NOVA SCOTIA annua PENSION SERVICES …0-nsleg-edeposit.gov.ns.ca.legcat.gov.ns.ca/deposit/b10680548_2014...the implementation of a new pension administration system. ... operation

NOVA SCOTIAPENSION SERVICES CORPORATION

2014-2015 annual report

July 27, 2015

Dear Shareholders,

We are pleased to provide you with the Annual Report of the Nova Scotia Pension Services Corporation for the year ended March 31, 2015.

Pension Services Corp. had a successful year. Its most significant achievement during the year was the implementation of a new pension administration system. This new system will drive enhancements in member services, communications, and retirement planning for years to come.

We would like to recognize staff for their dedication and commitment. It is through their efforts that all of Pension Services Corp.’s annual priorities were met in 2014-2015.

We would also like to thank the Public Service Superannuation Plan Trustee Inc. and the Teachers’ Pension Plan Trustee Inc. for the confidence that you have placed in our Board.

Yours respectfully,

John B. Carter Douglas J. MoodieCo-Chair Co-Chair

Nova Scotia Pension Services Corporation Annual Report

20152014-

CONTENTS

How to reach Pension Services Corp.: 1-800-774-5070 (toll free in NS) Purdy’s Landing, Suite 400 902-424-5070 (outside NS) 1949 Upper Water Street 902-424-0662 (Fax) Halifax, NS B3J 3N3

[email protected] 8:00 AM to 5:00 PM Monday to Friday

novascotiapension.ca

@

About Us 2

The Board of Directors 2

Corporate Structure 3

Our Goals 4

Corporate Scorecard 5

2014-2015 Highlights 6

Our Performance 7

Financial Summary 7

Compensation 8

The Year Ahead 9

Audited Financial Statements 10

2014-2015 Nova Scotia Pension Services Corporation Annaul Report 1

BOARD OF DIRECTORS The Board of Directors of Pension Services Corp. (Board) oversees the overall operation and management of Pension Services Corp. The Board sets the strategic direction of the Corporation, approves its operational budget, and makes key administrative decisions.

The Board consists of four members appointed by each of the Public Service Superannuation Plan Trustee Inc. (PSSPTI) and the Teachers’ Pension Plan Trustee Inc. (TPPTI). One director is appointed by the Nova Scotia Teachers’ Union and one is appointed by the Nova Scotia Government and General Employees Union.

The Board is chaired by two directors acting as Co-chairs who alternate for six month periods. The Co-chairs in 2014-2015 were John B. Carter and Douglas J. Moodie.

(L to R): Peter Urbanc (TPPTI), William Redden (TPPTI), Douglas J. Moodie (PSSPTI, Co-chair), Ian Johnson (PSSPTI), John B. Carter (TPPTI, Co-chair), Byron Rafuse (PSSPTI), Keiren Tompkins (PSSPTI) Absent: Jack MacLeod (TPPTI)

ABOUT US The Nova Scotia Pension Services Corporation (Pension Services Corp.) is a non-profit corporation that was established on April 1, 2013. It administers the pension benefits and investment assets of the:

Pension Services Corp. is jointly owned by the:

Public Service

Superannuation Plan

former

Sydney Steel pension

plans

Teachers’ Pension

Plan

Members’ Retiring

Allowance

Teachers’ Pension Plan Trustee Inc.

Public Service Superannuation Plan Trustee Inc. &

To deliver high quality pension, investment

performance, communication, and

educational services to Plan Members, Plan

Trustees, Beneficiaries, and Employers through

careful planning, effective management, and strong

collaborative efforts. - MISSION STATEMENT

To become the leading institutional investor and

public pension plan administrator in

Atlantic Canada by strengthening our team,

our corporate culture, our business processes

and our technology. - STRATEGIC VISION


CORPORATE STRUCTURE Pension Services Corp. reports to the Board and has 58 staff. The Corporation’s senior management team creates annual priorities including budgeting, an enterprise risk plan, performance objectives, and a resource plan. The outcomes of these annual priorities are measured in the corporate scorecard. The organizational structure of Pension Services Corp. is as follows:

