Colloque sur les régimes de retraite de L’ICA CIA Pension Seminar April 15, 2009 Colloque sur les régimes de retraite de L’ICA Le 15 avril 2009

Promises to Keep The Final Report of the NS Pension Review Panel Peter C. Hayes, FCIA, FSA Eckler Ltd., Halifax, NS 2

Topics Background Process Themes

Background Societal changes Declining pension coverage One of 3 Panels/Commissions

Process Created February, 2008 2 actuaries and a lawyer! Rounds of discussion papers, submissions, and meetings Final report January, 2009

Themes Hopes and promises Funding Flexibility Governance

Flexibility and governance; hopes and promises Types of plans Target benefit Jointly sponsored Governance Advisory Committee Governance Plan Hopes and promises

Funding Current regime Criticisms Going concern and solvency Exceptions Universities, SMEPPs, Municipalities Going concern Too much discretion Solvency Too conservative

Funding (cont’d) Proposed New Minimum Funding Standard Must include ALL promises Less conservative than solvency, less discretion than going concern Same for all plans Doesn’t preclude higher funding (per plan’s funding policy)

New Minimum Funding Standard Method and Assumptions What’s in the weeds? Consequences

Method and assumptions Accrued benefit method Unprojected Including ancillary benefits* Introduces MFCSC * Relationship between plan-mandated eligibility requirements and whether to reflect early retirement subsidies

Method and assumptions (cont’d) Discount rate: CIA CV rate, plus 0.6% to NRD, 0.3% t/a for actives 0.3% for pensioners

Which means … what?? First 10 years Thereafter CIA CV standard (for a June 30/08 valuation, but using the April 1, 2009 standard) 4.1% 5.5% NS NMFS Active members to NRD Active members after NRD Pensioners* 4.7% 4.4% 6.1% 5.8% CIA CV standard (for a December 31/08 valuation, but using the April 1, 2009 standard) 4.2% 5.7% 4.8% 4.5% 6.3% 6.0% *CIA annuity rates were 4.50% and 4.55% at June 30th and December 31st, respectively.

Method and assumptions (cont’d) Discount rate: CIA CV rate, plus 0.6% to NRD, 0.3% t/a for actives 0.3% for pensioners Mortality: per CV Standard Terminations: none Retirement: use plan experience, but … Adjust for plan with subsidies Inflation: 2% Assets: at market (no smoothing)

What’s in the weeds? Funded ratio between 95% and 105% Otherwise … Minimum contribution = MFCSC Otherwise … Add deficit amortization piece, or Subtract surplus amortization piece Amortization is over 10 years, with interest (one exception)

What’s in the weeds (cont’d) Terminations: CVs calc’d according to NMFS “Top-ups” paid within 1 year No partial wind-ups Target benefit plans (including MEPPs) 95% test, then Compare PVFB to assets-plus-PVFC

What’s in the weeds (cont’d) MEPPs: funding and benefit levels

Consequences Indexed plans or plans with generous early retirement benefits Heavier contribution burden (in some cases significant) vs current regime Non-indexed, no heavy subsidy It depends! MEPPs More stability vs current regime (depending on plan design)

Other stuff Member issues Promotion Province-wide plan Transition rules

Promises to Keep The Final Report of the NS Pension Review Panel Questions Peter C. Hayes, FCIA, FSA Eckler Ltd., Halifax, NS 20