Message from the Chair and Vice-Chair (continued)
Throughout 2012, the Trustees and OPTrustâ€™s management and staff continued to prioritize the identification, analysis and management of the wide range of risks facing the Plan. Over the year, the Board:
- Initiated a comprehensive review of OPTrustâ€™s strategic, investment, operational and governance risks. This work will help guide the development and implementation of a new enterprise risk management program, reporting to the CEO, over the coming year.
- Reviewed actuarial research modeling the impact of demographic and membership changes, long-term mortality improvements, and potential short-term investment losses on the Planâ€™s funded status. In 2013, the Trustees strengthened the Planâ€™s mortality assumption and reduced the assumed rate of inflation (and the nominal investment return target) used in our funding valuation as at December 31, 2012. These changes increase the Planâ€™s liabilities for funding purposes.
- Adjusted the Planâ€™s asset mix targets, based on the results of our most recent asset/liability study. These changes reinforce our successful diversification strategy, strengthening our ability to meet the Planâ€™s 6.25% nominal investment target return over the long term, while reducing investment risk at the total fund level.
- Monitored the preparation of our 2012 funding valuation, which showed that the Plan remains fully funded, after accounting for the Planâ€™s $852 million in rate stabilization reserves. These reserves, which the sponsors prudently set aside from past investment gains, are sufficient to pay down the Planâ€™s current $818 million deficit, at the sponsorsâ€™ discretion.