Investment AnalystManager Investment. Risk and Research

Employer Services, Coordinator

Client Service Associates

Client Service Consultants Employer Services

ConsultantsEmployer Services

Analysts

Manager. Investment Operations

Senior Investment Operations Officer

Investment Associate

Manager External Service Providers

Manager, Client Services

Internal Services, Coordinator

Portfolio Manager. Real Estate

Manager. Real Asset Funds

Portfolio Manager. Portfolio Solutions

Controller

Financial Services Officers

Assistant to the Director of Human Resources

Director, Financial Services

Manager, ComplianceDirector of Human Resources

Manager, Actuarial and Legislative Services

Service Associates

Elizabeth Vandenberg, CFAChief Investment Officer

Investment Clerk

Executive Assistant to CEO

Assistant to CPO

Investment

Division

Kim Blinn Chief Pensions Officer

Pension Division

Senior Investment Fund Accountant

Communications and Board Officer

Business Analysts

Web Analyst

Systems Administrator

Technical Support Analyst

Director of Information Management and Technology

Steven R. WolffChief Executive Officer

Corporate Services

In 2014, to promote opportunities for recent graduates, Pension Services Corp. created the ‘Campus to Career’ internship program. The program offers a one year internship to recent graduates. The internship is an Investment Associate position, working under the Investment Division, where the incumbent gains on-the-job training and industry knowledge.

CAMPUS TO CAREER


OUR 2014-2015 GOALS

Our goals set our strategic direction for the year. We are measured on our progress on these goals throughout the year on the Corporate Scorecard which is detailed on page 5.

Deliver outstanding service, accessible communication and practical education to assist members as they prepare for retirement, in support of plan Trustees in their promotion of public pension plans

1

Enable plan Trustees to achieve targeted investment performance by supporting them with expert resources, robust processes, reliable technical advice and timely information

2

Deliver excellent value for plan Trustees and shareholders by providing cost effective, strongly resourced and well-managed processes and services

3

Services and processes embed strong risk controls and industry best practice while providing for scalability and flexible design

4

Strive to implement sustainable and thoughtful corporate and investment strategies that provide economic and cultural benefits through environmental responsibility and stewardship

5

Ensure a high performing workforce by attracting and retaining diverse talent, building organizational capacity and engaging employees

6


CORPORATE SCORECARD For the fiscal year ended March 31, 2015

The Board is responsible for setting our strategic goals, monitoring our progress, and our performance in achieving them. Our Strategic Plan encompasses five strategic goals. The Board uses a Corporate Scorecard to measure and assess our progress and performance. Below is a summary of our Corporate Scorecard for the year ended March 31, 2015:

Customer Service

Member & Employer Communication

Member Education

Trustee and Board Reporting

3 3 3 2 *

3Deliver outstanding service, accessible communication, and practical education to assist plan members as they prepare for retirement, in support of Trustees in their promotion of public pension plans.

Investment Returns

Asset Mix

3 3 3

Deliver excellent value for Trustees and shareholders by providing cost effective, strongly resourced and well-managed processes and services.

Cost Effective

Operational Performance

Reporting

Technology Resources

3 3 3 3

3Services and processes embed strong risk controls and industry best practice while providing for scalability and flexible design.

2 ** 3 3 32 ***

3Strive to implement sustainable and thoughtful corporate and investment strategies that provide economic and cultural benefits through environmental responsibility and stewardship; and ensure a high performing workforce by attracting and retaining diverse talent, building organizational capacity and engaging employees

3 3 3 A33

3

Overall Score: Score:How we measure them:Our Goals:

Enable Trustees to achieve targeted investment performance by supporting them with expert resources, robust processes, reliable technical advice and timely information.

Enterprise Risk Management Framework

Audit Reviews

Protection of Information

Business Continuity Plan

Internal Procedures

Human Resource Metrics

Communications

Workforce Planning

Environmental Best Practices

Environmental Investment

Staff Training

* Short delay with one report due late May, received in early June.** 71 per cent of projects planned in the previous fiscal year were completed, slightly less than the 75 per cent minimum target. *** Annual internal procedures review underway but not yet completed.

The Corporation received a rating of “A” under one initiative. This relates to a new initiative developed in September 2014 that has its progress recorded annually.

3 Meeting or Exceeding Targets2 Missing Targets But Within Tolerance1 Missing Targets and Not Within Tolerance n/a Data Not Currently Available

RATING SCALE:


Plan investment assets under Pension Services Corp.’s administration exceeded $10 billion for the first time.

Pension Services Corp. negotiated our first Collective Agreement with the Nova Scotia Government and General Employees Union

More than 23,000 phone calls were answered, 90% of which were answered in

less than 20 seconds

Presented at 34 pre-retirement seminars and processed 819 retirements

Migrated to a new pension administration system, which provides enhanced services and access for plan members, retirees, and employers This project was initiated in 2010 and was delivered at less than budgeted cost and with only modest delay.

Conducted, on average, 24 hours of training for each employee.

Reduced our impact on the environment by introducing new printer technology

Continued to evolve our approach to communications and member education

2014-2015 HIGHLIGHTS

Enhanced policy and practices on information security

Reduced our time to hire by an average of 21 days for each new employee.


