Office of the Superintendent of Financial Institutions
OSFI has issued a
revised guide in draft form for consultation with pension plan stakeholders. However, the October 2017 guide remains in effect until the revised guide is finalized.
The Office of the Superintendent of Financial Institutions (OSFI) is responsible for administering a number of federal statutes, including the statute applicable to the regulation of federal private pension plans, the
Pension Benefits Standards Act, 1985 (PBSA). As part of the regulatory process, OSFI reviews actuarial reports filed with the Superintendent by administrators of pension plans registered or filed for registration under the PBSA
This Instruction Guide (Guide) sets out the reporting requirements of actuarial reports filed with OSFI for defined benefit pension plans, including those with defined contribution provisions. The Guide updates the previous one published in October 2016 to reflect
The Guide applies to actuarial reports with a valuation date on and after September 30, 2017. Early adoption is permitted.
Actuarial reports should be prepared in accordance with the federal pension legislation and directives, which includes the
OSFI expects actuaries to prepare their actuarial reports in accordance with accepted actuarial practice, i.e. to follow Canadian Institute of Actuaries (CIA) Standards of Practice –
Practice-Specific for Pension Plans (CIA Standards) and to consider their application as illustrated in CIA
Educational Notes (Guidance). Actuaries are expected to be familiar with the CIA Guidance material considered relevant in the preparation of actuarial reports. Research papers published from time to time by the CIA may also be of assistance to actuaries for the purpose of developing assumptions for their actuarial reports.
OSFI does not generally approve actuarial reportsFootnote 2. It relies on but reviews the work of the actuary, and may directFootnote 3 the plan administrator to have an actuarial report revised if, in the opinion of the Superintendent, the report has not been prepared in accordance with legislative requirements. When reviewing an actuarial report, OSFI may consider factors or require documentation not mentioned in the Guide.
Transparency and appropriate disclosure are part of good governance. OSFI expects plan actuaries to provide sufficient details in their actuarial report to enable another actuary to assess the reasonableness of the data, assumptions and methods usedFootnote 4.
Stakeholders may consult the
OSFI website for any future notices or the
InfoPensions newsletter on pension issues related to the valuation of defined benefit pension plans. Additional information is also available in the
Frequently Asked Questions.
The Guide does not address specific reporting requirements related to
The PBSA and the PBSR are the authoritative sources for requirements applicable to actuarial reports filed with OSFI. In the event of discrepancies between the information included in the Guide and the federal pension legislation, the latter shall prevail.
The administrator of a pension plan registered or filed for registration under the PBSA, or its agent, shall generally fileFootnote 6 an actuarial report as of the effective date of the plan and annually thereafter as at the plan year-end. A plan administrator will be permitted to file an actuarial report every three years if
An actuarial report may be filed at other intervals or times as the Superintendent may directFootnote 9.
Actuarial Information Summary (AIS) contains information set out in the actuarial report. The AIS should be completedFootnote 10 and submitted to OSFI with any actuarial report required to be filed.
Replicating Portfolio Information Summary (RPIS) also contains information set out in the actuarial report, but specific to a replicating portfolio. The RPIS should be completedFootnote 11 and submitted to OSFI with any actuarial report required to be filed that uses a replicating portfolio for solvency valuation purposes.
The administrator of a pension plan must file the actuarial report, AIS, and RPIS using the
Regulatory Reporting System (RRS)Footnote 12. Where an actuarial report is intended to support an application for the authorization of a transaction by the Superintendent (e.g. a plan termination or asset transfer), it must also be submitted directly to OSFI by email along with any required approval request form.
The actuarial report can be submitted via document upload in RRS. For details on how to file using RRS, please consult the
Manage Financial Returns User Guide for Insurance Companies and Private Pension Plans and
other RRS training material available on the OSFI website. RRS training material can also be found in RRS in the Documents folder under Training and Support.
An amendment to a pension plan may result from a modification to any plan related document (e.g. collective bargaining agreement) and increase or reduceFootnote 13 benefits which may alter their cost under the plan. The federal pension legislation requires that an actuarial report be prepared as at the effective date of such amendmentFootnote 14. Therefore, unless the amendment was reflected in the previous actuarial report or that report was subsequently modified to reflect the cost of the amendment, an actuarial report should be prepared as of the effective date of the amendment and filed with OSFI.
An interim actuarial report would normally satisfy this requirement. While its contents may be condensed, the actuary should still ensure that any interim report fully complies with the reporting requirements of the CIA Standards and Guidance.
An AIS should be completed and submitted with the interim actuarial report. Also, a copy of the amendment must be filed with OSFI within 60 days after it is made.
If only the current service costFootnote 15 is affected as a result of the amendment, and there is no impact on the assets or liabilities as of the amendment date, the interim actuarial report need only disclose the change in current service cost.
If the previous actuarial report showed an unfunded liability and/or solvency deficiency, and liabilities are increased as a result of the amendment, the interim actuarial report should disclose the new special payments required to amortize the new unfunded liability and/or solvency deficiency. Actuarial assumptions and methods should not change from those used in the previous actuarial reportFootnote 16.
An amendment which results in a solvency ratio not meeting the prescribed solvency ratio levels will be void unless authorized by the SuperintendentFootnote 17. Specifically, if the amendment would have the effect of reducing the solvency ratio to a level below 0.85, or if the solvency ratio is already below 0.85 when an amendment increasing accrued benefits is considered, then the interim actuarial report should disclose the payment that should be made to the pension fund for the amendment to not be considered void. If such a payment is or expected to be made after the date of the amendment, the actuary should refer to
Section 2.6.2 – Receivables of the Guide which describes the circumstances under which receivable amounts may be included in plan assets for valuation purposes.
An actuarial report should be prepared at the effective date of the plan and generally annually thereafter as at the plan year-end. Most plans have an established practice of preparing actuarial reports at either the first day or the last day of the plan year (e.g. December 31 or January 1st). OSFI accepts either practice as long as it is applied consistently from one year to the other.
A plan administrator who wants to change the reporting date of the plan from the expected valuation date should advise OSFI in writing at least 60 days prior to the plan year-end and explain the reason for the modification. An actuarial report with a valuation date earlier than the plan year-end may be accepted if contributions to the pension fund are increased as a result of the change in the valuation date. If the change in reporting date is not acceptable, OSFI may require the actuarial report to be revised using the reporting date that was initially scheduled in the previous actuarial report.
Filing of an interim actuarial report prepared as a result of an amendment does not impact the next reporting date. The next actuarial report should still be prepared as of the next regular reporting date for the plan.
An actuarial report must be filed within six months after the end of the plan year to which it relatesFootnote 18. If the plan administrator does not file the actuarial report within this timeline, OSFI may request explanations for the delay and may require that plan members be informed of the late filing.
