new realities forthe pension world

words to describethe global economic andmarket instability

highlightsfor the 2012 year

10 lucky ipad winners

labourers’ pension fund of central and eastern canada

2

Contributions(C) + Investment Earnings(I) = Benefits(B) + Expenses(E)

It really has been crazy out there in the pension world lately! Very few pension plans, if any, have escaped the realities of the past few years unscathed – volatile investment returns, low interest rates, pressure to increase contributions, pressure to reduce benefits, increased focus on investment strategy, plan re-design considerations, greater scrutiny from regulators, solvency relief and/or exemption considerations, increasing longevity, short-term versus long-term focus… and the list goes on and on. These issues are shared amongst all pension plans – MEPPs, public sector and corporate plans, big and small alike – and the Labourers’ Pension Fund (LPF) is no different. The burning question, though, is what is being done about it all and why is the LPF better positioned than most to deal with it?

The fundamental pension equation of

may hold the secret. A low interest rate low-return investment environment will drive contributions up in order to pay for the same level of benefit promised years ago. There is no doubt that times have changed since then.

If the same level of benefits “B” is to be maintained, the more “I” can be increased, the less “real” money is needed to go into the plan through contributions “C”. Conversely, if the plan has a depressed level of “I” over a sustained period, then “C” needs to make up for it. (That is why the low interest rate environment is affecting the pocket books of so many organizations and members.) Or, the benefits “B” may be reduced, which has not typically been the choice in respect of the LPF.

The challenge for the Board of Trustees in working with their various professional advisors is to balance the above fundamental pension equation. The contribution increase of $1.50 per hour after the 2008 market meltdown has now been fully phased-in and alternative investment strategies are being introduced in order to maximize returns while minimizing risk, both of which will help with the balancing. At the same time, the LPF has grown to over $3.5 billion in assets and maintains a contingency reserve or “cushion” of almost 10% to mitigate the future potential adverse impact of short-term market volatility or other plan experience.

A funding valuation effective December 31, 2012 is currently in process to determine the financial position of the plan and progress made towards funding the deficit. Together we will meet the challenges of today in order to make the LPF plan even stronger for tomorrow by balancing the oft-conflicting objectives of benefit adequacy, affordability, and security.

Over the past few years, many new phrases have been coined or used to describe the economic and market instability that has persisted globally. These include:

Sequestration – budget cuts made in the US as Republicans and Democrats have been unable to agree how balance government revenue and spendingEuro Crisis – ongoing financial crisis that has made it difficult or impossible for some countries in the Euro area to repay or re-finance their government debt without the assistance of third partiesContagion - the likelihood that significant economic changes in one country will spread to other countries

While Canada has managed to make its way through the financial crisis of 2008 and recession of 2011 relatively unscathed, our economy and markets have not been immune either. The Bank of Canada, in line with the US Federal Reserve, has kept interest rates extremely low at 1%, which has impacted bond yields. In addition to making it difficult for retirees to earn enough from their investments, it has also meant that pension fund liabilities have increased since their valuation is tied in part to the level of interest rates. Slowing global growth and fluctuating commodity prices has meant that our equity market, which has significant exposure to energy and

other commodities, has experienced volatile returns.

The continuing market and economic stability was evident in market returns over the past five year. Returns in 2012 were broadly strong, following poor to negative returns in 2011. Returns in 2012 ranged from 7.5% for the Canadian equity market to more than 20% for the Hong Kong equity market. It is worth noting that on a five year basis, equity market returns were negative. This means that those invested in equities over the five years ending December 31, 2012 would have lost money.

The Labourers’ Pension Fund (LPF) began a program of diversifying its investment strategy in 2006, lowering its allocation to equities and adding investments to private companies, real estate properties and infrastructure assets. This diverse asset mix has enabled LPF to weather the past few years relatively well. For the four years ending March 31, 2013, LPF earned an average annual rate of return of 11%, which has helped in greatly strengthening the security of the plan. LPF continues to search for ways to earn stable, less volatile returns, and will be investing more of the pension fund’s assets in real estate, infrastructure and private equity over the next few years.

New Realities for the Pension World

Words to describe the global economic and market instability

summer 2013

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New pension rules that took effect after May 18, 2010 let you voluntarily terminate your LPF membership if no contributions are paid to the LPF by an employer on your behalf for twenty-four consecutive months.

When a voluntary termination occurs, you are able to take the value of your pension in a lump sum and trans-fer it out of the plan. The issue is that when members do this, it negatively impacts the long-term financial health of the plan.