OUR PERFORMANCEPension Services Corp. has been appointed by the PSSPTI and the TPPTI to provide pension administration and investment management services for them. These services are fully described in detailed service agreements between each of the Trustees and Pension Services Corp.

The Trustees have developed Key Performance Indicators (KPI) with Pension Service Corp. as a means to monitor the Corporation’s performance with respect to its responsibilities as detailed in their service agreements. The Trustees review these KPIs each quarter.

At the end of the fiscal year, the Trustees and the Board assess the annual performance of Pension Services Corp. The KPIs and other measurements form the basis of the annual assessment.

The adjacent table summarizes Pension Services Corp.’s performance for the fiscal year ended March 31, 2015, as determined by the Trustees and the Board.

1 Did not achieve results - Did not meet expectations2 Partially achieved - Results meet some, but not all expectations3 Fully achieved - Results met all expectations4 Exceeded - Results exceeded most performance expectations5 Exceptional achievement - Results exceeded all performance expectations

RATING SCALE:

Investment Services Value Add

Service Metrics

Other Qualitative Measures

Trustee Support Qualitative

PENSIONS DIVISION

INVESTMENT DIVISION

Investment Services Qualitative

PSSPTI TPPTI 3.2 3

3 3

3 3

3 2

3 3.25

Progress on Strategic Vision and Goals

Corporate Administration Functions and Deliverables

Corporate Board 3

3

FINANCIAL SUMMARYPension Services Corp. operates on a cost recovery basis. The Corporation’s expenses are allocated and charged to its Trustee clients based upon the budget and allocation percentages approved by those Trustees and the Board.

For the fiscal year ended March 31, 2015, Pension Services Corp. had total expenses of $7.85 million. Total expenses increased by approximately $800 thousand over the previous year. This increase in expenses consisted of $308 thousand of additional salaries and benefits. Additional compensation expenses were comprised of an average 3 per cent salary increase for our employees, effective April 1, 2014, and new roles created in the investment operations and technology teams. During the year, Pension Services Corp. undertook several actuarial and operational special projects at the direction of plan Trustees. These special projects accounted for approximately $200 thousand of additional costs. Early in the fiscal year, Pension Services Corp. transitioned its technology infrastructure away from the Province of Nova Scotia (Office of the Chief Technology Officer) to a third-party provider. One-time and annual fees relating to this change were approximately $288 thousand.

The increased expenses noted above were included in the budget for the year and were pre-approved by plan Trustees and the Board. For the year ended March 31, 2015, the Corporation’s total expenses were within the budget targets set by plan Trustees and the Board.

For additional information, please refer to the Audited Financial Statements on page 10.


COMPENSATION FOR SENIOR MANAGEMENTThe goal of the compensation philosophy and framework is to attract, motivate, and reward a high-performing team. The framework is designed to promote a pay-for-performance culture by focusing employee efforts on the achievement of the mission, vision, core values, and critical business performance targets of Pension Services Corp.

The Board consulted with an external compensation expert in 2013 who was knowledgeable of best practices within the Canadian pension industry to develop the philosophy and framework. The Board is committed to reviewing compensation practices on a regular basis and to implementing improvements as necessary.

The compensation framework is designed to be fair and reasonable to stakeholders. Compensation is benchmarked to Canadian pension funds of similar size and complexity and to similar roles within Nova Scotia.

Elements of the framework include base salary, short-term incentive plan (STIP), and benefits. The STIP component of total compensation is ‘at-risk’ and linked to the performance of corporate, division, and individual objectives. The weightings for each of the three objectives vary by position to reflect roles and job responsibilities.

The Board approved STIP awards totalling $341,276 for 14 employees based upon performance in the fiscal year ended March 31, 2015. The awards were paid shortly after the year end. The STIP awards are significantly affected by the annual assessment of the Corporation’s performance by our plan Trustee clients and the Board. Details of the assessments are summarized on page 7.

The Communications and Disclosure Policy for the Board requires that the compensation of the Chief Executive Officer, Chief Investment Officer, and the Chief Pensions Officer be disclosed. The details are provided below:

Base Pay Incentive Award Total Compensation (excluding benefits)

Steven R. WolffChief Executive Officer $338,500 $99,473 $434,973 $449,733

Elizabeth VandenbergChief Investment Officer $167,200 $47,250 $214,450 $218,000

Kim BlinnChief Pensions Officer $124,200 $28,566 $152,766 $148,200

for the fiscal year ended Mar. 31, 2015

for the fiscal year ended Mar. 31, 2014


THE YEAR AHEAD

Trustees • Work with PSSPTI to complete its comprehensive

five year review of plan funding, benefits and contribution rates

• Under the direction of the PSSPTI, explore opportunities to expand plan membership

