Pension360

Carol Buckmann is an attorney who has practiced in the employee benefits field for over 30 years. This post was originally published at Pensions & Benefits Law.

Would you bet millions of dollars on your ability to accurately predict how the IRS will interpret the tax code? That’s what a plan sponsor that adopts a plan that isn’t approved by the IRS does. Even though they are not legally required to obtain determination letters,  virtually all plan sponsors with their own plan documents apply regularly for favorable determination letters approving their plan language.

The Internal Revenue Service recently announced that it is not only discontinuing its requirement that individually-designed plans seeking approval be reviewed for new determination letters every five years, but it will no longer review these plans except on adoption and termination.  The excuse given is lack of manpower and resources, but the decision leaves adopters of individually-designed plans in a quandary.

How are they to make sure that their plans are in compliance, given the seemingly ever-changing statutory and regulatory requirements and the serious consequences, up to retroactive disqualification, for failure to do it right?  

Here are some suggestions for plan sponsors and the IRS to consider.

If you are a plan sponsor:

• Could you move to a pre-approved plan?  The IRS will continue to approve the language in prototype and volume submitter plans used by vendors such as Fidelity and Vanguard and some banks and law firms.  This would simplify life, but at the cost of sacrificing flexibility.  Most of these plans have limited ability to accommodate custom provisions, or provisions designed to protect plan fiduciaries, such as contractual statutes of limitations for participant lawsuits or plan governance delegations.
• Encourage your law firm to develop a volume submitter plan.  Plans are legal documents that are best drafted by lawyers, and these might accommodate more flexible legally-recommended options than vendor pre-approved documents. Large vendor documents often seem to be drafted to make life simpler for the vendors.  However, your law firm will need a minimum number of adopters to do this.
• If you keep your own document, consider getting legal qualification opinions from your employee benefits counsel on a regular basis.  These will be particularly helpful in audits and litigation, but may also be sought by buyers in acquisition transactions.
• If you keep your own document, consider adopting model and sample amendments issued by the IRS, which are “safe harbors” with language intended to automatically satisfy the legal requirements. Note, however, that these also will limit flexibility and may not work without modification if there are unusual or complicated plan designs.
• If you keep your own document, make sure to hire the most competent drafters.  The consequences of drafting mistakes will get much more serious and expensive.

The IRS should consider the following changes to preserve individually-designed plans:

• Modify its rule that a document defect found on audit goes automatically into the closing agreement program, and is not eligible for the less expensive voluntary correction program (VCP) penalties.
• Modify its long-criticized rule that interim and discretionary amendments must be adopted by the end of the year in which they are effective or the plan sponsor’s tax return deadline for that year.  There should be reasonable extended remedial amendment periods for adopting amendments to reflect changes in the law. (That would also limit the frequency with which qualification opinions might have to be obtained from counsel.)
• Approve major modifications to a plan, such as conversion to another type of plan as if a new plan had been adopted at the effective date of the change.
• Issue more model and sample language and add choices, similar to the way that adoption agreements can be used for different choices.

The basic decision made by the IRS seems to be set in stone.  However, it will be a blow to the private pension system if these changes make individually-designed plans too risky to maintain.

Defined benefit plans, in particular, are already being discouraged by overly complex regulation and ever increasing PBGC premiums.  Since individually-designed plans have long been a way to  customize provisions to meet an employer’s own business needs, the IRS should make special efforts such as those suggested above to keep them alive.

Photo by Roland O’Daniel via Flickr CC License

PFZW, the pension fund that covers the Netherlands’ healthcare workers, announced on Tuesday its plans to divest from coal and fossil fuel holdings over the coming years.

It is one of the largest institutional investors yet to voluntarily begin dropping its investments linked to fossil fuels.

From Reuters:

Citing the need to invest in a way that protects the environment, the fund said it would divest completely from coal-related companies by 2020, while investments in fossil fuel companies will be reduced by 30 percent.