The actuarial report would generally include discussion and disclosure on the following elements:
If the pension plan includes a defined contribution component in addition to a defined benefit component, OSFI generally expects the information on the defined contribution component to be included in the actuarial report. The disclosure of elements relating to the defined contribution component is optional if the defined benefit and defined contribution components do not interact with each other, such as when:
If a pension plan includes a defined contribution component, the actuarial report should at a minimum disclose that such component exists. Where the report includes information with respect to a defined contribution component, the following elements are expected to be addressed:
OSFI believes it is good practice for the actuary to provide a summary of the key findings of the actuarial report and significant events that have occurred since the previous report that have a materialFootnote 20 impact on funding requirements. The approach facilitates review by regulators and stakeholders. Actuarial report highlights would generally include
The actuarial report should disclose any subsequent eventsFootnote 21 that emerged between the valuation date and the report date, and whether these events were reflected in the valuation, as may be appropriateFootnote 22. The actuarial report should specify if no subsequent events occurred.
OSFI expects an opinion to be expressed on all assumptions and methods used in the actuarial report, and in the format prescribed by the CIAFootnote 23. OSFI will not accept an actuarial report where the actuarial opinion with respect to the assumptions and methods is modified by a reservation. Any reservations, limitations, or deviations concerning other aspects of the report should be clearly disclosed.
The actuary should include a statement that the actuarial report was prepared in accordance with applicable legislation. For multijurisdictional pension plans, a statement that minimum member benefits stipulated by other jurisdictions’ legislation were taken into account in the valuation should also be included.
The PBSA is generally applicable to pension plans that provide benefits to employees in included employmentFootnote 24, whether or not other employees are also members of the plan. Minimum funding requirements (e.g. average solvency ratio) for these plans apply to the plan as a whole, but individual entitlements and corresponding liabilities of plan members are determined with regard to legislative requirements of their respective jurisdictions.
The following membership information should be included
Footnote 25 in the actuarial report:
For multijurisdictional pension plans, the above membership information should be provided separately for each applicable jurisdiction. If the actuarial report includes information with respect to a defined contribution component then the related membership data should be shown separately.
Membership information should be shown as at the valuation date of the actuarial report and of the previous actuarial report. A reconciliation of membership by category from the previous actuarial report and an explanation of large fluctuations in membership should also be included in the report.
The actuarial report should include information on the tests performed to ascertain the accuracy of membership dataFootnote 26. If membership data is insufficient or unreliable, OSFI expects the actuary to opine on the impact on valuation results, justify this opinion, and state, as applicable, the steps being taken to correct this problem before the next actuarial report.
The actuarial report should include a detailed summary of the plan provisions applicable to each member category that have a material impact on valuation results, such as the following:
The benefits payable on individual or plan termination should be clearly described in the actuarial report. In particular, the report should define early retirement benefits payable to deferred vested members such as whether the early retirement pension is
Where the plan provides for the use of early retirement reduction factors, the actuarial report should confirm that the resulting early retirement benefits are at least actuarially equivalent to the unreduced pension at pensionable age. OSFI expects the actuary to test for this minimum benefit when determining the going concern liabilities, the current service cost, and the solvency liabilities.
The actuarial report should disclose the sources of the asset data used in the valuation, and to the extent possible, the actuary should
Receivables are any amounts owing to the pension fund as at the valuation date, such as contributions and investment income. Amounts due to be remitted will generally be consistent with the CFS.
Future payments in part or in full of a deficit or transfer deficiency as at the valuation date should not be included in the plan assets at that date, unless the amount was to be remitted prior to that date based on the previous actuarial report.
It is generally acceptable to adjust the assets for amounts to be transferred to or from other pension plans. However, where such amounts are material to the plan, the actuarial report should disclose the liabilities associated with these transfers and information on the transaction, such as the date of application for approval.
The actuarial report should include information on the actual asset mix of the plan by major asset category at the valuation date. Pooled funds, if any, should also be allocated by major asset category.
The actuarial report should also disclose the following information, as stipulated by the Statement of Investment Policies and Procedures (SIP&P)Footnote 31 of the plan:
The SIP&P might not include asset mix ranges if it provides for a periodic rebalancing of the assets on an automatic basis. If this is the case, the actuarial report should include a justification as to why asset mix ranges were not included.
The actuarial report should include a reconciliation of assets, year by year, for each period since the valuation date of the previous actuarial report. This reconciliation should show changes in assets from various material sources, which typically include the following:
OSFI expects that investment expenses will generally be disclosed separately from investment income.
If the actuarial report includes information with respect to a defined contribution component then the related assets and reconciliation should be shown separately.
The CIA Standards and Guidance address the selection, appropriateness, and disclosure of going concern and solvency methods and assumptions. These documents also require the actuary to take into account the requirements of applicable legislation. This section of the Guide describes OSFI's requirements with respect to the valuation methods and assumptions used to determine the financial position of the plan for going concern and solvency valuation purposes.
The selection of asset valuation and actuarial cost methods is viewed as a fundamental element of the funding policyFootnote 32 of the plan administrator/employer provided to the actuary as part of the terms of engagement. An explanation of the methodology used to determine the asset, liability, and current service cost values should be provided in the report.
Methods are not expected to change from one report to another. Any modification should be clearly disclosed in the actuarial report and include the rationale for the modification and its financial impact.
Letters of Credit
Letters of credit may not be included for going concern valuation purposes.
For solvency valuation purposes, where letters of credit have been obtained in lieu of making solvency special payments, assets should include the aggregate face value of letters of credit in effect on the valuation date, up to a maximum of 15% of the solvency liabilities of the plan as determined at that dateFootnote 33. The maximum limit for the face value of letters of credit applicable until the actuarial report is filed should be based on the solvency liabilities included in the previous actuarial reportFootnote 34.
Letters of credit obtained under Solvency Funding Relief Regulations should not be included in solvency assets while the plan is being funded under these regulations, but should still be disclosed in the actuarial report.
The actuarial report should disclose the face value of any letters of credit included in the solvency assets. It should also show a reconciliation of the face value of letters of credit from the previous actuarial report. This reconciliation should include the amount of solvency special payments that were due during the year and replaced with a letter of credit, and employer contributions reducing the amount of letters of credit in force, as applicable.
Smoothing of Assets
Smoothing of going concern assets is allowed, provided the asset valuation method is reasonableFootnote 35, that is
Smoothing of assets is prohibited for solvency valuation purposes.
Risk Mitigation Strategies
Some pension plans use buy-in annuity products to limit the pension plan’s exposure to various risks related to retiree liabilities. The actuary should use an acceptable method for valuing buy-in annuities to be included in plan assetsFootnote 36.
Buy-out annuities may also be used by pension plans to limit exposure to risks. While these plans remain accountable for the provision of the annuitized benefits should the insurer default on its obligations, unless such event arises, OSFI expects related assets and liabilities to be excluded from the going concern and solvency balance sheets.
Another risk mitigation strategy using longevity risk hedging contracts allows pension plans to focus more narrowly on longevity risk. As is the case when a plan administrator of an ongoing plan purchases buy-in or buy-out annuities, a plan administrator that enters into a longevity risk hedging contract retains the ultimate responsibility for paying pension benefits. OSFI expects the actuary to consider the actuarial valuation implicationsFootnote 37 of these contracts in the actuarial report.
