PEBA is pursuing a new operating structure in order to better serve its pension plan members and employers. It will become a not-for-profit corporation (NPC), arm’s length from the Government of Saskatchewan.
This effort was conceived and spearheaded by the Public Employees Pension Board and the Municipal Employees’ Pension Commission, the bodies that oversee their respective pension plans. The Board and Commission have been meeting with the employers and unions of members since 2021 to ensure they understand the changes that are underway, and that their members’ pension will not be affected.
The Board and Commission are both representative, and composition is prescribed in legislation. For PEPP, there are four employer representatives, four employee or union representatives, and an independent chair. For MEPP, there are six employer representatives, and six employee or union representatives. The chair alternates between employer and employee representatives.
PEBA is one of the last provincial government agencies in Canada that administers pensions on behalf of pension plan boards. Almost all other provincial plans are administered by an arm’s length organization, which is considered best practice. This change will streamline and strengthen governance by having the not-for-profit corporation overseen by a skills-based, corporate board of directors, which report to the PEPP Board and MEPP Commission.
The World Bank has identified a model for building world-class pension organizations. PEBA is a mature, sophisticated organization when it comes to investment diversification, plan design and funding, plan administration, client service and technology. Independent governance is a pillar of the World Bank model, and that’s what this initiative will accomplish. As a result of the transition, PEBA will have clarity of governance and be well positioned to attract and retain talent, and potentially to offer in-house investment management.
No. Privatization typically means less regulation and the issuance of shares to private interests. In this case, there are no private interests involved. It’s simply a transition from government agency operation and oversight to operation and oversight by a not-for-profit corporation board. There are no shares involved. In addition, several protections are in place to prevent privatization: the control and oversight of representative boards, legislation governing the plans and the corporation, and provincial and federal regulatory oversight.
In order to establish PEBA as a not-for-profit corporation, given that it is currently an agency of the Government of Saskatchewan, legislative changes are required. After debate in the Legislature and discussion in the Standing Committee on Crown and Central Agencies, The Public Pension and Benefits Corporation Act received Royal Assent in the Saskatchewan Legislative Assembly on May 17, 2023.
The new corporate board will provide end-to-end oversight – from strategy to operations to staffing to risk to reporting. It will be a single source of accountability for the not-for-profit corporation. It will report to the PEPP Board and MEPP Commission and take strategic direction from them.
The board will be skills-based, meaning that members will have strong professional backgrounds in the financial sector and pension management, and in professional disciplines ranging from accounting to law. Its membership will be appointed by the PEPP Board and MEPP Commission.
It is expected that there will be between seven and 12 directors and the board will be appointed this fall (2023).
Details, such as board compensation, are still being finalized. An independent compensation consultant will be contracted to conduct an assessment of board compensation in comparison with market rates. This same consultant will assess management compensation.
There will be no changes to the pension and benefits plans that PEBA manages. They will continue to operate in exactly the same way, and will continue to be overseen by their respective boards. For members, their contribution rates, entitlements and services are not changing in any way.
MEPP will remain a defined benefit pension plan.
There’s a common misunderstanding that MEPP or PEPP are currently backstopped (or underwritten) by the provincial government, but this is in fact not the case. Pension management and responsibility rests solely with each pension plan’s board of directors.
There will be a small increase to operating costs as the new not-for-profit corporation takes over some services that are currently provided by the Government of Saskatchewan. We’re optimistic this could be offset by cost-savings in the years ahead.
There will be no impact to individual MEPP members or changes to their contribution rates at this time.
The legislative process began in 2022. It is anticipated that the new NPC will begin operating in 2024.
PEBA currently operates its own pension administration and IT systems and has implemented best-practice strategies and processes to protect member funds and data. PEBA will continue to employ systems and processes that meet financial industry standards to manage and protect member information during the transition to the NPC.
We would be glad to discuss the transition further and answer specific questions.
Email: mepp@plannera.ca
Phone: 1-877-506-6377