“This will take place in four annual steps and result in investments being withdrawn from approximately 250 companies” focused in the energy, utilities and materials sectors, the fund said in a statement.

Maurice Wilbrink, a spokesperson for PGGM, which manages assets for PFZW, said the divestments represent about 5 percent of PFZW’s equity portfolio, or 1.7 billion euros.

“That will be taken from companies in those sectors that score poorly” on measures of efficient resource use, and be reinvested in companies that score well, Wilbrink said.

He said PGGM and PFZW believe the investment change will be “neutral to slightly positive” for medium-term investment returns.

That comes despite the risk that the decision to divest may be poorly timed, given the fall in oil prices over the past year. The fund did not provide data but said in its third-quarter report that commodity-linked investments had “delivered the worst returns” in its investment portfolio, which had a loss of 3.2 percent from the same quarter a year earlier.

PFZW manages a $172 billion (USD) portfolio.

 

Photo by  penagate via Flickr CC

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at Calpensions.com.

California State University employees pay less for their pensions and health care than other state workers, including members of a faculty union scheduled to demonstrate for higher pay at a CSU trustees meeting in Long Beach today.

The California Faculty Association, backed by a member strike authorization, has launched a “Drive for Five” campaign for a pay raise of 5 percent, rather than the 2 percent pay raise offered by the university administration.

As it happens, the gap between the faculty goal and the administration offer, 3 percent of pay, equals the gap between what CSU employees and other state workers pay for the same pension.

CSU employees contribute 5 percent of pay. The employees of other state agencies contribute 8 percent of pay. Both groups are in the “2 at 55” CalPERS plan, which provides a pension of 2 percent of final pay for each year served at age 55.

It’s an obvious inequity, if not a subsidy, because the contribution rate for the employers in both groups is the same: 25.1 percent of pay this fiscal year, projected to grow to 30.1 percent in five years.

(Under a cost-cutting reform Gov. Brown pushed through the Legislature, state workers hired since Jan. 1, 2013, are in new plans requiring longer service or an older age to earn a similar pension.)

The lower employee pension payment may not feel like a free ride for the California State University faculty union representing 26,000 employees, the largest of the 13 bargaining units on the 23 campuses.

“Faculty salaries lag behind the UC and California community college faculty salaries both in absolute terms and in relation to inflation over the last 10 years,” said the faculty union’s “Race to the Bottom” analysis.

“While the average faculty salary at the University of California rose from 2004 to 2013, adjusted for inflation, purchasing power for CSU faculty fell during the time period,“ said the analysis. “This disparity is most dramatic in San Francisco, where UC San Francisco average salaries rose $16,138, while faculty at San Francisco State lost $9,748.”

Is the CSU employee pension contribution an issue in the current labor negotiations? Spokeswomen for the CSU chancellor’s office and the California Faculty Association did not reply.

The powerful California Public Employees Retirement System does not control employee contributions. But it does set the annual contribution rates that must be paid by state employers.

Four years ago, the Brown administration requested separate rates for CSU employers because CSU employees, unlike other state workers, had not agreed to increase their pension contributions.

“We expect that having separate rates will result in state employers having to contribute $50 million less for the remainder of the fiscal year and CSU employers having to pay $50 million more,” CalPERS actuaries said in a staff report.

The CalPERS board rejected the proposal on a rare tie vote, 5-to-5 with three absentees. The vote was evenly split between members elected by active and retired employees and Brown appointees and representatives of the state treasurer and controller.

Now the governor’s state budgets have begun gradually shifting more of the CSU employer pension cost to the university system.

The state continues to pay the full CSU employer rate. But the amount the state gives CSU for mid-year adjustments to the rate, based on payroll and other factors, has been tied to the fiscal 2013-14 level.

As the payroll increases over the years, the state will pay a shrinking amount of the mid-year rate adjustment, requiring CSU to pay the remainder.

