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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
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Promises to Keep The Final Report of the NS Pension Review Panel
Peter C. Hayes, FCIA, FSA Eckler Ltd., Halifax, NS 2
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Topics Background Process Themes
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Background Societal changes Declining pension coverage
One of 3 Panels/Commissions
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Process Created February, 2008
2 actuaries and a lawyer! Rounds of discussion papers, submissions, and meetings Final report January, 2009
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Themes Hopes and promises Funding Flexibility Governance
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Flexibility and governance; hopes and promises
Types of plans Target benefit Jointly sponsored Governance Advisory Committee Governance Plan Hopes and promises
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Funding Current regime Criticisms Going concern and solvency
Exceptions Universities, SMEPPs, Municipalities Going concern Too much discretion Solvency Too conservative
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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)
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New Minimum Funding Standard
Method and Assumptions What’s in the weeds? Consequences
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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
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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
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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.
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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)
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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)
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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
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What’s in the weeds (cont’d)
MEPPs: funding and benefit levels
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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)
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Other stuff Member issues Promotion Province-wide plan
Transition rules
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Promises to Keep The Final Report of the NS Pension Review Panel
Questions Peter C. Hayes, FCIA, FSA Eckler Ltd., Halifax, NS 20
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