A going concern valuation is required to be prepared using actuarial assumptions and methods that are in accordance with accepted actuarial practice, and included in the actuarial report of a plan that is not terminating or winding-up. The purpose of this valuation is to determine the plan’s assets and liabilities on the valuation date, ongoing funding requirements (current service cost), and any additional funding requirements (special payments). Annual special payments to liquidate the unfunded liability should be equalFootnote 38.
Actuarial assumptions developed by the actuary should be best estimates reflecting future expectations while taking into account pertinent observable experience and plan characteristics. The actuary should select a set of actuarial assumptions which are appropriate in aggregate for the purpose of the valuation as well as independently reasonable. The nature of the assumptions used will also depend on materialityFootnote 39 for the purpose of the valuation.
The rationale for the selection of each assumption should be provided in the actuarial report. Any change in assumptions from the previous actuarial report should be clearly identified and justified in the report.
Actuarial Cost Method
OSFI does not prescribe a specific approach for allocating the actuarial present value of benefits and expenses to time periods provided it complies with CIA StandardsFootnote 40. Notwithstanding the foregoing, OSFI will not accept the use of the forecast actuarial method in an actuarial report. This method requires that a highly subjective assumption be made with respect to those who are expected to become members in the future. Changes in this assumption can result in substantial differences in the cost of a pension plan. OSFI believes that status quo in the active membership is a best estimate assumption for valuation purposes.
Provision for Adverse Deviations
CIA Standards provide that assumptions for going concern valuations can be best estimates modified to incorporate margins for adverse deviations to the extent required by law or the terms of engagementFootnote 41. OSFI expects that a set of actuarial assumptions would, as a whole, include an appropriate provision for adverse deviations.
The actuary may setFootnote 42 the extent of any individual margin for adverse deviations based on the plan administrator/employer’s funding policy, his or her knowledge of the risk tolerance of the plan administrator/employerFootnote 43, and any other applicable terms of engagement. The actuary should also consider that a riskier asset mix would generally translate into a higher provision for adverse deviations than would otherwise be required if the same funding objective of a plan with a less risky asset mix is to be maintained.
It is not necessary that each assumption include a margin for adverse deviations. It would be acceptable, for instance, to select best estimate assumptions for all contingencies except the discount rate. The necessary overall margin would then be included entirely in the discount rate assumption. Alternatively, the overall margin could be expressed as a multiplier to the liabilities and current service cost.
Margins for adverse deviations should be explicitly disclosed. In particular, if additional margins for adverse deviations are included in economic assumptions other than the discount rate (e.g. salary increase), or in demographic assumptions (e.g. mortality), these margins should be explicitly stated in the actuarial report.
The discount rate is typically the most significant assumption in determining the liabilities and current service cost in the going concern valuationFootnote 44. OSFI does not prescribe a specific methodology for selecting the discount rate but believes that the rate used by the actuary should not exceed a certain level. While the approach helps to ensure that adequate margins for adverse deviations are included in the going concern valuation, the intention is not necessarily that it provide the only source of margins included in the valuation.
The approach used by OSFI in setting the maximum going concern discount rate is not unduly influenced by short term financial market volatility and interest rate fluctuations underlying the pricing of fixed-income securities. OSFI monitors financial market conditions and future expected returns and is currently of the view that generally, excluding any active investment management return, the discount rate for a plan whose investments include no more than 50% of fixed-income securities should not exceed 6.00%, before all expenses other than those related to active investment management.
The actuary is expected to adjust this maximum rate correspondingly for plans using an asset mix expected to generate a lower return than the one obtained using a 50% fixed-income allocation.
The actuarial report should include a description of the approach used to determine the discount rate, including quantification of the main components making up the discount rate, as appropriate. For instance, if a building-block approach is used by taking into account the target asset mix in the SIP&P, the actuarial report should disclose the inflation and real return assumptions, as well as any provision for the payment of expenses from the pension fund and any margin for adverse deviations.
It is generally acceptable to assume that active investment management will generate additional returnFootnote 45 only to the extent that additional management fees associated with active management exceed those for passive management. If the discount rate includes a positive added value (net of active investment management expenses) due to employing an active investment management strategy, the actuary should provide relevant supporting data in the actuarial report that demonstrates that such additional return will be consistently and reliably earned over the long termFootnote 46.
Some plans use a select and ultimate approach to set the going concern discount rate resulting in rate variations from one year to the other. The rate for some years could then be higher than the maximum rate. The approach is acceptable to OSFI provided the liability and the current service cost obtained using the select and ultimate approach are not lower than the liability and current service cost that would be obtained using the maximum going concern discount rate approach.
De-risking strategies may result in a discount rate used for liabilities underlying some of the plan’s member categories exceeding that applicable to others. As a result, the average discount rate for the plan would fall somewhere between these rates. Use of multiple discount rates is acceptable to OSFI provided that total plan liabilities are not lower than what they would have been had the maximum discount rate been applied to all member categories of the plan. Use of a discount rate in the calculation of the current service cost that is higher than that used in the calculation of the retired members’ liabilities is acceptable, provided that
Pension benefits are expected to be valued using an actuarial cost method such that no future gains or losses will occur if the experience of the plan does not deviate from assumptions. As such, OSFI would expect that the rate of return for the active members group should be assumed during only those years when a member is expected to be active; for years during which a current active member is expected to be retired, the discount rate related to the retiree group would be used.
Provisions for expenses should cover administration, passive investment management, and active investment management expensesFootnote 47. These should be clearly and separately disclosed in the actuarial report, and quantified so that the appropriateness of expense provisions taken individually and as a whole may be assessed.
Expense assumptions should be developed based on actual and expected expenses to be paid by the pension fund. The actuarial report should include the rationale for establishing an expense assumption which is materially lower than expenses experienced by the plan over previous years.
For plans pursuing an active investment management strategy, the approach used for determining a reasonable split between passive and active investment management expenses should be explained in the actuarial report. Passive investment management expenses should reflect the costs of maintaining a passive investment portfolio, which would typically include investment administration, rebalancing, transaction, and custodial fees relating to the management of assets.
In some cases (e.g. where a plan buys units of an investment fund), investment management expenses might not all be paid directly by the pension fund, but rather indirectly when the associated investment income is net of expenses. These expenses should be clearly and separately disclosed in the actuarial report, and taken into consideration in the determination of the expense provision.
If the actuarial report includes information with respect to a defined contribution component then the related expense provisions should be shown separately.
The actuary should apply judgment in selecting the appropriate mortality assumption, which includes two components: current mortality rates and adjustments for future improvements in mortalityFootnote 48.
It is considered best practice to reflect as there is substantial evidence that mortality has improved continuously for an extended period and will likely continue to improve in the future. OSFI expects mortality improvements to be reflected by use of projection scale CPM-B using a full generational projection of an industry base mortality tableFootnote 49.