“This process is intended to increase budget transparency and helps hold CSU accountable for payroll decisions that are within CSU’s control,” said H.D. Palmer, the Brown finance department spokesman.

At the same time, he said, CSU is held harmless for employer rates that are outside of CSU’s control, such as CalPERS investment returns and changes in actuarial assumptions.

Another difference: CSU employees are in a “100/90” health care plan that pays 100 percent of the average cost of several plans and 90 percent of the cost for dependents. After retiring, they remain in the plan until eligible for Medicare supplement.

Other state workers are in a health care plan that pays 80 to 85 percent of the average health plan cost for retirees, depending on bargaining, and 80 percent of the cost for dependents. They receive the more generous “100/90” plan after retiring.

“My plan also will change the anomaly of retirees paying less for health care premiums than current employees,” Brown said in a 12-point pension reform issued four years ago.

The debt or “unfunded liability” for retiree health care promised state workers over the next 30 years ($72 billion) was greater last year than the unfunded liability for state worker pensions ($50 billion).

A Brown reform proposed last January would, through labor bargaining, switch state worker retiree health care from “pay as you go” to a pension-like “prefunding” with investments to help pay future costs.

Employee contributions to the retiree health care fund would be matched by the state. Some small state worker bargaining units, including the Highway Patrol, had already begun making payments for their retiree health care.

Brown also proposed adding five years to the retiree health care vesting period that begins with 50 percent coverage after 10 years of service and reaches 100 percent after 20 years. Yet another difference: CSU employees currently vest after five years.

State workers would be barred from receiving a higher health care subsidy in retirement than on the job. The governor’s proposal for an optional low-cost health plan with high deductibles, strongly opposed by unions, stalled in the Legislature.

Last month, state engineers agreed to a contract that phases in payments for retiree health care, extends the vesting period, and has a smaller retiree health care subsidy, the Sacramento Bee reported. Most state worker unions will negotiate contracts next year.

 

Photo by TaxRebate.org.uk via Flickr CC License

Detroit’s future pension contributions could be significantly larger than projected under the city’s bankruptcy plan, according to a report from the Detroit Free Press.

Under the bankruptcy plan, Detroit pays nothing into its pension system for most of the next decade. But in 2024, the city will make one big payment.

The problem for the city is that the 2024 payment could be far larger than projected.

From the Detroit Free Press:

According to new actuarial estimates in documents reviewed by the Detroit Free Press, the city’s balloon payment due in 2024 for its two pension funds has risen to $195 million, or about 71% above the original $114 million projected under the city’s bankruptcy exit plan approved by a federal judge last year. No one has a recently updated forecast yet of what the city’s pension bills look like in the decades after that.

[…]

The actuaries for the city’s two pensions funds say the lower estimate used in the bankruptcy plan was based on outdated information, including projections that didn’t allow for the longer life expectancy of retirees or that the city would be hiring new employees after filing for bankruptcy who would need to become part of the pension system.

The old calculation also was based on pension cuts taking effect in June 2014, instead of nine months later in March, which underestimated the liability for the pension system, officials from the Gabriel Roeder Smith & Co. actuarial firm told its Detroit pension fund clients in recent weeks.

How much of this increase should have been anticipated? Experts warned early on that the ability of Detroit to know its true pension obligations was always unsteady even as the city was set to emerge from bankruptcy.

Martha Kopacz, who analyzed the plan for U.S. Bankruptcy Judge Steven Rhodes and found the city’s plan feasible, cautioned in her report last year that the city must be “continually mindful that a root cause of the financial troubles it now experiences is the failure to properly address future pension obligations.”

Before its bankruptcy, Detroit’s pension obligations totaled $3.5 billion.

 

Photo credit: “DavidStottsitsamongDetroittowers” by Mikerussell – Own work. Licensed under Creative Commons Attribution-Share Alike 3.0 via Wikimedia Commons

Three of Canada’s largest pension plans over the weekend bought the rights to operate the Chicago Skyway until the year 2104.

