November 4th, 2010


The following is a Notice provided by the administrator of the Municipal Employees
Pension Plan. For the purposes of the Notice, the administrator is referred to as “MEPP”
and the Pension Plan itself is referred to as “the Plan”.

Regulatory Background

The Manitoba Pension Benefits Act requires that two types of actuarial valuations be
conducted in respect of a pension plan at least every three years. These include:

1. Going-Concern Valuation: The going-concern valuation is based on the assumption
that a pension plan being evaluated will carry on indefinitely and determines the
contribution requirements that must be made to a plan over the long-term to meet its
pension obligations. Should the plan’s going-concern liabilities be greater that its
assets, the going-concern deficiency must be funded over a 15-year period.

2. Solvency Valuation: The solvency valuation is based on the assumption that a
pension plan being evaluated stops operating on the date the valuation is performed
and assesses whether or not the plan has sufficient assets to provide for all accrued
benefits at the valuation date. Should the plan’s solvency liabilities be greater than its
assets, the solvency deficiency must be funded over a five-year period.

Plan Background

MEPP is a public sector, multi-employer pension plan. Contributions to the Plan are from
members and the participating municipal and quasi-municipal employers. Unlike many
private sector pension plans, it is extremely unlikely that all employers that participate in
the Plan will cease to operate and therefore it is unlikely that the Plan would be wound
up in conjunction with the wind-up of the employers. This provides stability and security
for members of MEPP. Consequently, the pension obligations of MEPP can effectively
be secured by going-concern funding and not be subject to solvency funding.

On June 29, 2010, the provincial government introduced the Solvency Exemption for
Public Sector Pension Plans Regulation. The regulation provides MEPP with the option
to elect that the Plan be exempted from the solvency funding and transfer deficiency
requirements that would normally be applicable to the Plan.

Board of Trustees’ Decision

The MEPP Board of Trustees has decided to make an election to have the Plan
exempted from the solvency funding and transfer deficiency provisions. This means that
the solvency deficiencies, as indicated in the Plan’s solvency valuation (if any), do not
need to be funded over the next five years. Any deficiencies in the going-concern
valuation of the Plan must still be funded over 15 years, as per the current legislation.

This election will be made only if fewer than 1/3 of the members and fewer than 1/3 of
the other beneficiaries entitled to benefits under the plan object to the proposed election
by sending a written notice of objection to the administrator.

Reasons for Electing Solvency Exemption

· Solvency focuses on the Plan’s financial position in the event of an employer ceasing
to operate and/or plan termination, whereas MEPP, as noted above, is not
dependant on the viability of a single employer. As such, the risk associated with
solvency of the Plan is not substantial.

· Solvency is a volatile measure that can fluctuate based on the market conditions at
the valuation date. This can negatively impact members as it requires that any
deficiency be amortized and paid over a five-year period and in the event that
contribution rates are insufficient to fund both current service costs and solvency
requirements, member and employer contributions must be increased or member
benefits must be reduced.

Ongoing Sustainability of the Plan

The exemption does not eliminate MEPP’s obligation to file a solvency valuation. This
ongoing obligation ensures that MEPP continues to monitor the position of the Plan with
the provincial regulators and alerts the Board of Trustees to any issues relating to the
long-term sustainability of the Plan. In the highly unlikely event that the Plan is ever
wound up or terminated, and Plan assets are insufficient to meet liabilities, pension
benefits could be reduced on that basis.

Please note that the solvency exemption does not remove the Board of Trustees’
continued responsibility and duty to monitor the ongoing sustainability of the Plan and to
assess whether contribution rate increases and/or benefit reductions are required.
Once made, the election to exempt the Plan from the solvency funding requirements will
not be revocable.

Questions or Comments

Please provide any comments or questions relating to the solvency exemption, in
writing, by November 30, 2010 to:
Rose Neufeld, Executive Director
Municipal Employees Benefits Program
1200 – 444 St. Mary Avenue
Winnipeg MB R3C 3T1