OSFI expects the CPM2014 mortality table (and CPM-B projection scale) to be used for going concern valuations, unless the actuary justifies a different table and explains in the actuarial report why the use of the CPM2014 mortality table would not be appropriate. Where another base mortality table is chosen and/or where adjustments are made in accordance with the CIA mortality study (e.g. for pension size or industry), a detailed justification should be included in the actuarial report.
The resulting mortality tables of the CIA mortality study provide an industry standard of expected mortality with respect to Canadian pension plans. As such, other adjustments to the base mortality tables are generally not warranted but might be appropriate in certain cases, for example for groups with substandard or superior mortality. The justification of how the adjustments were determined should refer to relevant experience analysis, credible life-years of exposure, and each plan characteristic considered. Very large plans with fully credible experience may choose to develop their own mortality table to reflect actual experience. The adjusted basis should still provide for future mortality improvement.
Where a mortality table is constructed on plan experience or uses adjustments to a base table based on plan experience, the actuarial report should provide sensitivity information in comparison to the relevant CPM base mortality table (and CPM-B projection scale) to allow an assessment of the strength of the assumption. The life expectancy at age 65 using the valuation’s mortality table and the CPM table (and CPM-B projection scale) should be disclosed in the actuarial report. The financial impact on the going concern liabilities and current service cost of using a modified table (and CPM-B projection scale) should also be shown.
While the actuary may assume that active and deferred members will retire at different ages, the pensionable age for each group of members should be the same. A vested member terminating before pensionable age is entitled to a deferred pension payable on the same terms and conditions as the immediate pension the member would have received upon attaining pensionable ageFootnote 50.
Members and former members are eligible to receive an immediate pension benefit commencing ten years before pensionable ageFootnote 51. For a plan that includes material early retirement subsidies, OSFI would not consider reasonable the use of a retirement age assumption that ignores the possibility of members taking advantage of the plan’s early retirement options.
Where the actuary assumes members might terminate before retirement, the actuarial report should state how benefit entitlements are expected to be settled. The proportions of members assumed to elect a commuted value transfer and a deferred pension should be stated. Other assumptions used should be clearly disclosed in the actuarial report.
Assumptions to calculate the liability of members assumed to choose a commuted value transfer would generally be determined according to CIA StandardsFootnote 52. Alternatively, going concern assumptions could be used if the impact on the liabilities and current service cost, including experience gains or losses that might result from one report to another, is not material.
Benefits Subject to Consent
Some plans offer benefits that are subject to administrator or employer consent, such as unreduced early retirement benefitsFootnote 53. In these cases, the actuary should make a reasonable assumption of members being granted consent and clearly disclose this assumption in the actuarial report. Unless plan experience justifies otherwise, it would generally not be acceptable to assume that no members will be granted consent.
A solvency valuation is required to be prepared using actuarial assumptions and methods that are in accordance with accepted actuarial practice, and assuming the plan is terminated on the valuation date. A solvency valuation would also be prepared on the effective full termination date of a planFootnote 54. The purpose of the solvency valuation is to determine the plan’s assets and liabilities on the valuation date and any additional funding requirements (special payments). Annual special payments to liquidate the solvency deficiency should be equal to the amount by which the solvency deficiency divided by 5 exceeds the amount of going concern special payments payable during the yearFootnote 55.
OSFI believes that a solvency valuation implicitly requires the hypothetical or effective full wind-up of the plan upon its termination, and therefore also the settlement of benefitsFootnote 56. The actuary should select a set of actuarial assumptions which are appropriate for the purpose of the valuation. The nature of the assumptions used will also depend on materiality for the purpose of the valuation.
The rationale for the selection of each assumption should be provided in the actuarial report.
Any change in assumptions from the previous actuarial report should be clearly identified and justified in the report.
All benefits to which members would be entitled upon plan termination should be valued, including those in the plan that are over and above the minimum requirements of the PBSA. The accrued benefit cost method should be used to calculate liabilities.
The approach developed by the actuary should not change the nature of the benefit entitlements or the plan provisions, for example, by modifying pension indexation from a full Consumer Price Index (CPI) increase to a fixed increase.
The postulated termination scenario should be clearly identified in the actuarial reportFootnote 57, for example as the result of voluntary termination of the plan or bankruptcy of the employer. OSFI expects this scenario to be based on a reasonable expectation of the most likely outcome had the plan been terminated at the valuation date.
The determination of solvency liabilities should be consistent with the selected scenario. If pension benefits depend on continued employment, an assumption for increases in future salaries and maximum pension limit defined in the
Income Tax Act (ITA) may be required. A reasonable projection of salaries should be included for solvency valuation purposes if
Where the pension amount is determined by taking into account a period of employment which continues after plan termination, OSFI would expect its calculation to be consistent between options the member could elect. As such, the assumption for future salary increases should be the same for members electing a commuted value or a deferred pension.
If employment continues after plan termination, reasonable retirement and termination rates after plan termination may be used in recognition that members may not act so as to maximize the value of benefit or reach pensionable age. The determination of assumptions should comply with CIA StandardsFootnote 58 to ensure that the assumed increases in salaries and in the average wage indexFootnote 59 are consistent.
Appropriate disclosure and explanation should be provided in the actuarial report. Where the termination scenario does not maximize the value of benefits, the actuarial report should nevertheless disclose the solvency liability which would have resulted had such an approach been used.
Commuted Value Transfer versus Annuity Purchase
The actuarial report should clearly identify how benefit entitlements would be expected to be settled (commuted value transfer, purchase of an immediate or deferred annuity) for each category of members:
Where it is expected that members eligible for early retirement would, upon plan termination, be offered the choice of an immediate annuity or the commuted value, the actuary should assume that at least 50% of the liability of each of those members is based on the option that creates the highest solvency liability. The actuary should disclose the assumption in the actuarial report.
Portability options offered to members eligible for early retirement should be based on plan provisions. Even if portability is not available to members eligible for early retirement, the plan administrator could still choose to offer the option upon plan termination. The assumption made by the actuary with respect to the election form chosen by these members should be supported by the decision of the plan administrator of granting the option, and should be disclosed in the actuarial report. The decision is not expected to change from one report to another.
OSFI believes that it would generally not be acceptable to assume that benefits of all deferred members not entitled to an immediate pension would be settled by a commuted value transfer. These deferred members would be eligible to a deferred annuity upon plan termination. Although other portability options available to active members could also be offered to deferred members by the administrator on plan termination, it is generally not reasonable to assume that all members who have already opted willingly or by default for a deferred pension will choose to receive a commuted value upon plan wind-up. The actuary is expected to consider this observation in setting and justifying the assumption used for the settlement of benefits for deferred members on plan termination.
The discount rate used to value benefits expected to be settled by a commuted value transfer should be determined according to CIA StandardsFootnote 60. This usually includes the assumption that members will choose to start their pension at the age that maximizes the value of benefits. The actuary should disclose the retirement assumption in the actuarial report.
