were generated by variations from actuarial assumptions in three areas:

(i)lower wage growth;

(ii)lower inflation; and

(iii)higher investment returns.

The actuary's recommendations relating to this actuarial gain are as follows:

For Active Members:

(i)the full contribution holiday for the employers and employees be continued for the calendar year 2000; and

(ii)the mortality table be updated from the 1983 Group Annuity table to the 1994 Group Annuity table.

For Retired Members:

(i)the mortality table be updated from 1983 Group Annuity table to the 1994 Group Annuity table;

(ii)an increase of 0.09 percent be granted on pension, effective January 1, 1999, to pensioners on benefit for more than one year with proportionate increase of .075 percent for each month of pension payment made in 1998 be granted for pensioners who retired during 1998;

(iii)effective January 1, 2000, an increase be granted to pensioners on benefit for more than one year equal to the increase in the Consumer Price index during the period from October1,1998 to September 30, 1999

The Board of Trustees of the Metropolitan Toronto Police Benefit Fund at their meeting concurred with the Actuaries recommendations and forwarded them to the Corporate Services Committee with one amendment being that the increase on January 1, 2000 equal to the Consumer Price Index be limited to 6.0 percent.

(2)Metropolitan Toronto Pension Plan:

The Board of Trustees of the Metropolitan Toronto Pension Plan at their meeting on April 30, 1999, considered recommendations made by the plans' Actuary arising out of the plans' annual actuarial valuations as at December 31, 1998.

The pension plan experienced actuarial gains in 1998 that contributed to an increase in the "Indexation Reserve". The Reserve represent the difference between actuarial liabilities and actuarial assets. These gains were generated by variations from actuarial assumptions in three areas:

(i)lower wage growth;

(ii)lower inflation; and

(iii)higher investment returns.

The actuary's recommendations relating to this actuarial gain are as follows:

For Active Members:

(i)the full contribution holiday for the employers and employees be continued for the calendar year 2000; and

(ii)the mortality table be updated from the 1983 Group Annuity table to the 1994 Group Annuity table;

(iii)discount rate is changed from 7 percent to 6 percent, salary scale from 6 percent to 5percent and the YMPE scale from 5 percent to 4 percent.

For Retired Members:

(i)the mortality table be updated from 1983 Group Annuity table to the 1994 Group Annuity table;

(ii)an increase of 1.0 percent be granted on pension, effective January 1, 1999, to pensioners on benefit for more than one year with a proportionate increase of .083 percent for each month of pension payment made in 1998 be granted for pensioners who retired during 1998;

(iii)effective January 1, 2000, an increase be granted to pensioners on benefit for more than one year equal to the increase in the Consumer Price index during 1999; and

(iv)the discount rate be changed from 7 percent to 6 percent.

The Board of Trustees of the Metropolitan Toronto Pension Plan at their meeting concurred with the Actuaries recommendations except for the increase on January 1, 2000. They chose to recommend all recommendations on to the Corporate Services Committee except for the increase on January 1, 2000. This increase will be reviewed after the 1999 actuarial valuation has been completed.

Discussion:

As at December 31, 1998 the Indexation Reserve Account for the Metropolitan Toronto Pension Plan had increased to $216,596,000 from $154,434,000 a year earlier. For the Metropolitan Toronto Police Benefit Fund the amount is up to $80,182,000 from $68,706,000 a year earlier.

As can be seen these funds are in good actuarial shape. The recommendations for the use of these Indexation Reserve amounts are for two different improvements.

The recommendation to update the mortality table from the 1983 Group Annuity Table to the 1994Group Annuity table and the changes to the discount rate, salary scale and YMPE scale will control the risk of experience losses in the future.

Recommendations for pension increases for 1999 are slightly different between the two funds. The Metropolitan Toronto Police Benefit Fund has taken the step this year to change the method of calculating increases to be the same as OMERS. The increase of 0.9 percent was the rate of inflation for the period December 31, 1998 to September 30, 1999. They also requested that the increase for 2000 be approved at this time.

The Metropolitan Toronto Pension Plan has chosen not to change at this time and to continue to calculate pension increases based on the Consumer Price Index change from December 31, 1997 to December 31, 1998, which was 1.0 percent. They have, like the Metropolitan Toronto Police Benefit Fund, requested that the increase be effective January 1, 1999.

