Private-Sector Pension Plan Assets and Liabilities
The actuarial valuation report of a private-sector pension plan must present the assets and liabilities of a plan on a going
concern basis and on a
solvency basis.
The plan assets and liabilities using the above approaches exclude:
- additional voluntary contributions;
- amounts under the defined contribution component;
- amounts received further to a transfer;
- the
special improvement payments determined on the actuarial valuation date;
- the
special annuity purchasing payments determined on the actuarial valuation date;
- the value of additional obligations arising from all amendments considered for the first time.
The assets and liabilities fall under the plan's defined-benefit component before taking into account any amendments valued for the first time at the date of the actuarial valuation.
Note that...
The liabilities are increased by the value of the additional obligations resulting from an amendment considered for the first time
only for the calculation of the funding and solvency levels.
On a going concern basis
- Assets must include the value of irrevocable standby letters of credit that do not exceed 15% of the liabilities on a going concern basis.
- The assets can be determined based on the market value or a smoothed value. The period during which the market value is smoothed cannot exceed five years.
- Liabilities and assets exclude the value of guaranteed annuities.
On a solvency basis
- Assets must include the value of
irrevocable standby letters of credit that do not exceed 15% of the liabilities on a solvency basis.
- Assets must be established in accordance with their liquidation value, minus the estimated amount of the administration costs to be paid out of the pension fund in the event of plan termination.
- Liabilities and assets include the value of guaranteed annuities.
- Liabilities must be established assuming that the plan terminates on the date of the actuarial valuation and by using:
- an immediate retirement assumption for
active members eligible for an immediate pension;
- a retirement assumption established in accordance with the standards of practice of the Canadian Institute of Actuaries (CIA) for
active members not eligible for an immediate pension;
- a retirement assumption established in accordance with the standards of practice of the CIA for
non-active members whose pension is not being paid;
- a sex-specific mortality assumption for all members and beneficiaries,
including those subject to an Act other than the Supplemental Pension Plans Act.
For plan members and beneficiaries whose pension in payment is not guaranteed on the date of the actuarial valuation, the liabilities correspond to an estimate of the premium that an insurer would have required to guarantee the payment of the pension on the date of the valuation. For all the other members and beneficiaries,
including those subject to an Act other than the Supplemental Pension Plans Act, the liabilities correspond to the commuted value of the pension calculated in accordance with the provisions provided for by the Supplemental Pension Plans Act and its Regulation.
Letters of credit
Plan assets on a going concern basis and on a solvency basis must include the value of irrevocable standby letters of credit that meet the following conditions:
- The letters were provided to the administrator in accordance with the Supplemental Pension Plans Act.
- They were provided on or before the actuarial valuation date.
- They are in effect for the fiscal year following that date.
Legal references
- Sections 42.1, 61, 122.1, 122.2, 124, 127, 141, 142, 142.2, 142.3, 211, 212 and 212.1 of the
Supplemental Pension Plans Act
-
Section 67.4 of the Regulation respecting supplemental pension plans
- Section 6 and Paragraph 6 of section 1 of appendix B of the 2020 Agreement Respecting Multi-Jurisdictional Pension Plans as amended by the
2023 Agreement amending the 2020 Agreement Respecting Multi-Jurisdictional Pension Plans
References from the Canadian Institute of Actuaries