Benefits expected to be settled by the purchase of an annuity should be valued using an interest rate assumption (annuity proxy) based on the rate recommended in the most recently issued CIA GuidanceFootnote 61 relevant to the report date. If the annuity proxy for non-indexed annuities is used, the actuarial report should disclose the duration of the liabilities expected to be settled by the purchase of an annuity. If the discount rate is rounded, the approach and rationale for rounding should be explained in the actuarial report. The decision to round and the approach used is not expected to change from one report to another.
Some plans offer pension indexation which is not fully related to the CPI, i.e. partial indexation or indexation with a cap. The actuarial report should clearly explain the approach used to determine the indexation assumption or the net discount rate. In particular, the portion of the inflation risk premium considered in the determination of the discount rate is expected to be discussed by the actuary in the report.
A stochastic modelFootnote 62 may be used to determine the impact of the cap on indexation. Relevant information on the model should be disclosed in the actuarial report such as
The mortality table used to value benefits expected to be settled by a commuted value transfer should be determined according to CIA Standards, using the latest mortality table and improvement scale promulgated by the Actuarial Standards Board for the purpose of the calculationsFootnote 63.
The mortality assumption to be used to value benefits expected to be settled by the purchase of an annuity is provided in CIA Guidance. Where a mortality table other than the CPM2014 is chosen and/or where adjustments are made in accordance with the CIA mortality study (e.g. for pension size or industry), a detailed justification should be included in the actuarial report. The report should disclose the notional solvency liabilities and solvency ratio that would have resulted from using an unadjusted CPM2014 mortality table. If a mortality table other than the CPM2014 is used, the underlying adjustment to the CPM2014 mortality table as a percentage of the CPM2014 mortality rates that would have been assumed to achieve the solvency liabilities of the report should also be disclosed.
Any adjustment in mortality rates should reflect that it is uncertain how an insurer might view a particular plan’s mortality and how this might be reflected in the actual mortality basis assumed for a given plan. It is reasonable to expect that adjustments to mortality for a plan would be made by an insurer only if the characteristics of the plan are significantly different from the data used to develop the CPM2014 mortality table.
Where a unisex mortality table is used, the actuarial report should explain using supporting data how the mortality basis was derived. OSFI expects the report to state that total liabilities for members for which a unisex mortality table is used would have resulted in the same total liabilities had sex-distinct mortality been used.
Alternative Settlement Methods
OSFI recognizes that it might not be possible to settle a large pool of immediate and deferred pension liabilities by means of a single group annuity purchase. The federal pension legislation does not preclude using alternative settlement methodsFootnote 64 for solvency valuation purposes, but such method cannot result in pension benefits being surrendered in any year or in aggregateFootnote 65. Therefore, in order to reflect a realistic manner of settling benefits, the actuary should assume that benefits in payment and deferred pensions would be settled by the purchase of annuities or use of a replicating portfolio.
OSFI expects benefits to be distributed without undue delay after OSFI’s approval of the termination of a pension planFootnote 66. Therefore, only pension plans for which annuities cannot be purchased due to group annuity limitations (i.e. large plans) should use a replicating portfolio approach. For solvency valuation purposes, it is expected for all plans to envision the wind-up of assets first through a single group annuity purchase. If not possible due to capacity constraints of the annuity market, then through a series of group annuity purchases as contemplated under CIA Guidance.
A replicating portfolio should only be established in cases where the capacity of the Canadian annuity market would not permit the settlement of a terminating plan’s pension liabilitiesFootnote 67 by a single or a series of group annuity purchases for all:
It is expected that the actuary will discuss the capacity of the annuity market in the actuarial report, including whether it is sufficient to absorb a single or series of group annuity purchases for the plan, with the thresholds and manner specified in the CIA Guidance used as a reference. Notwithstanding the foregoing, the actuary could still assume that benefits would be settled by the purchase of annuities regardless of any limitations of capacity in the market for group annuity contractsFootnote 68.
If an alternative settlement method (i.e. series of group annuity purchases or replicating portfolio) is used, the actuarial report should disclose the notional solvency liabilities and solvency ratio that would have resulted if the single purchase of a group annuity had been assumed. Also, the actuarial report should disclose the underlying equivalent annuity proxy rate to be used to obtain the same solvency liability resulting from using an alternative settlement method. The mortality and the indexation rate assumptions used in these calculations should also be disclosed and be the same as those obtained based on CIA Guidance had the solvency valuation assumed the single purchase of a group annuity.
Where a mortality table other than the CPM2014 is chosen and/or where adjustments are made in accordance with the CIA mortality study (e.g. pension size or industry), a detailed justification should be included in the actuarial report. The report should disclose the notional solvency liabilities and solvency ratio that would have resulted from using an unadjusted CPM2014 mortality table under the assumption of a single purchase of a group annuity. If a mortality table other than the CPM2014 is used, the underlying adjustment to the CPM2014 mortality table as a percentage of the CPM2014 mortality rates that would have been assumed to achieve the solvency liabilities of the report should also be disclosed.
OSFI expects the actuary to discuss whether the capacity of the market would allow for the purchase of the fixed-income securities needed to establish the replicating portfolio. Simply assuming that market capacity is available to achieve the desired portfolio would not be sufficient.
The primary asset class of investment grade fixed-income investments of the portfolio would include a substantial allocation to high-quality fixed-income securities. For this purpose, OSFI considers that for a fixed-income investment to be deemed of high-quality, the rating should be comprised among the two highest credit rating categories given by at least one of the recognized rating agencies operating in Canada, i.e. DBRS (AA(low) or higher), Standard and Poor’s (AA- or higher), Fitch (AA- or higher), and Moody’s (Aa3 or higher).
Expected pension benefit payments should be covered by the assets of the replicating portfolio only. As such, it is expected that the actuary would establish margins assuming no recourse to additional sources of funds. Employers and pension plan administrators are ultimately responsible for risk management decisions. The plan administrator has fiduciary responsibilities to plan members and beneficiaries. Given that it is the plan administrator’s role under the PBSA to file the actuarial report with the Superintendent, the filing of the actuarial report implies that the administrator supports the assumptions used in the actuarial report as determined by the actuary based on the terms of engagement. Among others, this includes using appropriate assumptions and sufficient margins for adverse deviations, determined in accordance with CIA Guidance to ensure a high probability that benefits will be paid.
The establishment of a replicating portfolio assumes that a portion of the pension fund will be maintained and not wound up on plan termination for the payment of pension benefits to retired members and members assumed to elect to receive a pension from the plan. Therefore, OSFI expects economic and demographic assumptions to be consistent, as applicable, with those used under the going concern valuation, notwithstanding appropriate margins for adverse deviations included in the valuation of solvency liabilities supported by the replicating portfolio.
The actuarial report should include appropriate disclosure and explanation of underlying assumptions and methods used to establish a replicating portfolio, such as
Each of the key risks for which a margin should be identified is included below:
It is expected that the actuary will provide meaningful disclosures regarding the benefit security implications of using the replicating portfolio approach and that plans of this size would generally calculate these impacts based on stochastic modeling. Disclosures should, therefore, include
Alternatively, for plans using a deterministic approach, the financial impact of adverse experience with respect to each of the risks should be disclosed separately in the actuarial report. In these cases, OSFI expects the actuary to perform stress testingFootnote 70 when considering the impact of these risks, such as the expected loss associated with each one.
