Estimated solvency ratio results (May 2017)

OSFI regularly estimates the solvency ratio for approximately 370 pension plans with defined benefit provisions that it supervises. The Estimated Solvency Ratio (ESR) assists OSFI with the early identification of solvency issues that could affect the security of members’ promised pension benefits.

The exercise uses the most recent actuarial, financial, and membership information filed with OSFI for each plan before the analysis date. Assets are projected based on either the actual rate of return provided on the Solvency Information Return or an assumed rate of return for the plan. Solvency liabilities are projected using relevant Canadian Institute of Actuaries' commuted value and annuity proxy rates. Expected contributions, benefit payments, and expenses are taken into account and an ESR, based on the estimated adjusted market value of the fund, is then calculated for each plan. While the ESR for any particular plan is only an estimate, it helps provide an early indication of a plan's financial condition and can be used to identify broader trends.

The weighted average ESR for all pension plans was 0.97 as at December 31, 2016, up from 0.95 at the end of 2015. The line graph below shows the current and previous ESRs dating back to December 2007.

The bar graph below illustrates the distribution of the ESR results for federal defined benefit plans as at December 31 of each year since 2007. It shows the percentage of pension plans with ESRs below 0.80, between 0.80 and 0.90, between 0.90 and 1.00, and over 1.00 in each year. The most recent ESR exercise indicated that 80% of defined benefit plans were underfunded as at December 31, 2016, approximately the same percentage as at December 31, 2015. There has been a decrease in the number of plans that are more significantly underfunded (ESRs below 0.80) from 19% at the end of 2015 to 16% at the end of 2016.