The consortium of pension funds paid $2.8 billion for the lease rights; the Skyway was originally leased by the city to Spain’s Cintra Infraestructuras and Australia’s Macquarie Group in 2005. The cost of that deal was $1.83 billion.

More from the Chicago Sun-Times:

The buyers are a consortium made up by the Canadian Pension Plan Investment Board, the Ontario Municipal Employees Retirement System and the Ontario Teachers’ Pension Plan, according to a joint statement from the three entities. Each will have a 33.33 percent stake in the Chicago deal.

“Skyway represents a rare opportunity for us to invest in a mature and significant toll road of this size in the U.S.,” said Cressida Hogg, managing director and head of infrastructure for the Canada Pension Plan Investment Board.

The Council must approve the sale of the Skyway rights. A spokeswoman for Mayor Rahm Emanuel’s administration declined comment.

The Skyway company reported collecting nearly $80.7 million in revenue from tolls last year, a slight increase from 2013.

[…]

Motorists who use the 7.8-mile-long toll road on the South Side are unlikely to notice any changes as a result of the sale because the schedule of toll increases was laid out in the long-term lease agreement approved by the City Council 10 years ago.

Barring another sale, the pension funds will operate the Skyway for the next 99 years.

 

Photo by bitsorf via Flickr CC License

A judge ruled against Providence, Rhode Island this weekend in a case brought by the city against its pension consultant.

The city claims that Buck Consultants miscalculated the savings that would result from a 2012 pension reform measure that suspended COLAs for the city’s retirees.

More from WPRI:

A U.S. District Court judge ruled Friday that Providence officials failed to prove how the city would have saved millions of dollars if its longtime actuary didn’t make errors in analyzing the city’s 2012 pension reform ordinance.

U.S. District Court Chief Judge William E. Smith granted a motion for summary judgment filed by Buck Consultants, the firm the city accused of negligently overestimating savings it would generate from suspending retiree cost-of-living adjustments (COLAs) by at least $10 million.

Lawyers for the city argued that Providence relied on Buck’s opinion that the COLA suspension would save the city $180 million when it negotiated a pension settlement with its public safety unions and retirees, but the estimate should have been $170 million. If Buck gave an accurate assessment, lawyers argued, the city would have sought an additional $10 million in savings from the settlement or moved forward with the original pension reform ordinance.

In his decision, Smith called the city’s damage theories “inherently speculative,” arguing that officials did not “present any evidence showing that it actually could have succeeded in getting any further concessions from the unions, let alone in what amount.”

Providence was seeking $10 million in damages.

 

Photo by Joe Gratz via Flickr CC License

The writing has been on the wall: since early Summer, Pension360 has covered CalPERS’ efforts to scale back its real estate exposure in a big way.

On Thursday, the country’s largest pension fund sold $3 billion worth of real estate to the Blackstone Group – an sale which amounts to 10 percent of CalPERS’ real estate holdings.

More from the Sacramento Bee:

The California Public Employees’ Retirement System has been working for years to remove speculative undeveloped holdings from its real estate portfolio and focus more on commercial buildings and other properties that are already developed and producing income.

“This sale allows CalPERS to focus on our strategic plan and on investing in assets and managers that better align with our real estate goals,” said Paul Mouchakkaa, the pension fund’s managing investment director for real assets, in a prepared statement.

CalPERS put the assets up for sale in June.

[…]

Selling to Blackstone also helps with another strategic goal: reducing the number of outside investment managers with which CalPERS does business. CalPERS hopes to save money by having relationships with fewer managers; the pension fund spent $1.6 billion on fees to outside managers in 2014.

The sale comes as the $293.7 billion fund wrestles with a broader effort to reduce investment risks. The pension fund is considering a plan to lower its “discount rate,” which is a target for annual investment profits. A lower rate translates into fewer risks, although lower investment gains would likely lead to higher pension contributions from state and local governments and public employees.