Termination ExpensesFootnote 71
The solvency valuation should provide for expenses that may reasonably be expected to be paid by the pension fund, under the postulated termination scenario, between the valuation date and the wind-up of the plan, i.e. the date when all plan benefits are settled and assets are distributed. In order to provide for a realistic manner of settling benefits, the assumed termination date, settlement date, and wind-up date should not be the same. OSFI expects the actuary to make and disclose the assumption as to when the wind-up of the plan might reasonably occur after the termination date, considering the delays incurred to
It should be clear from the actuarial report that the termination expense amount represents the actuary’s best estimate assumption had the plan been terminated at the valuation date.
Termination expenses should be deducted from the market value of assets in calculating the solvency ratio and not be netted from future investment income. The provision would usually include
Where a replicating portfolio is assumed, expenses related to its establishment should be discussed in the actuarial report and reflected in the termination expenses. The assumption of a series of group annuity purchases until the full wind-up of the plan would also require an adjustment to termination expenses.
Where it is assumed that the employer would pay for some of the termination expenses in the event of plan termination, the proportion of termination expenses payable by the employer and pension fund should be disclosed. The actuary is expected to opine on the reasonableness of the assumption in consideration of the financial position of the employer as at the valuation dateFootnote 74.
Determining Benefits Payable at Pensionable Age
Members are assumed to grow into any minimum age requirementFootnote 75. If there is no service component in the plan’s pensionable age, members are entitled to any benefit payable at pensionable age. If pensionable age has a service component, the benefit payable at pensionable age should be provided to members who have met the service requirement at the valuation date.
Deferred pension benefits payable at pensionable age are fully vested, i.e. pensionable age must be the same for active and inactive members. OSFI considers indexing and bridge benefits payable at pensionable age to be part of the member’s pension benefit and, therefore, payable to a member or former member at pensionable ageFootnote 76.
OSFI allows the exclusion from solvency liabilities of benefits genuinely subject to consentFootnote 77. If the plan provides benefits subject to the consent of the plan administrator, the actuarial report should specify whether consent to these benefits is assumed to be granted for solvency valuation purposes. When making this assumption the actuary should
Projection of the Maximum Pension Limit
A projection of the maximum pension limit defined in the ITA is required if the plan automatically reflects future changes in the limit,and its determination for purpose of pension benefit calculation is made at retirement instead of at termination of employment or plan terminationFootnote 78. Since the increase in the ITA maximum is based on the increase in the average wage index, the appropriate projection assumption would be the implicit rate of inflation plus 1%Footnote 79.
The actuary may decide not to project the maximum pension amount when it should be projected because it is determined that the impact of doing so would not be material. The actuarial report should then disclose this assumption and explain the reason why including a projection would not have a material impact on the results of the solvency valuation.
The actuarial report should include a balance sheet showing the going concern assets and liabilities as at the valuation date and as at the date of the previous actuarial report. If the actuarial report includes information with respect to a defined contribution component then the related assets and liabilities should be shown separately.
The balance sheet should include the following items separately:
The actuarial report should also include in separate notes to the balance sheet
If best estimate assumptions are selected for all contingencies except the discount rate, the actuarial present value of the provision for adverse deviations that should be disclosed in the actuarial report is the actuarial present value of the provision for adverse deviations included in the discount rate. If additional margins for adverse deviations are included in other economic or demographic assumptions, the actuarial present value of the provision for adverse deviations disclosed in the actuarial report should include the present value of these margins as well.
The actuarial report should include a balance sheet showing the solvency assets and liabilities as at the valuation date and as at the date of the previous actuarial report. If the actuarial report includes information with respect to a defined contribution component then the related assets and liabilities should be shown separately.
If the plan is using a replicating portfolio, the actuarial report should include in separate notes to the balance sheet
The actuarial report should show the solvency ratio of the plan as at the valuation date and as at the date of the previous actuarial report. If the actuarial report includes information with respect to a defined contribution component then related assets and liabilities should not be included in the determination of the solvency ratio.
The report should also state whether assets would exceed liabilities had the plan been terminated at the valuation date. Where the solvency ratio is less than 1.00, all aspects of the restrictions that may apply to the transfer of commuted values and annuity purchases which may affect the portability of benefits, including a portability freeze, and result in additional funding requirementsFootnote 81 should be discussed in the actuarial report.
Average Solvency Ratio Used to Determine Funding Requirements
The actuarial report should include a solvency balance sheet showing the adjusted solvency asset amount (which is the product of the average solvency ratio and solvency liabilities), the solvency liabilities, and the excess or deficiency at the valuation date and at the date of the previous actuarial report. If the actuarial report includes information with respect to a defined contribution component then the related assets and liabilities should be shown separately.
The actuarial report should show the average solvency ratio used for funding purposes which is the arithmetic average of the adjustedFootnote 82 solvency ratios at the valuation date, prior valuation date and prior second valuation date.
If adjustments are made to the current and prior year solvency ratios to determine the average solvency ratio, the actuarial report should provide details of the calculation for each of those solvency ratios, which may include the following items:
Transfer deficiency payments are not considered special payments because they do not improve the plan’s solvency ratio. They restore the solvency ratio of the plan to its level prior to the payout of the commuted value to the member. Therefore, transfer deficiency payments should not be included in the adjustments of prior solvency ratios to determine the average solvency ratio.
A reconciliation of the going concern valuation results is considered useful disclosure in an actuarial report, allowing the reader to understand the sources of changes in the financial position of the plan since the last valuation in the previous actuarial report and to assess the reasonableness of the actuarial assumptions. The reconciliation would generally show
Experience gains and losses should be shown separately for each assumption made in the actuarial report, unless the gain or loss related to the assumption is considered not material. Where gains and losses with respect to two or more assumptions are combined, the report should state that gains or losses for assumptions not shown separately are not considered material. OSFI expects the actuary to explain any significant or unusual gains or losses in the actuarial report.
Consistent and material experience losses from year to year that relate to a given assumption would generally indicate that it is inadequate. OSFI expects the actuary to review and, if required, strengthen assumptions on a regular basis.
The impact of each assumption changed in the actuarial report should be described and disclosed separately. However, it is acceptable to combine some assumptions for this purpose provided these are related (e.g. changes to different economic assumptions resulting from a modification in the underlying inflation assumption).
A reconciliation of the solvency results from the last valuation in the previous actuarial report is generally not required. However, if the actuarial report does not include a going-concern valuation (i.e. termination report), OSFI expects gains and losses since the last valuation to be reconciled in the actuarial report.
The actuarial report should provide the following informationFootnote 84 with respect to the current service costFootnote 85 and special payments:
The actuarial report should state that contributions and special payments are required to be remitted to the pension fund on a monthly basisFootnote 86. Outstanding contributions will accrue with interestFootnote 87.
