OPSEU Policy
with respect to
Union Appointed Trustees and Sponsors
for
Jointly Trusteed Pension Plans
RECOMMENDATIONS
I. General Principles
1. OPSEU sponsors and trustees have a fiduciary responsibility to pension plan members and the Union to manage the plan’s assets to ensure the funds are available to pay the pensions that have been promised. All other policy guidelines are subordinate to this principle.
2. OPSEU policy is to advance the interests of its members and all working Canadians through the socially responsible investment of pension funds which includes shareholder activism, ethical and other screens and economically targeted investment strategies.
3. OPSEU is responsible for ensuring that all union appointed sponsors and trustees are sufficiently trained to carry out the policies of the union.
4. OPSEU has oversight of its appointed sponsors and trustees and has an obligation to ensure the policies of the Union are being followed. In the event that trustees fail to perform their duties, the Union has a responsibility to remove them. The appointment and removal process should be accomplished by way of a written
policy setting out both the grounds and procedure for appointment and removal.
II. General Governance
5. The governance policies of pension plans should be transparent to sponsors, trustees and members.
6. Trustees must ensure that investment portfolios remain diversified, seeking adequate rates of return at acceptable levels of risk.
7. Pension plans should have comprehensive governance policies to enable trustees to be responsible fiduciaries by being active decision-makers.
8. Governance policies should provide detailed descriptions of direct responsibilities of trustees as well as delegation of responsibility through the organization itself. Governance policies should describe the monitoring and regular review processes to ensure evaluation of decision-making.
III. Sponsorship and Trust Documents
9. In the case of jointly trusteed plans, sponsorship agreements must prohibit changes to the plan, trust or sponsorship except by mutual consent of the parties to protect against unilateral or legislative change.
10. In the case of jointly trusteed plans, there should be an equal number of employer and union trustees on Boards of Trustees.
11. Retirees should be given the opportunity to serve as trustees.
12. Lengths of trustee terms should be designated to enable sponsors to have an orderly process for the appointment of trustees.
13. Trustees should elect a chair and vice chair, or co-chairs, from among themselves (rotating between sponsors) for a specified period.
14. Sponsors should provide in the trust agreement a process for appointing a mutually agreed “extra” trustee to resolve deadlocks between “regular” trustees.
15. The Board of Trustees should have the specific authority to hire and fire the plan and investment managers.
16. The Board of Trustees should at minimum establish four committees with clear terms of reference and equal representation of union and employer trustees – namely an Administration Committee, an Investment Committee, an Adjudication Committee and an Audit Committee.
17. The Board of Trustees should, at minimum, reserve direct responsibility for actuarial valuations and investment decisions, audited financial statements and annual reports.
18. Trustees should ensure that the plan text - defining members' pension benefits - is interpreted fairly and consistently with established rules and procedures.
19. Trustees should establish and monitor standards of service to members and regularly review these standards of service.
IV. Communication with Sponsors and Members
20. The Board of Trustees should make their decision-making transparent through documentation that is clear, comprehensive and fully informed. Regular reporting to sponsors and members should be incorporated into the sponsorship and trust documents such that reporting is meaningful and relevant to sponsor and member
concerns and allows for dialogue.
21. Service to members should be a high priority. While legislation guarantees a bare minimum of information to members, pension plans should have much higher standards of communication. Members should have information on their pension entitlements as well as more general information on the plan.
22. The Board of Trustees should ensure that pension plans have comprehensive and accessible web sites.
23. Pension plans should deliver retirement planning workshops specific to the plan.
V. Active Trusteeship and Training
24. Information and briefings provided by staff and advisors should be complete and communicated in a form as determined by trustees to ensure accessibility and transparency.
25. Trustees are responsible for the decisions they make and must be aware of the rationale for each decision. Trustees must be fully informed and seek advice when necessary.
26. Trustees are fiduciaries for the plan as a whole. All trustees must receive ongoing training in pension fund administration.