The draft by-law prepared by City Legal Services to implement the recommend changes for the Metropolitan Toronto Pension Plan is appended to this report. Section 1 of the draft provides for several "housekeeping" amendments to eliminate inconsistencies in the wording of the prior amendments. Section 2 provides for same-sex spousal benefits in accordance with another report by the Chief Financial Officer and Treasurer to your Committee on that topic for consideration at the same meeting at which this report is to be considered. Section 3 expands the existing provision for the 1999 contribution holiday to include the year 2000. Section 4 puts in place the recommended pensioner increases for 1999, and Section 5 stipulates the dates of coming into force of the various amendments.

A draft by-law prepared by City Legal Services to implement the recommended changes to the Metropolitan Toronto Police Benefit Fund is also appended to this report. These recommended changes include a contribution holiday for 1999 and an increase in spousal benefits to 66 2/3percent with respect to members who have not yet retired. Section 1 of the draft provides for two "housekeeping" amendments to eliminate inconsistencies in the wording of the 1997 and 1998amendments implementing the pensioner increases for those years. Section 2 provides for same-sex spousal benefits in accordance with a separate report by the Chief Financial Officer and Treasurer to your Committee for consideration at the same meeting. Section 3 puts in place the recommended pensioner increases for 1999 and 2000. Section 4 stipulates the dates of coming into force of the various amendments.

Conclusion:

The Metropolitan Toronto Pension Plan and the Metropolitan Toronto Police Benefit Fund are in good actuarial shape as at the end of 1998. The use of the Index Reserve Fund to give pensioner increases for the years 1999 and 2000 is appropriate and the changes in actuarial assumptions provide a greater degree of conservatism which will serve to stabilize the funds actuarial experience in the future.

The contribution holiday and survivor benefit improvements for active members of the Metropolitan Toronto Police Benefit Fund are now similar to the OMERS plan provisions. This would now bring the provisions of the Metropolitan Toronto Police Benefit Fund in line with those approved by Council for the Metropolitan Toronto Pension Plan, the Toronto Civic Employees' Pension and Benefit Fund and the Toronto Fire Department Superannuation and Benefit Fund.

Contact Name:

Ivana Zanardo

Director

Pension, Payroll and Employee Benefits

397-4143

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D R A F T

CITY OF TORONTO

BY-LAW No. -1998

To amend further By-law No. 15-92

of the former Municipality of Metropolitan Toronto

respecting pensions and other benefits.

The Council of the City of Toronto HEREBY ENACTS as follows:

1.(1)Section 6 of By-law No. 80-92 of the former Municipality of Metropolitan Toronto, a by-law "To further amend By-law No. 15-92 respecting pensions and other benefits", is amended by adding thereto the following subsection:

"6.(1.1)Subsection 22(3) of said By-law No. 15-92 is amended by striking out "(2)(b)" in the first line thereof and substituting therefor "(2)(c)"."

(2)Section 1 of By-law No. 74-97 of the former Municipality of Metropolitan Toronto, a by-law "To amend further By-law No. 15-92 respecting pensions and other benefits" is amended by striking out the text "1996" at the end of subsection 42.6(1) of said By-law No.15-92 as enacted by said section 1 and substituting therefor "1995".

(3)By-law No. 279-1998, a by-law "To amend further By-law No. 15-92 of the former Municipality of Metropolitan Toronto respecting pensions and other benefits", is amended by

(a)inserting the text "per cent." in the second line of clause 4(2)(a) thereof, immediately following the text "66" and preceding the closing quotation marks;

(b)striking out the text "1997" at the end of subsection 42.7(1) of said By-law No. 15-92 as enacted by subsection 5(1) thereof and substituting therefor "1996".

2.Clause 1(1)(ee) of By-law No. 15-92 of the former Municipality of Metropolitan Toronto, a by-law "To provide pensions for employees, their spouses and children of the Metropolitan Corporation and other participating employers", as such clause was amended by By-law No. 279-1998, is further amended by

(a)striking out the words "a man and woman" in the first line thereof and substituting therefor "two persons";

(b)adding at the end of subclause (ii) immediately following item (B) thereof the text "provided that this subclause shall apply with respect to a member and a person of the same sex only if the member has died on or after the 5th day of June, 1998"

3.Subsection 13(1.2) of said By-law No. 15-92, as such subsection was enacted by By-law No. 892-1998, is repealed and the following substituted therefor:

"Contribution Holiday 1999 and 2000

13.(1.2)During the calendar years 1999 and 2000, subsection (1) shall be interpreted as if the contributory rates specified therein were all zero."

