Reminders for actuaries
The Supplemental Pension Plans Act and the regulations thereunder remain the main tools allowing to prepare a compliant document. Nonetheless, Retraite Québec has some instructions for actuaries.
Actuarial valuations
Alternative settlement methods
The Canadian Institute of Actuaries published, in April 2023, the
Educational Note – Alternative Settlement Methods for Hypothetical Wind-Up and Solvency Valuations 
.
The note describes four alternative settlement methods for solvency valuations for pension plans that have very large liabilities. However, the note stipulates that the actuary can use one of the four methods only if it is allowed by law, or if the actuary has reason to believe that the regulator would likely find the method acceptable.
Retraite Québec wishes to inform actuaries that, pursuant to the Supplemental Pension Plans Act, the alternative settlement methods presented in the Educational Note of April 2023 cannot be used in Québec.
Legal reference
Amendment
Where an amendment is valuated for the first time, the actuarial valuation report must show:
- the date on which the amendment was decided;
- the effective date of the amendment.
Retraite Québec notes that the date on which the amendment was decided is often missing.
Legal reference
Appropriation of surplus assets
Retraite Québec notes certain application problems related to the use of surplus assets of
private-sector pension plans. As a result, Retraite Québec points out that if the date of the complete or partial actuarial valuation does not correspond to the date of the end of a fiscal year of the pension plan, the actuarial valuation report:
-
cannot provide that surplus assets will be appropriated to the payment of the current service contribution or the value of additional obligations resulting from an amendment of the plan valuated for the first time in that valuation. The same applies for surplus assets transferred to the employer
-
may cause the end of a contribution holiday at the date of the actuarial valuation if the conditions to take a contribution holiday are no longer met at that date.
A transfer to the employer cannot rely on an actuarial valuation report prepared after the fiscal year for which the amount of the refund was determined. For example, an actuarial valuation as at 31 December 2023 (corresponding to a date of the end of a fiscal year) determines the amount of the surplus assets that may be used during 2024. A transfer to the employer can be carried out during 2024 only if the actuarial valuation report is prepared before 31 December 2024.
For a plan that has members subject to an act other than the Supplemental Pension Plans Act, a transfer to the employer must take into account the rules of other acts and of the 2020 Agreement Respecting Multi-Jurisdictional Pension Plans, as amended by the 2023 Agreement amending the 2020 Agreement Respecting Multi-Jurisdictional Pension Plans.
In order for Retraite Québec's supervision to be easier, where an actuarial valuation allows for an appropriation of surplus assets, the actuarial valuation report should indicate:
- the plan provisions that allow for the appropriation of the surplus;
- the documents or legal references that justify a refund to the employer where the plan has members subject to an act other than the Supplemental Pension Plans Act.
Legal references
Categories of investments
To determine the target level of the stabilization provision, the actuarial valuation report must show the target proportion in effect at the date of the actuarial valuation for each category of investments. In addition to that information,
Retraite Québec expects the report to show the target proportion of the assets that is used to determine the interest rate assumption on a funding basis. The distribution of assets must reflect the effect of derivatives, where applicable.
Legal references
Defined-contribution component
The actuarial valuation report must contain the following information:
- the number of active members;
- the number of non-active members whose pension is not being paid;
- the number of beneficiaries and non-active members whose pension is being paid.
Each information must be broken down according to the type of benefits accrued under the plan:
- defined-contribution benefits only;
- defined benefits only;
- defined-contribution benefits and defined benefits.
If this information does not correspond to the information entered on lines 11.1 to 11.6 of the annual information return,
Retraite Québec expects the actuary to explain the difference in his or her report.
Important
In the actuarial valuation report, members of a defined-contribution component must be divided between the active and non-active members. Retraite Québec notes that that information is often missing and would like to remind actuaries to include that information in the report.
Legal reference
Merger outside Québec
For
private-sector pension plans subject to the Supplemental Pension Plans Act, a condition related to the degree of solvency of merged plans must be met in order for the merger to be authorized. For more information, consult
Newsletter number 31: Amendments to the Supplemental Pension Plans Act effective on 1 January 2016.
Where at least one of the plans affected by the merger is not registered with Retraite Québec, the actuarial valuation report reflecting the merger must give the degree of solvency of plans calculated according to the rules provided for in the Supplemental Pension Plans Act, to show that the condition is met. For example, if the absorbing plan is registered in Ontario, the liabilities on a solvency basis used to calculate the plan's degree of solvency cannot exclude the value of the post-retirement indexation, even if the Ontario Pension Benefits Act allows it.
Important
Where the merger affects members or beneficiaries subject to an act other than the Supplemental Pension Plans Act, the conditions provided for in that other act, where applicable, must also be met. It is the case, for example, of the
Ontario Pension Benefits Act , which provides special conditions for the transfer of assets.