As the Bee notes in its final paragraph, CalPERS is indeed beginning a years-long shift to a more conservative investing strategy.

 

Photo by  thinkpanama via Flickr CC License

CalPERS is aiming to reduce corporate “board stagnation” with a proposal, released Thursday, that aims to make corporate boards more diverse and the churn of directors more frequent.

From Bloomberg:

“We’ve got board stagnation,” said Anne Simpson, director of corporate governance at Sacramento-based Calpers. “We’re not going to create an opportunity for new members for diversity to progress unless there’s some space.”

Directors’ independence can be compromised after 10 years, and companies should either classify them as nonindependent or provide an annual explanation why, Calpers said in a set of principles released Thursday. Routine discussions about replacing directors would ensure boards have a “necessary mix of skills, diversity and experience,” Calpers said in the document.

S&P 500 boards replace about 7 percent of their members annually and the average tenure is 8.5 years, according to Spencer Stuart, an executive search consulting firm. Among those boards, only 3 percent set an explicit term limit for directors and 73 percent have a mandatory retirement age, typically age 72 or older.

[…]

Pressure has been building for companies to assess the diversity and tenure of their boards, said Dan Siciliano, law professor and director of the Rock Center for Corporate Governance at Stanford University near Palo Alto, California. Board composition has become easier to track, and high-profile examples of homogeneous boards at Facebook Inc. and Twitter Inc. drew attention to the issue, he said.

White males account for 73 percent of board seats for Fortune 500 companies, according to the advocacy group Alliance for Board Diversity.

 

Photo by  rocor via Flickr CC License

Leo Kolivakis is a blogger, trader and independent senior pension and investment analyst. This post was originally published at Pension Pulse.

Karen Seidman of the Montreal Gazette reports, Pension paid to McGill’s former principal rankles employees:

Amid a climate of austerity on the McGill University campus, new revelations about the pension that former Principal Heather Munroe-Blum recently started collecting has rankled many union groups.

Access to Information documents show that Munroe-Blum, who retired from her position as principal in 2013 and is no longer teaching at McGill, is entitled to a supplementary pension of almost $284,000 a year on top of the almost $87,000 she gets from regular pension plans from McGill and the University of Toronto.

The information also suggests that Munroe-Blum may have been earning much more than has been documented, perhaps as high as $740,000 — which would make it the richest package of any university president in Canada, then or now. That’s based on the fact that her supplementary pension entitlement should represent about 50 per cent of her highest average earnings.

However, Olivier Marcil, vice-principal of communications and external relations for McGill, said in an email that her salary was $369,000 plus benefits as previously reported, but that “adjustments were made to her pension calculation during that time which resulted in the ($284,000 pension payment) amount” (click on image below).

Munroe-Blum’s salary and benefits were often a sore point on campus, especially after it was revealed she was collecting a base salary of $369,000 as Quebec universities were being asked to absorb $124 million in cuts. There were also “contract benefits” of $128,000 to $226,000 a year.

The combined pensions, which she just started collecting on July 1, are bringing her almost $371,000 a year — which is as much as she was allegedly earning during her tenure as principal. Her supplementary pension alone — which was negotiated as part of her 2003 contract confirming her appointment as principal and vice-chancellor — has already paid her more than $96,000 since July 1.

“During her tenure here they reduced the benefits of the pension plan for employees but she has this insane, over and above pension plan which no one else gets,” said Sean Cory, president of the Association of McGill University Research Employees. “The amount that she is getting really caught me off guard.”

He says the fact that her regular pensions from U of T and McGill are $86,850 combined shows “just how good this extra pension plan is,” with Munroe-Blum collecting an additional $284,000 a year for the rest of her life.