Given the actuarial report is generally prepared after the beginning of the plan year to which the funding recommendation applies, the actuarial report should state that any adjustments to contributions and special payments applicable to the year should be made when the report is filed. As such, required funding amounts since the beginning of the plan year included in the actuarial report over those included in the previous actuarial report are due at the time of filing.
Pre-Existing Going Concern Special Payments
Pre-existing going concern special payments need to be considered when preparing an actuarial report. These payments are present when a previous actuarial report disclosed a going concern unfunded liability. The remaining balance of any pre-existing going concern special payments
The excess of the present value of all pre-existing going concern special payments over the going concern deficit shall be applied to reduce the outstanding balance of any unfunded liability. The amortization period of a schedule cannot be reduced but flexibility is available in choosing which schedule(s) to adjust. Once the schedule(s) to be reduced has(have) been identified, the remaining payments of this(these) schedule(s) should be reduced pro rataFootnote 88.
Where changes in going concern assumptions or methods occurred since the valuation date of the previous actuarial report, the actuary should consider the net effect of plan experience and changesin assumptions or methods to determine funding requirements. For instance, experience gains may not be applied to reduce payments if this is followed by a change in assumptions that leads to the introduction of a new special payment, as the net effect would be longer amortization than if the total net financial change was applied.
Contribution holidays are limited by the funding and solvency positions of the plan as at the valuation date. Employer contributions payable until the next actuarial report must at least be equal to
Additional Payments in Excess of Minimum Funding Requirements
If payments greater than the sum of the minimum required special payments are made in a plan year toward an unfunded liability or a solvency deficiency, these additional payments may be used to reduce the amount of a special payment in a subsequent plan year (consecutive or non-consecutive)Footnote 90.
To determine funding requirements, going concern and solvency assets should be reduced by the amount of the additional payments that will be applied to reduce special payments in respect of periods after the valuation dateFootnote 91. The actuarial report should disclose the balance of unallocated additional payments and show how additional payments have been used since the last valuation to reduce required special payments.
Other legislative provisions such as the use of letters of credit or solvency relief measures may impact funding requirements. OSFI expects the actuarial report to include sufficient details and explanations for the reader to be able to follow from one valuation to the next the impact of these provisions on special payments. As such, the actuarial report should provide a reconciliation of the amounts having an impact on the reduction of special payments since the last valuation. Also, the interaction of these amounts to the extent they affect special payments should be disclosed.
Negotiated Contribution Plans
Where a pension plan is considered a negotiated contribution planFootnote 92, the actuarial report for that plan should state
In addition to the membership data disclosure requirementsFootnote 93, the actuarial report should disclose the expected number of hours worked annually until the next actuarial report, if relevant to the plan’s benefit structure.
Also, the actuarial report should either
OSFI expects the actuary to comment in the actuarial report on recent plan experience, if relevant, relating to key indicators such as
In considering these factors, and taking into account the duration of collective agreements in force, the actuary is expected to opine on the likelihood that the plan will meet funding requirements for the foreseeable future.
In the case of a Designated Plan, an employer may not make contributions in excess of the amount of eligible contributions under the
Income Tax Regulations (ITR), unless the Minister of National Revenue has waived the designated status of the planFootnote 94. These contributions are determined based on a maximum funding valuation using actuarial assumptions prescribed under the ITR.
In spite of the funding limitations under the ITR, the actuarial report of a Designated Plan that is registered under the federal pension legislation should be prepared in accordance with OSFI expectations applicable to any other pension plan as outlined in the Guide. These expectations require that the usual information on going concern and solvency valuations be included in the actuarial report.
If contributions to the pension fund are constrained by the ITR, the balance sheet resulting from the maximum funding valuation of the plan and the amount of eligible contributions under the ITR should be clearly and separately disclosed in the actuarial report.
The assumptions prescribed under the ITR for the maximum funding permitted under the ITR should not be used as the basis to value the going concern liabilities or current service cost of the plan under the federal pension legislation. OSFI expects the actuary to select reasonable going concern assumptions without regard to the fact that the plan is a Designated Plan. In particular, OSFI believes that the discount rate, mortality, and retirement age (if the plan includes early retirement subsidies) assumptions prescribed under the ITR are not appropriate assumptions for a going concern valuation.
Current service contributions, as well as going concern and solvency special payments required under the PBSR, should be calculated regardless of the maximum funding permitted by the ITR. The information should be clearly and separately disclosed in the actuarial report.
OSFI expects the minimum required contributions under the PBSR to be paid to the pension fund unless these amounts do not qualify as eligible contributions under the ITR. Total contributions for the current service cost and special payments to fully fund the deficit on the basis of the maximum funding valuation are considered eligible contributions under the ITR.
Contributions and special payments that have not been made prior to the actuarial report because of the ITR restriction and cannot be paid according to the actuarial report should not be included as receivables in the report. The unfunded liability resulting from these amounts will be amortized over future years.
For further information, please visit the
OSFI website or contact us at:
Office of the Superintendent of Financial Institutions 255 Albert Street Ottawa, Ontario K1A 0H2 Telephone: (613) 943-3950 or 1-800-385-8647 E-mail:
Introduced in 2006.
Return to footnote 1
Termination reports require the approval of the Superintendent.
Return to footnote 2
Subsection 9(2) of the PBSA.
Return to footnote 3
Paragraphs 3260.09 and 3330.04 of the CIA Standards.
Return to footnote 4
Section 10.1 of the PBSR
Return to footnote 5
Subsection 12(2) of the PBSA.
Return to footnote 6
See section 8515 of the
Income Tax Regulations for more information.
Return to footnote 7
Subsection 2(1) of the PBSR.
Return to footnote 8
Section 2 of the Directives.
Return to footnote 9
OSFI – Guide to Completing the Actuarial Information Summary for more information.
Return to footnote 10
OSFI – Guide to Completing the Replicating Portfolio Information Summary for more information.
Return to footnote 11
Returns are not considered received at OSFI until the filing process is complete and the returns have been accepted in RRS. If the plan is not registered to file returns using RRS, it should do so immediately. Pension plan administrators must contact the Bank of Canada, as host of the RRS system, to register for access to the Bank of Canada secure site and the RRS system. For assistance in registering, please contact RRS Support at the Bank of Canada by phone at 1-855-865-8636, or by e-mail at
Return to footnote 12
OSFI Instruction Guide – Authorization of Amendments Reducing Benefits in Defined Benefit Pension Plans for more information.
Return to footnote 13
Paragraph 2(g) of the Directives
Return to footnote 14
Also referred to as normal cost.
Return to footnote 15
Subsection 9(13) of the PBSR.
Return to footnote 16
Subsection 10.1(2) of the PBSA and section 9.3 of the PBSR.
Return to footnote 17
Subsection 12(4) of the PBSA.
Return to footnote 18
Might also be required for the solvency valuation if the actuarial report does not include a going concern valuation.