Legal references
Multi-Jurisdictional Pension Plans
The 2020 Agreement Respecting Multi-Jurisdictional Pension Plans (2020 Agreement), came into force on 1 July 2020. Nevertheless, the 2020 Agreement does not apply to matters pending on 30 June 2020. For example, for a plan that has members from Québec, Ontario and Alberta, the 2016 Agreement Respecting Multi-Jurisdictional Pension Plans and the Memorandum of Reciprocal Agreement continue to apply to the pending matters at that date.
In general, the division, merger or termination of a plan is pending before Retraite Québec on 30 June 2020 if a document validly establishing this event for the application of the Supplemental Pension Plans Act was sent to Retraite Québec before 1 July 2020.
For example:
- a termination report or a termination notice was sent to Retraite Québec before that date;
- the division amendment or the actuarial valuation report that reflects the division was sent to Retraite Québec before that date.
Important
Regarding the 2023 Agreement amending the 2020 Agreement Respecting Multi-Jurisdictional Pension Plans, in effect since 1 July 2023, the same principle applies to the pending matters on 30 June 2023.
Participation data
For plans with components provided for by an
exemption regulation (such as plans of the municipal and university sectors), the actuarial valuation report must show membership in the plan by component (active members, non-active members and beneficiaries).
In order to make supervision of membership easier, Retraite Québec recommends that the actuarial valuation report also show the number of active members, non-active members and beneficiaries of the plan, regardless of the various components existing in the plan.
Legal references
Stabilization provision
To calculate the target level of the stabilization provision:
- a maximum of 50% of
direct infrastructure or real estate investments can be considered as fixed-income securities. Investments in stock market securities are excluded.
- unquoted private debts can, up to 10% of the investments, be considered as fixed-income securities under certain conditions. In that case, the actuarial valuation report must mention that the plan administrator attests that the required certifications were obtained and it can file them with Retraite Québec upon request.
Note that
The target of the plan investment policy for variable income securities to be used to determine the target level of the stabilization provision is the target in effect at the date of the actuarial valuation.
Where an investment policy provides for a change of the target over time, like the gradual reduction of the proportion of variable income securities, the target to be used is not the ultimate target provided for in the policy, nor any other target provided for at a later date than the date of the actuarial valuation.
Legal references
Special monitoring
For a
private-sector pension plan during each actuarial valuation (including
partial valuations), the actuary must show the reconciliation of sums that are subject to special monitoring provided for in
section 42.2 of the Supplemental Pension Plans Act , also called banker's clause.
To do so, and as it is the case to determine the assets and liabilities, accrual-based accounting rather than cash-based accounting must be applied. However, where the special annuity purchasing payment is included in the banker's clause under the annuity purchasing policy, it must be recorded only when it is paid.
Employer contributions that have not been paid due to the special rules for Designated Plans within the meaning of
section 8515 of the Income Tax Regulations are not considered.
Retraite Québec verifies the reconciliation of the banker's clause from the information on lines 307, 308, 334.1 and 335 in the Annual Information Return (AIR) of the plan concerned. Therefore, the amounts recorded beyond the amortization payments and special contributions must correspond to the additional contributions paid in order for the financial position of the plan to be improved, included on line 308 of the
AIR, entitled Required employer contributions: special improvement and amortization payments. The actuarial valuation report must show the broken down amounts included on line 308 of the
AIR so that it can be shown that the amounts included in the banker's clause are limited to those allowed by the Supplemental Pension Plans Act. In addition, the reduction of the member or employer banker's clause attributable to the use of surplus assets to pay a member or employer contribution should correspond respectively to the amounts entered on lines 334.1 and 335 of the
AIR.
Important
If the value of the banker's clause is nil on the date of the actuarial valuation, the actuary must mention it in his or her report.
Legal references
Terms of engagement of the actuary
The work of an actuary, regarding the preparation of an actuarial valuation in compliance with the
Supplemental Pension Plans Act , is governed by the
Rules of Professional Conduct and the
Standards of Practice of the Canadian Institute of Actuaries.
Retraite Québec reminds the actuary that under the Rules of Professional Conduct, an actuary "who performs professional services shall take reasonable steps to ensure that such services are not used [...] to violate or evade the law". In addition, "it is the professional responsibility of the actuary not to be associated with anything which the actuary knows or should know is false or misleading".
Therefore, the actuary must be careful when a mandate entrusted to him or her seems to violate these rules.
Actuarial Information Summary
The actuary who signs the complete actuarial valuation report must complete the
Actuarial Information Summary and sign the declaration it contains.
References of the Canadian Institute of Actuaries