• Support the TPPTI as it strives to improve the long term sustainability of the Teachers’ Pension Plan

Service • Deliver outstanding service to plan Trustees, plan

members, beneficiaries and employers• Leverage new technologies to expand upon the

format and delivery of information we provide to members, retirees and employers

• Develop and implement new processes and services to effectively onboard new employers and employee groups into the PSSP

• Implement and roll out the new My Retirement Plan website to over 30,000 active plan members

Investments • Under the direction of plan Trustees,

implement the recommendations within the 2015 asset liability studies for the Public Service Superannuation Plan and Teachers’ Pension Plan

• Integrate the new Investment Risk Framework into all our decision-making processes

Communication and Education • Produce clear, concise, and timely

communication material that educates plan members and employers regarding pension benefits and transparently highlights the financial information of the plans we administer

• Update www.novascotiapension.ca so that information is accessible and more readily understood

Human Resources • Enhance the workforce planning process to mitigate the critical retention risk identified in the succession

planning process• Support the talent development of our employees through professional and career development and

improved performance management• Develop strategies to address priority areas identified in the How’s Work Going Survey• Engage the Joint Consultation Committee in constructive, proactive, strategic discussions on employee

relations issues and approaches

Technology Project • Ensure successful deployment of FileNet

business process automation• Use new technologies to support refinement of

our operating model , improving synergies and obtaining efficiencies

• Identify and appoint a financial management system and support provider to improve reporting and enhance decision making for the real estate portfolios

Risk Framework • Enhance the compliance and enterprise risk

management frameworks through implementation of complementary risk control initiatives including introduction of a controls audit program


Financial Statements of

NOVA SCOTIA PENSIONSERVICES CORPORATION

Year ended March 31, 2014



NOVA SCOTIA PENSION SERVICES CORPORATIONFinancial Statements


Financial Statements

Balance Sheet 1

Statement of Earnings and Retained Earnings 2

Statement of Cash Flows 3

Notes to Financial Statements 4


NOVA SCOTIA PENSION SERVICES CORPORATIONBalance Sheet

March 31, 2014

2014

Assets

Current assets:Cash $ 2,442,066Accounts receivable (note 3) 370,159Short-term investment (note 4) 1,244,900Prepaid expenses 65,147

4,122,272

Fixed assets (note 5) 183,141

Intangible assets (note 6) 2,797,494

$ 7,102,907

Liabilities and Shareholders' Equity

Current liabilities:Accounts payable and accrued liabilities (note 7) $ 2,917,306

2,917,306

Loans payable (note 8) 2,765,228Future benefits liability (note 10) 1,420,374

4,185,602

Shareholders' equity:Common shares (note 12) -

Commitments (note 14)

$ 7,102,907

See accompanying notes to financial statements.

On behalf of the Board:

Original signed by John B. Carter Co-Chair, Board of Directors

Original signed by Doug L. Moodie Co-Chair, Board of Directors


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NOVA SCOTIA PENSION SERVICES CORPORATIONStatement of Earnings and Retained Earnings


2014

Revenue $ 7,036,347Interest income 10,648

7,046,995

Expenses: Salaries and benefits 5,044,212 Professional services 1,032,128 Office administration 573,011 Property rental 387,040 Amortization 10,604

7,046,995

Net earnings, being retained earnings, end of year $ -



NOVA SCOTIA PENSION SERVICES CORPORATIONStatement of Cash Flows


2014

Cash flows from operating activities:Net earnings $ -Item not involving cash:

Amortization 10,604Transfer of cash from the Province of Nova Scotia (note 10) 1,263,900Change in non-cash operating working capital:

Increase in accounts receivable (328,595)Increase in prepaid expenses (65,147)Increase in accounts payable and accrued liabilities 2,917,306Increase in future benefits liability 114,910

Net cash provided by operating activities 3,912,978

Cash flows from financing activities:Proceeds from loans payable 2,468,169Net cash provided by financing activities 2,468,169

Cash flows from investing activities:Purchase of fixed assets (184,620)Purchase of intangible assets (2,509,561)Purchase of short-term investment (1,244,900)Net cash used in investing activities (3,939,081)

Increase in cash 2,442,066

Cash, beginning of year -

Cash, end of year $ 2,442,066



NOVA SCOTIA PENSION SERVICES CORPORATIONNotes to Financial Statements


Nova Scotia Pension Services Corporation (“the Corporation”) is a private enterprise, incorporated onApril 1, 2013 under the laws of Nova Scotia under Bill No. 17 (Financial Measures Act (2012) datedApril 12, 2012).