4.The said By-law No. 15-92, as heretofore amended, is further amended by adding thereto the following section:

"General Pensioner Increase (1999)

42.8(1)Save and except for those pensions increased pursuant to subsection (2), the amount of pension payable under this By-law is hereby increased by 1.0percent effective the 1st day of January, 1999, in respect of

(a)each pensioner in receipt of a pension; and

(b)each employee member entitled to a deferred pension under clause 28(1)(a) and, if applicable, clause 28(4)(b), or predecessors thereof,

on or before the 31st day of December, 1997.

Adjusted Pensioner Increases (1999)

Effective the 1st day of January, 1999, the amount of pension

(a)payable

(i)to each employee pensioner in receipt of a pension; and

(ii)to each pensioner under section 29 or a predecessor thereof in respect of a deceased employee member who died prior to retirement; and

which commenced on a date shown in Column I;

(b)payable to each pensioner under section 31 or any predecessor thereof in respect of a deceased employee pensioner whose retirement commenced on a date shown in Column I;

(c)payable to each employee member entitled to a deferred pension under clause28(1)(a) and, if applicable, clause 28(4)(b), as a result of termination of employment which took place after December 1, 1997, on a date shown in Column I, treating any such termination which occurred on any day of a month other than the first as if it had occurred on the first day of the next following month,

is hereby increased by the percentage set out opposite such date in Column II:

Column IColumn II

January 1, 19981.000 per cent.

February 1, 19980.917 per cent.

March 1, 19980.833 per cent.

April 1, 19980.750 per cent.

May 1, 19980.667 per cent.

June 1, 19980.583 per cent.

July 1, 19980.500 per cent.

August 1, 19980.417 per cent.

September 1, 19980.333 per cent.

October 1, 19980.250 per cent.

November 1, 19980.167 per cent.

December 1, 19980.083 per cent."

5.(1)Subsection 1(1) shall be deemed to have come into force on the 1st day of January, 1992.

(2)Subsection 1(2) shall be deemed to have come into force on the 18th day of June, 1997.

(3)Subsection 1(3) and section 2 shall be deemed to have come into force on the 5th day of June, 1998.

(4)Sections 3 and 4 shall come into force on the date of enactment and passing of this by-law.

ENACTED AND PASSED by an affirmative vote of at least two-thirds of the Members of Council present and voting this th day of June, A.D. 1999.

MayorCity Clerk.

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D R A F T

CITY OF TORONTO

BY-LAW No. -1999

To amend further By-law No. 181-81

of the former Municipality of Metropolitan Toronto

respecting pensions and other benefits.

The Council of the City of Toronto HEREBY ENACTS as follows:

1.(1)Section 1 of By-law No. 73-97 of the former Municipality of Metropolitan Toronto, a by-law "To amend further By-law No. 181-81 respecting pensions and other benefits", as such section was amended by By-law No. 149-97 of that Municipality, is further amended by striking out the text "1996" at the end of subsection 32r(1) of said By-law No.181-81 as enacted by said subsection 1(1) and substituting therefor "1995".

(2)Subsection 2(1) of By-law No. 278-1998, a by-law "To amend further By-law No. 181-81 of the former Municipality of Metropolitan Toronto respecting pensions and other benefits", is amended by striking out the text "1997" at the end of subsection 32s(1) of said By-law No. 181-81 as thereby enacted and substituting therefor "1996".

2.Clause 1(1)(z) of By-law No. 181-81 of the former Municipality of Metropolitan Toronto, a by-law "To provide pensions and death benefits to members of the Metropolitan Police Force", as such clause was re-enacted by By-law No. 86-89 of that Municipality, is amended by adding immediately following subclause (ii) thereof the text "provided that this clause shall apply with respect to a member and a person of the same sex only if the member has died on or after the 5th day of June, 1998".