Return to footnote 19
See paragraph 1340 of the CIA Standards for more information.
Return to footnote 20
See paragraphs 1515 and 1520 of the CIA Standards for more information.
Return to footnote 21
CIA Educational Note – Events Occurring After the Calculation Date of an Actuarial Opinion for a Pension Plan for more information.
Return to footnote 22
Paragraphs 3260.08 and 3330.03 of the CIA Standards.
Return to footnote 23
Subsection 4(4) of the PBSA.
Return to footnote 24
It is acceptable for specific individual information to be left out to protect confidentiality, if necessary. The actuarial report should then include an offer to provide details if requested.
Return to footnote 25
Paragraph 3260.01 of the CIA Standards.
Return to footnote 26
Subsection 2(1) of the PBSA.
Return to footnote 27
Subsection 16(2) of the PBSA.
Return to footnote 28
Section 22 of the PBSA.
Return to footnote 29
Paragraph 3260.01 of the CIA Standards.
Return to footnote 30
In accordance with paragraph 7.1(3)(b) of the PBSR, the plan administrator must submit the SIP&P to the actuary for a plan with defined benefit provisions.
Return to footnote 31
CAPSA – Pension Plan Funding Policy Guideline for more information.
Return to footnote 32
Subsection 2(1) of the PBSR
Return to footnote 33
See definitions of valuation date and actuarial report in subsection 2(1) of the PBSR for more information.
Return to footnote 34
CIA Educational Note – Guidance on Asset Valuation Methods for more information.
Return to footnote 35
OSFI Guidance – Buy-in Annuity Products for more information.
Return to footnote 36
OSFI Policy Advisory – Longevity Insurance and Longevity Swaps for more information.
Return to footnote 37
Subsection 9(3) of the PBSR.
Return to footnote 38
CIA Report – Materiality for more information.
Return to footnote 39
See paragraph 3210.15 of the CIA Standards for more information.
Return to footnote 40
Paragraph 3230.01 of the CIA Standards.
Return to footnote 41
CIA Research Paper – Provisions for Adverse Deviations in Going Concern Actuarial Valuations of Defined Benefit Pension Plans and
CIA Research Paper – Provisions for Adverse Deviations in Going Concern Actuarial Valuations for more information.
Return to footnote 42
Financial risks of negotiated contribution plans are typically borne by plan members. See
CIA Educational Note – Financial Risks Inherent in Multi-Employer Pension Plans and Target Benefit Pension Plans for more information.
Return to footnote 43
CIA Revised Educational Note – Determination of Best Estimate Discount Rates for Going
ConcernFunding Valuationsfor more information.
Return to footnote 44
i.e. provide returns above those obtained using a passive investment management strategy.
Return to footnote 45
Paragraph 3230.03 of the CIA Standards.
Return to footnote 46
CIA Educational Note – Expenses in Funding Valuations for Pension Plans for more information.
Return to footnote 47
CIA Educational Note – Selection of Mortality Assumptions for Pension Plan Actuarial Valuations for more information.
Return to footnote 48
Refers to one of the mortality tables published in the
CIA Final Report – Canadian Pensioners’ Mortality, i.e., CPM2014, CPM2014Publ, or CPM2014Priv
Return to footnote 49
Section 17 of the PBSA.
Return to footnote 50
Subsection 16(2) of the PBSA.
Return to footnote 51
See section 3500 of the CIA Standards for more information.
Return to footnote 52
OSFI Policy Advisory – Benefits Subject to Consent for more information.
Return to footnote 53
OSFI Instruction Guide – Filing and Reporting Requirements for Defined Benefit Pension Plan Terminations for more information
Return to footnote 54
Paragraphs 9(4)(c) and 9(4)(d) of the PBSR.
Return to footnote 55
Subsection 29(11) of the PBSA.
Return to footnote 56
Paragraph 3240.03 of the CIA Standards.
Return to footnote 57
Paragraph 3520.10 of the CIA Standards.
Return to footnote 58
Paragraph 3540.11 of the CIA Standards.
Return to footnote 59
Return to footnote 60
For example, the March 1, 2017
CIA Educational Note – Assumptions for Hypothetical Wind-Up and Solvency Valuations with Effective Dates Between December 31, 2016 and December 30, 2017
Return to footnote 61
Use of Models for more information.
Return to footnote 62
Final Communication of a Promulgation of the Mortality Table Referenced in the Standards of Practice for Pension Plans (Subsection 3530) for more information.
Return to footnote 63
CIA Educational Note – Alternative Settlement Methods for Hypothetical Wind-Up and Solvency Valuations for more information.
Return to footnote 64
Subsection 36(4) of the PBSA.
Return to footnote 65
Return to footnote 66
Liabilities of other pension plans sponsored by the same corporate entity could also be considered in the analysis.
Return to footnote 67
Paragraph 3240.05.1 of the CIA Standards.
Return to footnote 68
If the margin is instead included as an adjustment to the mortality rates, the actuarial report should nevertheless disclose the adjustment to the discount rate that would have been required to create the same increase in solvency liabilities had the margin not been included in the mortality rates.
Return to footnote 69
OSFI Guideline – Stress Testing Guideline for Plans with Defined Benefit Provisions for more information.
Return to footnote 70
Also referred to as wind-up expenses.
Return to footnote 71
Section 7.6 of the PBSA.
Return to footnote 72
Section 9.01 of the PBSA.
Return to footnote 73
Paragraph 3240.14 of the CIA Standards.
Return to footnote 74
OSFI Guidance - Pensionable Age and Early Retirement for more information.
Return to footnote 75
Return to footnote 76
Return to footnote 77
CIA Educational Note – Reflecting Increasing Maximum Pensions Under the Income Tax Act in Solvency, Hypothetical Wind-Up and Wind-Up Valuations for more information.
Return to footnote 78
Return to footnote 79
Active management expenses are generally offset by active management return, therefore having no impact on the liabilities.
Return to footnote 80
See sections 8 and 9 of the Directives for more information.
Return to footnote 81
See subsections 9(8) through 9(11) inclusive of the PBSR for more information.
Return to footnote 82
Unless the plan uses advance contributions in excess of minimum funding requirements, special payments for negotiated contribution plans are defined as the difference between negotiated contributions and total current service cost.
Return to footnote 83
Section 9 of the PBSR.
Return to footnote 84
Defined as the cost of providing the benefits and the provision for expenses, allocated to a time period by the actuarial cost method, excluding special payments.
Return to footnote 85
Subsection 9(14) of the PBSR.
Return to footnote 86
Section 10 of the PBSR.
Return to footnote 87
Subsection 9(7) of the PBSR.
Return to footnote 88
Subsection 9(5) of the PBSR.
Return to footnote 89
Subsection 9(6) of the PBSR.
Return to footnote 90
Paragraphs 9(8)(c) and 9(8)(d) of the PBSR.
Return to footnote 91
Return to footnote 92
See section 2.4 of the Guide.
Return to footnote 93
Subsection 8515(2) of the ITR.
Return to footnote 94