Under the Nova Scotia Pension Services Corporation Act (the "Act"), the Corporation was devolvedfrom the Nova Scotia Pension Agency, a government agency of the Province of Nova Scotia. TheCorporation has issued an equal number of shares to Teachers’ Pension Plan Trustee Inc. and PublicService Superannuation Plan Trustee Inc. All assets, liabilities and obligations of the Nova ScotiaPension Agency as at March 31, 2013 were transferred to the Corporation on April 1, 2013.

The purpose of the Corporation is to provide pension administration and pension investment servicesfor the Teachers’ Pension Plan and Public Service Superannuation Plan, Ancillary Plans of theProvince of Nova Scotia (Sydney Steel Corporation Superannuation Fund, Members’ RetiringAllowances Plan and Members’ Supplementary Retiring Allowances Plan established under theMembers’ Retiring Allowances Act) and any other pension plan or arrangement that retains theservices of the Corporation and is approved by the Board of Directors (“the clients”).

The Corporation operates on a cost recovery basis as provided for in the Act. The Corporation is anot-for-profit organization and, as such, is exempt from income taxes, provided certain requirementsof the Income Tax Act are met.

1. Significant accounting policies:

(a) Basis of presentation:

The Corporation's financial statements are prepared in accordance with Canadianaccounting standards for private enterprises in Part II of the CPA Canada Handbook.

(b) Investments:

Investments in equity instruments that are quoted in an active market are accounted for atfair value, with changes in fair value recorded in net income. Transaction costs areaccounted for in the original cost of the investments, except for equity investments that arequoted in an active market, the transaction costs are expensed as incurred.


NOVA SCOTIA PENSION SERVICES CORPORATIONNotes to Financial Statements (continued)


1. Significant accounting policies (continued):

(c) Fixed assets:

Fixed assets are stated at cost, less accumulated amortization. Amortization is providedusing the following methods and annual rates:

Asset Basis Rate

Computer hardware Straight-line 4-5 yearsFurniture and fixtures Straight-line 5 years

The carrying amount of an item of fixed assets is tested for recoverability whenever eventsor changes in circumstances indicate that the carrying amount may not be recoverable. Animpairment loss is recognized when the asset’s carrying amount is not recoverable andexceeds its fair value.

(d) Intangible assets:

Intangible assets represent deferred development costs related to pension system,electronic filing system and investment trading system projects. Development activities arerecognized as an asset provided they meet the capitalization criteria, which include theCorporation's ability to demonstrate: technical feasibility of completing the intangible assetso that it will be available for use or sale; the Corporation's intention to complete the assetfor use; the Corporation's ability to use the asset; the adequacy of the Corporation'sresources to complete the development; the Corporation's ability to measure reliably theexpenditures during the development; and the Corporation's ability to demonstrate that theasset will generate future economic benefits. Development expenditures that do not meetthe capitalization criteria and expenditures for research activities are expensed as incurred.Intangible assets are measured at cost less accumulated amortization and will be amortizedon a straight-line basis over their useful lives of 5 years.

(e) Employee future benefits:

The Corporation has an obligation to provide future benefits to its employees in respect ofpost-retirement health benefits, public service awards and a supplemental employeeretirement plan. The benefits are based on years of service and final average salary.

Post-retirement health benefits are available to all retirees whereas the public service awardis only available to bargaining unit employees. The supplemental employee retirement planbenefits are based on years of service and salary level – being available only to employeesabove a defined salary. The Corporation accrues its obligations under the benefit plans asthe employees render the services necessary to earn the benefits on an annual basis.





The obligation at the end of the year is determined based on the most recent actuarialvaluation report prepared for accounting purposes. The measurement date of the obligationcoincides with the Corporation’s fiscal year-end. The date of the most recent actuarialvaluation of the obligation prepared for accounting purposes is April 1, 2013. The report wasreceived on June 25, 2013 and has been extrapolated to March 31, 2014.

(f) Revenue recognition:

Revenue is recognized when services are provided and the customer assumes risk of loss,collection of the relevant receivable is probable, persuasive evidence of an arrangementexists and the sales price is fixed or determinable.

(g) Expense allocation:

The net of operating costs, amortization and income are charged to clients based on theclients’ usage rate of the services provided by the Corporation. Wherever practical, thesecosts are matched to the client based on their use of specific services.

(h) Financial instruments:

Financial instruments are recorded at fair value on initial recognition. Freestanding derivativeinstruments that are not in a qualifying hedging relationship and equity instruments that arequoted in an active market are subsequently measured at fair value. All other financialinstruments are subsequently measured at cost or amortized cost, unless management haselected to carry the instruments at fair value. The Corporation has not elected to carry anysuch financial instruments at fair value.

