The Public Employees Benefits Agency (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. Board and Commission members are appointed by employers and unions whose members are in the 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’ pensions 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.
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.
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.
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 boards of the PEPP and MEPP pension plans.
That work is still underway. But it is expected that there will be between seven and 12 directors. And we expect it to be skills-based, and not representative.
The NPC board will be appointed this fall (2023). Details, such as board compensation, are still being finalized. An independent consultant will be contracted to recommend board compensation in comparison with market rates.
Similar to board compensation, an independent third-party will be contracted to conduct a compensation review. We expect that the not-for-profit corporation’s employees will be paid based on market rates. In other words, the corporation will pay salaries in line with what similar organizations pay for the same type of work.
Both PEPP and MEPP are registered pension plans under provincial legislation and are governed by associated acts and regulations. Legislation specific to those plans will not change. It’s also important to note that the plans will still be subject to annual independent audits, and will still produce annual reports. They will still be audited by the Provincial Auditor. And they will still subject to regulation by the Financial and Consumer Affairs Authority of Saskatchewan and Revenue Canada.
We expect the NPC will adopt very similar levels of transparency.
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.
Those details are still being worked out. But, we expect the NPC, like PEBA, will operate in a very open and transparent manner.
This initiative was first announced to our plan members in May 2022. And in the months leading up to the announcement, and since the announcement, we’ve been in ongoing dialogue with member employers and unions, sharing our plans, explaining the rationale, answering their questions, and seeking their feedback. And we’ll continue to do so in the months ahead.
We’ve also been communicating with members on an ongoing basis, through sessions like this one, through member and employer newsletters, and though our web sites and social media channels.
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. This includes all investment management activities, which are contracted to some of the best firms in the world. For members, their contribution rates, entitlements and services are not changing in any way. The only impact members will see is a very small increase of $20 to $30 annually in administrative fees which are built into the plan and not charged directly to members. But we’re optimistic this could be offset by cost-savings in the years ahead.
It should be noted that industry benchmarking shows PEBA’s administrative costs are consistently lower than other pension administrators. And, the management fees that members pay are typically lower than retail financial institutions and are expected to remain this way.
Investment costs are by far the largest costs incurred by the plans, and those do not change as a result of this initiative.
On the administration side, there will be a small increase to cover new costs like human resource services, legal services, and auditing services.
Yes. We are keenly interested to track the impact of these changes over time. We track expenditures year-over-year and will closely monitor, manage and report any expected or realized administration cost increases.
There will be no changes that affect PEBA employees during this transition. Salaries, benefits, and union affiliations will not be affected. PEBA employees are currently part of the larger cross-government SGEU bargaining unit. As part of the transition, PEBA's intent is to partner with SGEU on the creation of a separate bargaining unit.
We would be glad to discuss the transition further and answer specific questions.
Email: pepp@plannera.ca
Phone: 1-877-275-7377