27. Sponsors must satisfy themselves that their trustees are trained to the extent that they are able to carry out their fiduciary responsibility.
28. Sponsors, in recognition of their own fiduciary responsibility for pension fund governance, must receive ongoing training in pension plan governance.
29. Trustee training expenses should be covered by the plan as a cost of effective governance and should be directly under the control of trustees.
30. There should be an appropriate number of trustee meetings per year such that trustees are confident that they can fulfill their fiduciary responsibility.
VI. Statements of Investment Policy (SIPPs)
31. All pension plans are required by law to have statements of investment policy and procedures (SIPPs). SIPPs must be developed, monitored, regularly reviewed and filed annually by trustees.
32. SIPPs are specific to the administrative and financial circumstances of each pension plan. But each should include language on:
plan liabilities, benchmarks, risk tolerance, investment manager selection, investment strategies, private placements, all classes of assets, proxy voting, fund management, mandates and monitoring of practices, conflict of interest.
33. The Board of Trustees must monitor fund managers to ascertain whether they are in compliance with plan investment mandates.
34. Statements of investment policy should have breadth, depth and clarity and should be communicated and made accessible to members both in print and on websites.
VII. Social investment strategies
35. No component of statements of investment policy should bar trustees from pursuing social investment strategies.
Shareholder activism
36. No component of SIPPs should bar trustees from pursuing shareholder activism. This is especially relevant given the recent accounting and auditing scandals and the loss of confidence in the markets.
37. Shareholder activism includes proxy voting, initiating shareholder proposals at annual meetings and class action suits. Shareholder activism encourages investment in corporations that take the high road on labour standards, environmental protection and responsible community behaviour.
38. The SIPP must give clear information about how shareholder activism is to be undertaken, the extent of activities and by whom so that there is direction to investment managers and information to members about investment strategy.
39. The SIPP should provide authorization to work with other shareholders in developing and supporting shareholder resolutions.
40. Pension plans should have proxy voting guidelines.
41. The Board of Trustees must monitor proxy voting through delegation or retention of the votes. The process for delegation or retention, monitoring and review must be described in the SIPP. Trustees must assure themselves that the process works in the best interests of plan members by regular review of voting results.
42. Investment managers must be advised of proxy voting policies of the pension plan.
Ethical screens
43. No component of SIPPs should bar trustees from implementing investment screening.
44. Screens include the following:
- positive screens, to screen in good features such as good labour, human rights and environmental practices;
- negative screens, to screen out poor corporate behaviour such as child labour;
- best-of-sector screens to include best-practice companies within a sector.
45. Investment screening must be described in the SIPP and communicated to members. The description should include the financial and non-financial criteria being used for the screens.
Economically targeted investment
46. No component of SIPPS should bar trustees from implementing economically targeted investment (ETIs).
47. ETIs are investment funds set up to benefit workers and their communities, including: real estate development and mortgage funds, regional development, worker-friendly and privatization alternatives.
48. Investment policy relating to ETIs will be extensive and therefore will form documents separate from the SIPP. However, they should be referenced in the SIPP.
49. The SIPP should contain the objectives of the ETI investment as well as reference to the ETI's asset allocation, type and risk profile.
50. A specified proportion of assets or amount of money may be allocated to an investment vehicle such as a pooled fund organized by a number of pension funds in order to minimize risk. Documents relating to this strategy, including performance benchmarks, should be referenced in the SIPP.
51. Trustees who are authorizing, implementing, setting standards, criteria or processes for shareholder activism, screening or targeted investment initiatives, must assure themselves that investment managers understand and support such initiatives and are capable of implementing them.
52. Investment managers should be required to report on performance at least quarterly, and on compliance once or twice a year. Reports should have depth and clarity and should be accessible in a format agreeable to or suggested by the trustees themselves. Investment managers should be required to meet with trustees at
least annually for discussion on performance and strategy.
Click here to view Pension Investment Report .pdf
