Despite difficult markets, HOOPP ended the year 99 per cent funded. This means the Plan’s total assets, on a five-year “smoothed” actuarial basis, are just shy of those needed to cover all of its current and future pension liabilities, based on pensions earned to date.

Net assets

As of December 31, 2007, net assets available for benefits stood at $30 billion, up from $27.9 billion at year end 2006. This increase can be attributed to investment gains and positive pension cash flow. (Positive pension cash flow occurs when the total of contributions and benefit transfers flowing into the Plan exceeds the total of pension payments and benefit transfers flowing out of the Plan).

For funding purposes, net assets available for benefits are adjusted based on a technique which uses a five-year average of previous year-end asset values, all extrapolated to the end of 2007. This adjustment helps to minimize the impact of short-term market volatility in any one year. This actuarial or “smoothed” value of net assets stood at $28.4 billion as of December 31, 2007, up from $25.2 billion at year end 2006.

Pension liabilities

The Plan’s accrued pension liabilities (the current value of future benefits owing to members based on service earned to date) stood at $28.7 billion at December 31, 2007, up from $25.8 billion at year-end 2006.

Accrued Pension Benefits Correction

HOOPP recently discovered that certain membership data elements used in the preparation of actuarial valuations of the 2004, 2005 and 2006 valuation years have been misinterpreted. This means HOOPP’s reported financial/funded position for each of those years was overstated by approximately 1 to 2 per cent. This impact is more than offset by HOOPP’s recent sound investment returns, and will have no impact on either benefits or contribution rates.

For full details, please see Note 13 in the Consolidated Financial Statements.

Stable position

In 2007, HOOPP was able to

• announce it will hold contribution rates stable until the end of 2009
• provide a cost-of-living adjustment for all pensioners equal to 75 per cent of the increase in the consumer price index
• reduce the risk in the HOOPP investment portfolio

While HOOPP is 99 per cent funded other pension plans are facing more significant funding shortfalls. That said, it’s important to keep in mind that the Plan’s funding status can quickly change, depending on economic, market or demographic experience. To mitigate the impact of this change HOOPP has begun moving to a liability driven approach to investing – this means our investment team focuses on generating investment returns above the level required to fund the benefits being earned by Plan members while closely considering the risk of a particular asset relative to the Plan’s liabilities.

HOOPP’s Board will continue to monitor the Plan’s funded position closely – and will take a proactive, considered and consultative approach to enhance and protect the Plan’s funded status.