To protect the benefits of all plan members, we intro-duced plan amendments in February 2013 to require the permanent reduction in the plan benefit paid out based on the funding level of the plan on a “solvency basis”, which is the percentage of benefits that would be paid out if the plan itself were to be terminated. This perma-

nent reduction will also apply to a deferred pension if the member chooses to terminate and then elects the Deferred Pension option.

reduction only applies if you voluntarily terminate plan membershipIt’s important to note that this reduction only applies if you voluntarily terminate your plan membership and work in Ontario or Prince Edward Island.

If you don’t voluntarily terminate membership in the Plan, you will remain a member of the Plan until you retire and these benefit reductions will not apply to you.

Members of other provinces who elect to voluntarily terminate their membership will not be affected by these reductions; however, they may lose entitlement to

some future pension benefits as they will no longer be considered plan participants.

how to voluntarily terminate membership If you are eligible to voluntarily terminate your plan membership – and choose to pursue this option despite the reduction to your benefit – you must request a “Voluntary Election To Terminate Membership Form” from the LPF office. This form will provide you with an estimate of your benefit.

To complete your termination request, you must sign the form and mail it to the LPF office. The date of your termination will be effective the date we receive the signed form. If we don’t receive a signed form, you will continue your LPF membership.

Voluntarily ending your LPF membership? Your benefit may be reduced

statement of changes in net assets available for benefits

December 31 December 31

2012 2011

(Rounded to the nearest 000’s) $ $

Income

Employers’ pension contributions 377,537 345,793

Investment income 181,187 137,640

Investment management custodial and

measurement services (12,726) (13,113)

Total income 545,998 470,320

Expenditures

Pension payments to participants 153,601 140,694

Operating expenses 8,384 7,696

Total expenditures 161,985 148,390

Other adjustments

Unrealized increase (decreas) on portfolio investments 76,870 (5,879)

Unrealized gain (loss) on foreign exchange (2,861) 24,301

Total other adjustments 74,009 18,422

Increase in net assets 458,022 340,352

Invested in capital assets 98 (1,250)

Net assets available for benefits, beginning of year 2,876,041 2,536,939

Net assets available for benefits, end of year 3,334,161 2,876,041

statement of net assets available for benefits

Assets

Current assets 99,189 69,413

Captial assets - at net book value 3,138 3,236

Investments - at fair value 3,247,938 2,818,522

3,350,265 2,891,171

Liabilities

Accounts payable and accrued liabilities 3,327 3,018

Due to other funds 2,054 1,712

Pension benefits payable 6,023 5,485

Accrued pension liability 1,562 1,679

12,966 11,894

Net assets

Invested in capital assets 3,138 3,236

Available for benefits 3,334,161 2,876,041

3,337,299 2,879,277

3,350,265 2,891,171

note The foregoing financial information is a condensed version of the Fund’s audited financialstatements for the years ended December 31, 2012 and December 31, 2011 as reported on byDeloitte & Touche LLP, Chartered Accountants. The complete financial statements, including theAuditor’s Report, are available at the Fund Office.

fund registration The Labourers’ Pension Fund of Central and Eastern Canada is registeredunder the Ontario Pension Benefits Act and the Income Tax Act under Plan Registration #0573188.

asset allocation

Plan Fair Market Value %

Canadian Bonds & Debentures 371,083 11%Canadian Pooled Bonds 676,483 20%Foreign Private Equity 156,268 5% Canadian Pooled Funds 311,443 9%Cash & Short Term Notes 69,511 2%Real Estate 239,644 7%Infrastructure 156,890 5%Canadian Common Stocks 441,414 13%Other 63,857 2%Foreign Common Stocks 356,477 11%Foreign Pooled Funds 507,195 15% Total 3,350,265 100%

there were approximately 41,802active plan members

total employers’ contributions received werein excess of $377 million

total operational (administrative, etc.) expenseswere $8.3 million

945 new pensions were awarded during the year

At year-end, 15,244 pensioners and 1,835 beneficiariesof deceased members were receiving pensions

over $153 million was paid out to pensioners andbeneficiaries during the year

Highlightsfor the 2012 year

labourers’ pension fund of central and eastern canada

4

This Newsletter outlines topics of interest and timely information for Members of the Labourers’ Pension Fund of Central and Eastern Canada. For an exact and complete description of your pension and entitlements, contact the Labourers’ Pension Fund office to obtain a copy of the Rules and Regulations of the Pension Plan, and any other documents referred to herein. If the information provided in this Newsletter differs from that contained in the Rules and Regulations, the Rules and Regulations will be the governing document. You may also contact the Fund office with any Newsletter inquiries.

