A message from the Municipal Retiree Benefit Trust Board of Trustees: March 23, 2023

How the Municipal Retiree Benefit Trust Board of Trustees is planning for a sustainable future

The Municipal Retiree Benefit Trust Board of Trustees (MRBT board) is working to improve the long-term sustainability of the group benefits program. The MRBT board prioritizes making group benefits accessible to current and future retired members. However, unlike your pension, group benefits are not guaranteed.

One of the tools the MRBT board uses to plan for a sustainable future is a valuation. The trust is currently having its first valuation. We will share the results later this year.

How are group benefits funded?

Extended health care benefits are funded through the MRBT. Ongoing funding for the trust comes from two sources:

• Employer contributions of 0.6 per cent of salary
• Premiums paid by retired members enrolled in group benefits

These funds accumulate and earn investment income over time.

Before January 1, 2022, employer contributions had to be used in the same year; they couldn’t carry over to future years and they couldn’t accumulate investment income.

The retiree benefit trust provides more flexibility in funding retiree group benefits, which makes the program more sustainable.

Initial funding for the trust was provided by a transfer of $100 million from employer contributions as part of plan changes. This amount is equivalent to about one year of extended health care costs. The Municipal Pension Board of Trustees will transfer additional funds of up to $70 million from employer contributions in the next few years. The MRBT aims to use initial and ongoing funding to keep coverage levels and premiums consistent over several decades.

Dental benefits continue to be funded solely by retired member premiums.

What affects the cost of providing group benefits?

You may have noticed that extended health and dental premiums increased this year. Like most things, the group benefits program is becoming more expensive to offer. That’s because the program faces cost pressures such as:

• Provider cost increases
• Inflation
• Higher usage by members and beneficiaries enrolled in the program

Also, the amount of money available in the trust can vary based on:

• The total amount of contributions received from employers
• The number of retired members choosing to enrol in the group benefits program
• Investment returns

These factors make it hard to predict how much the program will cost and how much money will be available to cover that cost. Fortunately, the MRBT board can now use tools like regular valuations to help keep the funding of the trust on track.

How do valuations help keep the trust sustainable?

At least every three years, the trust has a valuation done by an independent actuary (a specialist in financial modelling, statistics and risk management). The valuation determines how many years MRBT can continue to provide the same benefits at the same subsidy level based on current funding.

The valuation results help the MRBT board decide how the fund is balanced relative to the funding goal. The board has three ways to balance the fund, if needed:

• Increase or decrease premium rates
• Increase or decrease subsidy levels
• Enhance or reduce the benefits covered by the plan

It’s important to know that the MRBT board can choose at any time to change premium rates, subsidy levels or benefits to protect the sustainability of the group benefits program.

Valuations help the MRBT board continue to offer an affordable and sustainable group benefits program to current and future retirees like you.

Read the trust’s 2022 Annual Report this fall to learn more about the results of the first valuation.

Sincerely,
Bonnie Pearson, board chair
On behalf of your Municipal Retiree Benefit Trust Board of Trustees