Transaction costs incurred on the acquisition of financial instruments measuredsubsequently at fair value are expensed as incurred. All other financial instruments areadjusted by transaction costs incurred on acquisition and financing costs. These costs areamortized using the straight-line method.





Financial assets are assessed for impairment on an annual basis at the end of the fiscalyear if there are indicators of impairment. If there is an indicator of impairment, theCorporation determines if there is a significant adverse change in the expected amount ortiming of future cash flows from the financial asset. If there is a significant adverse change inthe expected cash flows, the carrying value of the financial asset is reduced to the highest ofthe present value of the expected cash flows, the amount that could be realized from sellingthe financial asset or the amount the Corporation expects to realize by exercising its right toany collateral. If events and circumstances reverse in a future period, an impairment loss willbe reversed to the extent of the improvement, not exceeding the initial impairment charge.

(i) Related party transactions:

Monetary related party transactions and non-monetary related party transactions that havecommercial substance are measured at the exchange amount when they are in the normalcourse of business, except when the transaction is an exchange of a product or propertyheld for sale in the normal course of operations. Where the transaction is not in the normalcourse of operations, it is measured at the exchange amount when there is a substantivechange in the ownership of the item transferred and there is independent evidence of theexchange amount.

All other related party transactions are measured at the carrying amount.

(j) Use of estimates:

The preparation of the Corporation’s financial statements requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities at thedate of the financial statements and the reported amounts of revenues and expenses duringthe year. Significant items subject to such estimates and assumptions include theassumptions used in measuring the future benefits liability. Actual results could differ fromthose estimates made.




2. Transfer of assets and liabilities:

On April 1, 2013, Nova Scotia Pension Agency transferred to the Corporation, all assets andliabilities as follows:

Public ServiceTeachers' Superannuation

Pension Plan Plan Other Total

Assets:Accounts receivable $ 6,884,668 $ 6,559,689 $ 1,014 $13,445,371Intangible assets 148,529 148,530 - 297,059

Liabilities:Accounts payable and

accrued liabilities 6,722,685 6,722,686 - 13,445,371Loans payable 148,529 148,530 - 297,059

In addition to the foregoing, the Province of Nova Scotia transferred $1,263,900 in cash to offsetthe future benefits liability outstanding as at March 31, 2013 (note 10).

3. Accounts receivable:

Accounts receivable include amounts owed to the Corporation from its clients for servicesprovided, expenses incurred in order to service those clients or paid on behalf of those clients.

The following amounts were due to the Corporation from its clients as at March 31, 2014:

2014

Teachers Pension Plan $ 165,229Public Service Superannuation Fund 159,119Province of Nova Scotia:

Sydney Steel Corporation Superannuation Fund 18,700Members' Retirement Allowances Act Plans 12,897Department of Finance 3,535

Accrued interest 10,649Other 30

$ 370,159




4. Short-term investment:

The short-term investment consists of a guaranteed investment certificate with a maturity date ofAugust 20, 2014.

5. Fixed assets:

Accumulated Net book2014 Cost amortization value

Computer hardware $ 174,645 $ (705) $ 173,940Furniture and fixtures 9,975 (774) 9,201

$ 184,620 $ (1,479) $ 183,141

6. Intangible assets:

2014

Accumulated Net book Cost amortization value

Intangible assets subject to amortization:Systems project costs $ 2,806,619 $ (9,125) $ 2,797,494

$ 2,806,619 $ (9,125) $ 2,797,494

The costs of $297,059 in intangible assets (note 2), transferred from the Province of Nova Scotiaon April 1, 2013, were related to the construction and development of a new pension systemwhich were capitalized and will be amortized upon completion of the project.

The amortization of project costs commences upon completion of the project. Three projectshave been capitalized as at March 31, 2014. They are the pension system project which involvesthe creation of a new computerized pension system, the electronic filing project to create a robustfile transfer and control system and the investment trading system project to move away from theProvince of Nova Scotia’s trading system and onto a network controlled by the Corporation. Asthe assets are amortized, an amount equal to the amortization will be charged back to Teachers’Pension Plan, Public Service Superannuation Plan and other clients using this technology,offsetting loans from the related entities.




6. Intangible assets (continued):

The pension system and electronic filing projects are considered to be intangible assets whichwill not be subject to amortization until the projects are completed. The investment trading systemproject was completed during the year. Amortization expense will commence when projects havebeen completed. Amortization will be charged over 5 years using the straight-line method. Thebasis to account for internally generated intangible asset costs is the aggregation of all intangiblecosts that can be directly identified as being part of the production of the asset. These costsinclude the salary costs of specific employees based on their time spent while working on project-related tasks.