It also raises some important questions: Why is Munroe-Blum being credited with years of service at both McGill and U of T for the purpose of calculating her supplemental pension from McGill? With 12 1/2 years of service at U of T, prior to joining McGill, this effectively doubles her pension entitlement and enables her to collect for all of that time at the higher principal’s salary rather than having some of it at the lower professor’s or vice-president’s salary she would have earned at U of T.

Marcil said that was negotiated into her original contract and that “I personally don’t know whether or not this is or was common practice among other university presidents.”

Why did McGill agree to such a lucrative pension package for Munroe-Blum? When she left the principal’s post in 2013, Stuart Cobbett, chair of McGill’s board of governors, defended her departure package in an op-ed in the Montreal Gazette, saying the university had great results to show from her leadership.

But Cory said Munroe-Blum’s pension package makes him wonder how many other former principals are collecting equally lucrative pensions, and how McGill — which has been crying about austerity and cutbacks — can sustain such long-term payments.

Molly Swain, president of McGill’s support employees union, said the revelations about Munroe-Blum’s pension package comes as McGill claims to have no money and is constantly instituting belt-tightening measures.

“That makes this tough to swallow,” she said, adding her union is representing students who were remunerated with only room and board for overseeing first-year students in residence and have been fighting to get what they believe is their rightful monetary compensation.

“It’s extremely hypocritical,” she said. “That’s an absolutely massive pension. It’s appalling.”

She said it also points to a culture at McGill, and other universities, of there being no accountability and quietly providing income and benefits that go well beyond the base salary of their top administrators.

However, that is something that seems to be changing. McGill’s current principal, Suzanne Fortier, made public her contract and the details of her compensation ($390,000 and not a lot of other perks), as did Alan Shepard, the president of Concordia University. The Université de Montréal has had a policy in place since 2009 that determines salaries based on the median of rectors and presidents of Canadian universities.

Still, Swain said, Munroe-Blum’s deal is concerning for employees.

“The university is maintaining austerity for a certain group of people — but not for people at the top,” she said.

Earlier this week, I discussed how some people retire in EU style. And let there be no doubt that Dr. Heather Munroe-Blum who was appointed chairperson of the board of directors of the Canada Pension Plan Investment Board in June 2014 is enjoying a retirement package that most Canadians can only dream of (add to this $160,000 a year compensation she gets for being CPPIB’s chair).

The dispute here is whether her McGill pension was padded by including her years of experience at University of Toronto at a time when she was putting the squeeze on McGill employees’ pensions. She obviously signed a contract where she wisely negotiated her pension as part of her overall compensation (this is what all of Canada’s highly paid senior pension fund managers do for their own compensation as well as what Canadian and American corporate CEOs do when negotiating their outrageous pensions).

Of course, it’s no secret that there’s no love lost between McGill employees and Heather Munroe-Blum. My departed friend, Sam Noumoff, used to criticize her when we would get together for the Men’s club at Alep restaurant to enjoy Montreal’s best Syrian & Armenian cuisine. “She’s a ruthless corporate b*tch,” Sam used to say and his sentiment was shared by other professors at the table (most of which are cynical ex Marxists like he was).

I never met Dr. Munroe-Blum so I won’t criticize her on a personal level or question the way she handled McGill’s finances back then. She has an impressive career but she obviously pissed off many employees with her cost cutting decisions (some of which were needed) and her reportedly confrontational style didn’t help either. But to be fair, it’s the nature of the job and I don’t know many university or hospital administrators who are loved during a period where they’re implementing severe budget cutbacks.

One thing this article does raise, however, is the need to introduce a lot more transparency and accountability to the way Canadian universities report their finances and pension deficits. In March 2012, I discussed my thoughts on offering Canadian universities pension relief and stated the following:

Why will universities with these defined-benefit plans be ‘exempted’ from more stringent tests for pension solvency that apply to businesses? I have friends who are professors and others who work at various universities, including McGill, and they’re not to happy with the way their DB plans have been mismanaged (McGill got sucked into the non-bank asset backed commercial paper –ABCP — scandal that rocked the Caisse and other large Canadian pension funds).

