Actuarial Valuation Reports

The Joint Board of Trustees (JBT) regularly undertakes a full actuarial valuation of the Plan as part of its regular business.  An actuarial report must be filed with the regulators in Ontario at least once every three years.

The Government of Ontario has introduced the details of a brand-new regime with respect to the framework for the funding requirements for defined benefit pension plans.  These new rules apply to actuarial valuations with a valuation date on or after December 31, 2017 and filed with the regulators after April 30, 2018.  The JBT have filed the January 1, 2018 valuation in order to adopt the new funding rules effective May 1, 2018.

For your information, we provide the last two filed valuations.

2018 Actuarial Valuation Report

2017 Actuarial Valuation Report

Going Concern Valuation (funding valuation)

The going concern valuation is used to estimate the funded position of the CUPE Employees’ Pension Plan (CEPP), assuming the CEPP is continued indefinitely, and to estimate the contributions currently required to be made to the CEPP fund, both to fund the cost of any benefits being earned by members for current service and, in the event there is a funding deficiency, to liquidate the amount of the funding deficiency.

The JBT establishes the economic and demographic assumptions and methods used in the going concern valuations in conjunction with the actuary, as well as input from the Settlors.  The assumptions are reviewed annually to determine if any refinements are necessary.

At the time of each actuarial valuation, an analysis is done of the performance of the CEPP experience compared to the demographic and economic actuarial assumptions to determine if there are gains or losses that have emerged.  Based on the results of this analysis, the JBT decides if changes to the funding actuarial assumptions are required.

A description of the actuarial assumptions and the gains and losses can be found in the filed actuarial valuation report.

The Trustees use an asset smoothing technique for the going concern valuation, to reduce fluctuations in the CEPP fund returns to prevent the extreme highs and lows we have seen in the market in recent years and to smooth the resulting investment gains and losses.  An alternate method would be to use the market value of the fund as at the valuation date.

At the time of each actuarial valuation of the CEPP, a determination is made as to whether there is a surplus or a deficit.  A surplus or a deficit is determined by comparing the asset value against the actuarial liabilities on January 1 of each year.  The actuarial liabilities represent the present value of all accrued benefits as at the date of the valuation, based on service to that date and salaries projected to retirement.

A surplus is the excess of the asset value over the actuarial liabilities.

A deficit occurs when the value of assets fails to cover the actuarial liabilities.

Under the new rules, if a deficit is reported in the filed going concern valuation, the deficit has to be funded by special payments over a maximum period of 10 years.

Solvency Valuation

The solvency valuation is required by the Regulations under the Pension Benefits Act (Ontario).  It is intended to reflect the status of the CEPP as if it had been wound up (terminated) on the valuation date and the CEPP members had been provided with the benefits specified by the Plan and the Pension Benefits Act (Ontario).  The purpose of this valuation is to show the degree of benefit security provided for all of the CEPP members’ accrued benefit by the current assets of the CEPP fund.  The solvency valuation does affect the required contributions to the CEPP.  If the solvency valuation reveals that there is a solvency deficiency, then additional contributions must be made to the CEPP.

Most of the economic and demographic assumptions and methods used in the solvency valuation are prescribed by legislation.

As in the going concern valuation, at the time of each actuarial valuation, an analysis is done of the performance of the CEPP experience compared to the demographic and economic actuarial assumptions to determine if there are gains or losses that have emerged.

A description of the actuarial assumptions and the gains and losses can be found in the filed actuarial valuation report.

The Trustees use the market value of the fund as at the valuation date for the solvency valuation.

In the solvency valuation, a surplus or a deficit is determined based on current salaries.

Under the new rules, solvency special payments are only required for plans that are less than 85% funded on a solvency basis.  The solvency deficiencies must be funded by special payments amortized over a maximum period of five years, up to an 85% level.

Results of the Filed Actuarial Valuation Report as at January 1, 2018

The going concern and solvency valuations were conducted as at January 1, 2018 and were filed with the Financial Services Commission of Ontario (FSCO) and the Canada Revenue Agency (CRA) as required at least once every three years.

The going concern valuation reveals a surplus of $177,669,200; and a funding ratio of 129.7%. The solvency valuation discloses a deficit of $60,045,000; and solvency ratio of 93%.

The CEPP meets the new funding rules under both the going concern valuation and solvency valuation and no special payments are required.