7. Accounts payable and accrued liabilities:

2014

Accounts payable $ 2,262,926Harmonized sales tax payable 51,066Due to Teachers' Pension Plan 297,526Due to Public Service Superannuation Plan 305,788

$ 2,917,306

8. Loans payable:

As capital costs are incurred, the Corporation calls for a loan from the Teachers’ Pension Planand Public Service Superannuation Plan. The amount required to cover capitalized costs isfunded equally by each plan unless agreed otherwise by the plan making the loan to theCorporation. Loans are long-term in nature and do not bear interest.

As at March 31, 2014, the loans payable are as follows:

2014

Teachers' Pension Plan $ 1,382,614Public Service Superannuation Plan 1,382,614

$ 2,765,228




9. Related party transactions:

a) Teachers’ Pension Plan Trustee Inc. as trustee of Teachers’ Pension Plan:

The Corporation entered into an agreement with the Teachers’ Pension Plan Trustee Inc. onApril 1, 2013 to provide pension and investment services to the Teachers’ Pension Plan. Theamount charged to Teachers’ Pension Plan for the year was $3,473,583 (note 13). As atMarch 31, 2014, the Corporation has a receivable of $165,229 from Teachers’ Pension Plan(note 3).

During the year, Teachers’ Pension Plan advanced cash to the Corporation to fund itsproportionate share of upcoming expenses as required. As at March 31, 2014 the cashadvance due to Teachers’ Pension Plan was $297,526 (note 7).

During the year, the Teachers’ Pension Plan loaned the Corporation funds to fund capitalassets for the betterment of servicing the clients of the Corporation. As at March 31, 2014,the loan payable due to Teachers’ Pension Plan was $1,382,614 (note 8).

b) Public Service Superannuation Plan Trustee Inc. as trustee of Public ServiceSuperannuation Plan:

The Corporation entered into an agreement with Public Service Superannuation PlanTrustee Inc. on April 1, 2013 to provide pension and investment services to Public ServiceSuperannuation Plan. The amount charged to Public Service Superannuation Plan for theyear was $3,414,029 (note 13). As at March 31, 2014, the Corporation has a receivable of$159,119 from Public Service Superannuation Plan (note 3).

During the year, Public Service Superannuation Plan advanced cash to the Corporation tofund its proportionate share of upcoming expenses as required. As at March 31, 2014 thecash advance due to Public Service Superannuation Plan was $305,788 (note 7).

During the year, Public Service Superannuation Plan loaned the Corporation funds to fundcapital assets for the betterment of servicing the clients of the Corporation. As at March 31,2014, the loan payable due to Public Service Superannuation Plan was $1,382,614 (note 8).

Employees of the Corporation are members of Public Service Superannuation Plan. Duringthe year, the Corporation made $348,041 in contributions to the plan (note 11).




9. Related party transactions (continued):

c) Premises:

The Corporation bases its operations in Purdy’s Wharf, a building jointly owned by both TPPInvestments I Inc. a wholly owned subsidiary of Teachers’ Pension Plan and PSSInvestments I Inc. a wholly owned subsidiary of Public Service Superannuation Plan. TheCorporation serves as directors of both TPP Investments I Inc. and PSS Investments I Inc.The rent paid to the landlord for the year was $387,040.

d) Province of Nova Scotia:

During the year, the Province of Nova Scotia provided services to the Corporation and itsclients. The significant related party purchases from the Province of Nova Scotia were asfollows:

2014

Payroll services $ 330,100Telecommunications 83,223Stationary and postage 5,109Other 1,674

$ 420,106

The Corporation entered into an agreement with the Province of Nova Scotia on April 1,2013 to provide pension services to Sydney Steel Corporation Superannuation Fund and theMembers Retiring Allowances Act Plans. For the year, the Corporation charged the Provinceof Nova Scotia for services related to Sydney Steel Corporation Superannuation Fund($94,543) and Members Retiring Allowances Act Plans ($49,742) (note 13).

During the year, the Province of Nova Scotia advanced cash to the Corporation to fund itsproportionate share of upcoming expenses relating to Sydney Steel CorporationSuperannuation Fund and Members Retiring Allowances Act Plans as required. As at March31, 2014, the Corporation has a receivable from the Province of Nova Scotia for servicesrelated to Sydney Steel Corporation Superannuation Fund ($18,700) and Members RetiringAllowances Act Plans ($12,897) (note 3).

Pension services were provided to the Department of Finance during the year. The amountcharged to the Province of Nova Scotia was $4,450 (note 13). As at March 31, 2014, theCorporation has a receivable of $3,535 from the Department of Finance (note 3).