3.The said By-law No. 181-81, as heretofore amended, is further amended by adding thereto the following section:

"General Pensioner Increase (1999)"

32t.(1)Save and except for those pensions increased pursuant to subsection (2), the amount of pension payable under this By-law is hereby increased by 0.9percent. effective the 1st day of January, 1999, in respect of

(a)each pensioner in receipt of a pension; and

(b)each member entitled to a deferred pension under section 18 or a predecessor thereof,

on or before the 31st day of December, 1997.

Adjusted Pensioner Increases (1999)

(2)Effective the 1st day of January, 1999, the amount of pension

(a)payable

(i)to each member in receipt of a pension; and

(ii)to each pensioner under section 17 or a predecessor thereof in respect of a deceased member who died prior to retirement; and

which commenced on a date shown in Column I;

(b)payable to each pensioner under section 17 in respect of a deceased pensioner member whose retirement commenced on a date shown in ColumnI;

(c)payable to each member entitled to a deferred pension under section 18 as a result of termination of employment which took place after December 1, 1997, on a date shown in Column I, treating any such termination which occurred on any day of a month other than the first as if it had occurred on the first day of the next following month, is hereby increased by the percentage set out opposite such date in Column II:

Column IColumn II

January 1, 19980.900 per cent.

February 1, 19980.825 per cent.

March 1, 19980.750 per cent.

April 1, 19980.675 per cent.

May 1, 19980.600 per cent.

June 1, 19980.525 per cent.

July 1, 19980.450 per cent.

August 1, 19980.375 per cent.

September 1, 19980.300 per cent.

October 1, 19980.225 per cent.

November 1, 19980.150 per cent.

December 1, 19980.075 per cent.

Adjusted Pensioner Increases(2000)

(3)Save and except for those pensions increased pursuant to subsection (4), the amount of pension payable under this By-law shall be increased effective the 1st day of January, 2000, in respect of

(a)each pensioner in receipt of a pension; and

(b)each member entitled to a deferred pension under section 18 or a predecessor thereof,

on or before the 31st day of December, 1998, by the percentage increase, not in excess of 6 per cent., in the Consumer Price Index for Canada (All Items) between September, 1998, and September, 1999.

Adjusted Pensioner Increases (2000)

(4)Effective the 1st day of January, 2000, there shall be increases in the amounts of certain pensions in the manner described in subsection (2), as if that subsection had been re-enacted with the following modifications:

(a)replacement of the text 1997? in the fourth line of clause (c) thereof with ?1998?;

(b)replacement of the two lines of text immediately following clause (c) thereof with ?is hereby increased case by the percentage pension increase provided for in subsection (3) multiplied by the adjustment factor set out opposite such date in Column II:?; and

(c)replacement of Columns I and II thereof with the following:

Column IColumn II

January 1, 19991.0000

February 1, 19990.9167

March 1, 19990.8333

April 1, 19990.7500

May 1, 19990.6667

June 1, 19990.5833

July 1, 19990.5000

August 1, 19990.4167

September 1, 19990.3333

October 1, 19990.2500

November 1, 19990.1667

December 1, 19990.0833

4.(1)Subsection 1(1) shall be deemed to have come into force on the 18th day of June, 1997.

(2)Subsection 1(2) and section 2 shall be deemed to have come into force on the 5th day of June, 1998.

(3)Section 3 shall come into force on the date of enactment and passing of this by-law.

ENACTED AND PASSED by an affirmative vote of at least two-thirds of the Members of Council present and voting this day of June, A.D. 1999.

MayorCity Clerk.

________

The Corporate Services Committee reports, for the information of Council, having also had before it the following communications:

(i)(April30, 1998) from the Board Secretary, Metropolitan Toronto Pension Plan, advising that the Board of Trustees of the Metropolitan Toronto Pension Plan on April 30, 1999, had before it the Actuarial Report and Cost Certificate for the Fund as at December 31, 1998, submitted by Mr. Robert Camp, William M. Mercer Limited, and setting out full details of the Fund's financial position on the valuation date, making recommendations as to the utilization of the experience gains, and illustrating the effect of the recommendations on the funded position; and that the Board of Trustees:

(A)recommended to the Corporate Services Committee that:

(1)for active members:

