The frozen Transit Windsor Pension Plan is a defined benefit plan, based on career earnings, and was originally regulated by the Province of Ontario. On January 1, 1996, the frozen plan was transferred to the federal jurisdiction under the authority of the Office of the Superintendent of Financial Institutions Canada (OSFI). The transfer was a direct result of a Labour Board decision that deemed Transit Windsor to be a federal employer. The transfer to federal jurisdiction triggered a requirement to provide OSFI with a valuation report and the first report was filed effective January 1, 1996. The initial valuation did not reflect any funding deficits.

The market value of Transit Windsor’s Pension Plan assets is currently valued at approximately $34.78 million compared to $32.96 million one year ago. This value is based on the audited financial statements for 2019. (Note: the market value of the assets as presented in the actuarial valuation for 2018 is $32.901 million. The difference is due to more up to date information being available at the time when the financial statements are audited. This difference does not impact the required service level contributions and was corrected during the 2019 valuation). Legislated changes to the actuarial valuation assumptions (i.e. improved mortality tables, asset smoothing, etc.) created the need for additional special payments into the Plan. Over the last two years, based upon the most recent valuations, plan contributions have decreased due to increased interest rates, which increases the Plan’s assets, resulting in lower payment contributions required.

In 2011, the federal government recognized the burden that funding solvency deficits were creating for employers. In an effort to reduce funding volatility for plan sponsors, the federal government introduced the use of properly structured Letters of Credit (LOC) to satisfy solvency payments up to a limit of 15% of the Plan assets. On June 27, 2017, OSFI provided information indicating new regulations had passed into legislation effective June 29, 2017. With the amendments now in force, the limits on letters of credit and solvency payment reductions have changed from 15% of plan assets to 15% of plan liabilities. The impact of this change allows for more flexibility in terms of meeting annual solvency deficit requirements.

LOCs provide an alternative means for plan sponsors to satisfy their funding obligations in a secure fashion that does not compromise benefit security. The value of the LOC is never put into the Plan; rather it is held by the trustee for instances such as bankruptcy, wind-up, or other extenuating circumstances, at which time the LOC would be called and deposited into the Plan to discharge the Plan’s liabilities. Since the LOC is held by the City, the bank would look to the City for reimbursement of the amount of the LOC. All LOC funding must be renewed by December 31 (the fiscal year-end of the Pension Plan) with the documents in place by December 15.

Since 2011, and prior to December 31st of each year, the Transit Windsor Board of Directors and Windsor City Council had approved the update and renewal of the LOC in accordance with the requirements of the Pension Benefits Standards Act, 1985, satisfactory in content to the City Treasurer and in form to the City Solicitor. As part of the LOC increase presented to City Council on March 25, 2018, authority was delegated to the CAO to approve future adjustments to the Letter of Credit, which may be required, in order to fund the Transit Windsor pension deficit up to the maximum allowable amount of 15% of plan liabilities as determined by the annual Actuarial