9. Related party transactions (continued):

In all cases the measurement basis of related party transactions has been the value of cashreceived or paid between parties and the value of invoices raised for services betweenparties.

10. Future benefits liability:

On April 1, 2013, the Province of Nova Scotia transferred the future benefit obligation related tothe staff of the Nova Scotia Pension Agency as at March 31, 2013 to the Corporation. Anactuarial valuation was provided to the Province of Nova Scotia by Mercer (Canada) Limited onJune 12, 2013 with respect to the estimated obligations as of March 31, 2013 of benefits providedunder the post-retirement health benefits, the public service awards and supplementaryemployee retirement plan to Nova Scotia Pension Agency employees.

The opinion provided by Mercer to the Province of Nova Scotia was based on the Province’s costof borrowing under the generally accepted accounting principles for governments asrecommended by the Public Sector Accounting Board (“PSAB”). The Corporation had anactuarial valuation prepared by Eckler Limited under CICA on June 25, 2013.

The following table shows the difference in opinions and accounting standards.

CICA PSAB Variance

Post-retirement Health Benefits $ 562,698 $ 526,900 $ 35,798Public Service Award 478,619 485,000 (6,381)Supplemental Employee Retirement Plan 264,147 252,000 12,147

$ 1,305,464 $ 1,263,900 $ 41,564

On August 8, 2013, the Province of Nova Scotia paid $1,263,900 to the Corporation to cover theobligations as at March 31, 2013. Under CICA accounting standards, there was a shortfall of$41,564 to the net obligation of the Corporation.

The future benefit obligation of the Corporation at March 31, 2014 was calculated under Section3463 of Part III of the CPA Canada Handbook – Accounting by Eckler Limited based oninformation supplied by the Corporation. In determining liabilities under CPA 3463, the methodrequired is the projected unit credit method prorated on services (i.e. benefits are projected withsalary increases to retirement and then prorated based on service).




10. Future benefits liability (continued):

The significant assumptions used are as follows:

March 31, 2014

Discount rate 4.0% per annum for the 2013/14 post retirementbenefit cost

Compensation increase 2.25% per annum for employees over 50 years ofage, rising to 4.75% per annum for employees under30 years of age

Retirement age 35% at Rule of 80 (minimum age 55), remainder atage 60 with 2 years of service, age 65 or 35 years ofservice

Mortality UP-94 with future mortality improvements inaccordance with Scale AA for the 2013/14 postretirement benefit cost

Income Tax Act maximum pension $2,697 per year of service in 2013, increasing 2.25%per annum after 2013

The future benefits obligation as at March 31, 2014 is calculated as follows:

March 31, 2014

Post-retirement Health Benefits $ 642,496Public Service Award 454,883Supplemental Employee Retirement Plan 322,995

$ 1,420,374

11. Employee pension plan:

Permanent employees of the Corporation participate in the Public Service Superannuation Plan(the "Plan"), a contributory defined benefit pension plan, which provides pension benefits basedon length of service and earnings.

Contributions to the Plan are required by both the employees and the employer. TheCorporation’s contributions range from 8.4% to 10.9% of an employee's salary. Total employercontributions for 2014 were $348,041 and are recognized in salaries and benefits expense in thefinancial statements.

The Corporation is not responsible for any under-funded liability, nor does the Corporation haveaccess to any surplus that may arise in this Plan.




12. Issued share capital:

The Share Capital of the Corporation is 100,000 common shares of one class without par value.The shares do not carry a dividend; they are not redeemable and are not convertible. During theyear ended March 31, 2014, 100 shares were issued, 50 to the Teachers’ Pension Plan TrusteeInc. and 50 to Public Service Superannuation Plan Trustee Inc. at nil value and no shares wereresold. At the end of the year, there were no existing commitments to issue or re-sell shares.

13. Revenue:

Revenue by client is as follows:

2014

Teachers' Pension Plan $ 3,473,583Public Service Superannuation Plan 3,414,029Province of Nova Scotia:

Sydney Steel Corporation Superannuation Fund 94,543Members' Retiring Allowances Act Plans 49,742Department of Finance 4,450

$ 7,036,347

14. Commitments:

As at March 31, 2014, the Corporation was contractually obligated under various operating andoccupancy leases. Future minimum annual lease payments over the next five years are asfollows.

2015 $ 1,247,2822016 1,240,1542017 1,119,8422018 882,2082019 903,224

$ 5,392,710


NOVA SCOTIA annua PENSION SERVICES …0-nsleg-edeposit.gov.ns.ca.legcat.gov.ns.ca/deposit/b10680548_2014...the implementation of a new pension administration system. ... operation

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