Plan Registration Number 0573188Labourers’ Pension Fund of Central and Eastern Canada1315 North Service Road East 6th Floor, Oakville ON L6H 1A7

Mailing Address:PO Box 9002, Lakeshore West POOakville ON L6K 0G1T: 289.291.3663F: 289.291.0651Toll Free: 1.866.932.1100E: pension_fund@lpfcec.org W: www.lpfcec.org

Publications Mail Agreement 6432905

A recent court case has changed the rules in Ontario relating to who may receive your LPF pre-retirement death benefits in the event you die before retirement.

greatest impact: you are separated and have a new common-law spouse This court decision relates directly to a situation in which you and your married spouse have separated, but have not divorced, and you have a new common- law spouse.

Before this court decision, your common-law spouse would be entitled to your pre-retirement death benefit, even if another beneficiary was named.

Not anymore. If you have both a common-law spouse and a married spouse who is separated but not divorced from you at the time of your death, neither spouse has an automatic entitlement to the pre-retirement death benefit. Instead, the benefit is payable to your designated beneficiary. If you have not designated a beneficiary, then it is payable to your estate.

The chart below shows the “ranking” of who will receive your pre-retirement death benefit in different situations in Ontario. As you can see, naming a beneficiary is an important step no matter what your marital situation. But it gains particular importance in situations where you

have separated from your spouse, but are not divorced.

action step: review your beneficiary designa tion With so much at stake, it’s important to review your beneficiary designation to ensure it continues to reflect your wishes. You can review your current beneficiary online by clicking on the “Access LPF” icon at www.lpfcec.org.

If you don’t currently have a beneficiary designation, or you wish to change it, you can download the beneficiary designation form directly from the website, then complete the form and mail it to us.

Earlier this year, we asked you to send us your email address – with the first 500 respondents entered to win one of 10 iPads!

We’re pleased to announce the 10 lucky winners. Congratulations – and thanks to everyone who sent in their email information!

And if you still haven’t provided us with your email, it’s easy to do. Just log on to Access LPF and add your email address to your personal information. Simple!

Jennifer M. Smith – Member of Local 506Christopher D. Kirk – Member of Local 493Marino Moniz - Member of Local 183Jose F. Cordeiro - Member of Local 183Jose Ferreira - Member of Local 183Jeff D. Stiles - Member of local 900Richard Neron – Member of Local 493Paulo Tomas Farias – Member of Local 183Cameron D. MacIsaac – Member of Local 1115Mario Savone – Member of Local 183

10 lucky iPad winners – just for sending us their email address!

Access your pension information – online or mobile

Make note – new LPF mailing address!

Are you a pensioner planning to return to work?

It’s easier than ever to access your pension information. Whether you want to view your Pension Contributions and work history, get a pension estimate, update your personal information, apply for your pension, or access one of the many other services available, it’s all avail-able on our secure member site!

Visit www.lpfcec.org and click on the “Access LPF” icon. Enter your LPF Member ID number (User ID). If you didn’t receive your LPF ID card, please call us at 1-866-932-1100.

You can also connect through your mobile phone by downloading the LPF Mobile App – available for Apple, Android and Blackberry devices!

If you’re sending us something by mail,make sure you use our new mailing address:

The Labourers’ Pension Fund PO Box 9002Lakeshore West POOakville ONL6K 0G1

Don’t forget to sign a “Re-Employed Pensioner – Notice of Election” form before you start working! Send the completed form to the LPF by fax, email or regular mail. These forms are available at your local union, at the LPF Office and online at www.fpfcec.org.

Board of Trustees

Chairman Joseph S. Mancinelli

Vice Chairman Carmen Principato

Douglas Serroul Luigi Carrozzi Manuel Bastos Jack Oliveira Cosmo Mannella

Administrator David D’Agostini

Separated but notdivorced in Ontario?Make sure you namea beneficiary

Ranking by law of who will receive your pre-retirement death benefit

No spouse (no married or common-law spouse)

Married spouse(not separated)

Common-law spouse(and divorced from married spouse)

Separated from married spouse, with or without a common law spouse

1

2

3

Beneficiary

Estate

n/a

Married spouse Beneficiary

Estate

Common-law spouse

Beneficiary

Estate

Beneficiary

Estate

n/a

trees

PRESERVED SAVED

water (gallons)

PREVENTED ELIMINATED

5,157 1,984130,96836

air emissions (lbs) solid waste (lbs)

The paper selected for this project represents these environmental savings:

*compared to products made of 100% virgin fibers