The problem at Canadian universities and other universities is that they hide their pension problems from public scrutiny. Why? Because they’re petrified if the public finds out, it will impact their fundraising as well as their constant cries to increase tuition fees.

Now, I happen to think you can make a case for raising tuition fees marginally, especially here in Quebec where students enjoy the lowest tuition fees in Canada and are asking for “free tuition like in Denmark” (without understanding how the Danish system works). But when I see how Canadian universities are mismanaged — not just their pensions but general mismanagement in their operations — makes me think twice about raising tuition fees.

True, universities are not corporations and shouldn’t be run like corporations. But why should we give their defined-benefit plans less stringent tests for solvency? Who is monitoring their performance and why isn’t this information easily accessible to the public and updated on a regular basis? I can say the same thing about Canadian cities and municipalities, the other pension time bomb which is rarely discussed. Most people haven’t got a clue of what the hell is going on at these city plans.

This is why I think we should consolidate all defined-benefit pension plans — private and public — into larger public DB plans which are operating under more scrutiny and are more transparent and accountable for the decisions they take (not perfect but better than most smaller plans).

If it were up to me, I would either roll up all university pensions to be managed by our large well governed provincial plans or have CAAT pension plan manage all Canadian university pensions since that’s what they specialize in and are doing a great job at it (see CAAT’s 2014 Annual Report here).

Of course, in my ideal world, every Canadian would have their pension managed by CPPIB or several CPPIBs by enhancing the CPP. I’ve discussed my thoughts on this when I went over introducing real change to Canada’s pension plan as well as when I went over breaking Ontario’s pension logjam.

Speaking of CPPIB, its latest quarterly results for fiscal 2016 are available here:

The CPP Fund ended its second quarter of fiscal 2016 on September 30, 2015, with net assets of $272.9 billion, compared to $268.6 billion at the end of the previous quarter. The $4.3 billion increase in assets for the quarter consisted of $4.2 billion in net investment income after all CPPIB costs and $0.1 billion in net CPP contributions. The portfolio delivered a gross investment return of 1.62% for the quarter, or 1.55% on a net basis.

For the six month fiscal year-to-date period, the CPP Fund increased by $8.3 billion from $264.6 billion at March 31, 2015. This included $4.0 billion in net investment income after all CPPIB costs and $4.3 billion in net CPP contributions. The portfolio delivered a gross investment return of 1.6% for this period, or 1.5% on a net basis.

“Despite significant declines across all major global equity markets and mixed results in fixed income markets this quarter, the CPP Fund showed a modest gain. Broad diversification of the investment portfolio across geographies and asset classes contributed to the Fund’s resiliency,” said Mark Wiseman, President & Chief Executive Officer, CPP Investment Board (CPPIB). “As a long-term investor, our five- and 10-year returns are the most important measurements of our performance, and these remain strong.”

CPPIB is performing very well given the difficult investment environment. I don’t pay attention to quarterly results and don’t see trouble at Canada’s biggest pensions.

I’m sure Heather Munroe-Blum has a handful being the chairperson of this mega fund but she’s doing a great job and has a very experienced board of directors backing her up as well as a very experienced and competent senior management team delivering outstanding long-term results.

My only beef with CPPIB’s board and senior management team, as well as that of other large Canadian public pensions is that they lack true diversity at all levels of their organization. Here they can learn a thing or two from Prime Minister Trudeau who nominated Canada’s most diverse cabinet ever (click on image below; they are sitting with the Governor General of Canada, David Johnston, who was the Principal of McGill back in my days of attending that university and was liked by most people and still is):

Nevertheless, critics claim Trudeau’s diverse cabinet is not a true Canadian portrait without referring to the fact that he nominated two ministers with disabilities, two aboriginal ministers, and Canada’s first Muslim minister