(a)the full contribution holiday for the employers and employees be continued for the calendar year 2000 for which the cost is expected to be $485,000;

(b)the mortality table be updated from the 1983 Group Annuity table to the 1994 Group Annuity table for which the cost is $350,000;

(c)the discount rate be changed from 7 percent to 6 percent salary scale from 6 percent to 5 percent and YMPE scale from 5 percent to 4percent for which the cost is $3,390,000;

(2)for retired members:

(a)an increase of 1.0 percent be granted on pensions, effective January1, 1999, to pensioners on benefit for more than 1 year with a proportionate increase of 0.083 percent for each month of pension payment made in 1998 be granted for pensions who retired during 1998 for which the cost is $5,452,000;

(b)the mortality table be updated from the 1983 Group Annuity table to the 1994 Group Annuity table for which the cost is $9,150,000;

(c)the discount rate be changed from 7 percent to 6 percent for which the cost is $45,414,000; and

(3)the authority be granted for the introduction in Council of the necessary Bills to give effect to Recommendations No. (1 and 2);

(B)requested the City Solicitor to draft the appropriate amending by-law respecting Recommendations No. (1 and 2), and submit such draft by-law directly to the Corporate Services Committee for consideration with this matter; and

(ii)(March 12, 1999) from the Board Secretary, Metropolitan Toronto Police Benefit Fund and Pension Plan, advising that the Board of Trustees of the Metropolitan Toronto Police Benefit Fund on February26, 1999, recommended to the Corporate Services Committee that:

(1)the plan should be converted to a non-contributory plan subject to annual review, effective January 1, 1999;

(2)the basic percentage for spousal survivor pensions be increased to 66 2/3 percent from 60 percent for all active members, effective July 1, 1998; and

(3)the authority be granted for the introduction in Council of the necessary Bills to give effect to Recommendation No. (1).

(iii)(April 30, 1999) from the Board Secretary Metropolitan Toronto Police Benefit Fund, advising that the Board of Trustees of the Metropolitan Toronto Police Benefit Fund on April30, 1999, had before it the Actuarial Report and Cost Certificate for the Fund as at December 31, 1998, submitted by Mr. Robert Camp, William M. Mercer Limited, and setting out full details of the Fund's financial position on the valuation date, making recommendations as to the utilization of the experience gains, and illustrating the effect of the recommendations on the funded position; and the Board of Trustees:

(A)recommended to the Corporate Services Committee that:

(1)for active members:

(a)the full contribution holiday for the employers and employees be continued for the calendar year 2000 for which the cost is expected to be $1,555,000;

(b)the mortality table be updated from the 1983 Group Annuity table to the 1994Group Annuity table for which the cost is $736,000;

(2)for retired members:

(a)an increase of 0.9 percent be granted on pensions, effective January1, 1999, to pensioners on benefit for more than 1 year with a proportionate increase of 0.075 percent for each month of pension payment made in 1998 be granted for pensions who retired during 1998 for which the cost is $5,276,000;

(b)effective January 1, 2000, an increase be granted to pensioners on benefit for more than 1 year equal to the increase in the Consumer Price Index during the period from October 1, 1998 to September 30, 1999 with a proportionate increase for each month of pension payment made in 1999 be granted for pensioners who retire during 1999 for which the cost is $11,750,000, subject to the maximum guaranteed inflation increase in any one year is capped at 6 percent;

(c)the mortality table be updated from the 1983 Group Annuity table to the 1994 Group Annuity table for which the cost is $8,208,000; and

(3)the authority be granted for the introduction in Council of the necessary Bills to give effect to Recommendations No. (1 and 2); and

(B)requested the City Solicitor to draft the appropriate amending by-law respecting Recommendations No. (1 and 2), and submit such draft by-law directly to the Corporate Services Committee for consideration with this matter.

(A copy of the Actuarial report and Cost Certificate with respect to the Metropolitan Toronto Pension Plan as at December 31, 1998, and the Actuarial Report and Cost Certificate with respect to the Metropolitan Toronto Police Benefit Fund as at December 31, 1998, prepared by William M. Mercer Limited, dated April, 1999, was forwarded to all Members of Council with the May 20, 1999, agenda of the Corporate Services Committee; and copies thereof are also on file in the office of the City Clerk.)