Actuarial deficiencies

In the actuarial valuation report, the actuary must first eliminate all the amortization payments for technical, stabilization and solvency deficiencies determined before the valuation date. The actuary can also eliminate the amortization payments for improvement unfunded liabilities when the following condition is met:

Assets^DB_gc ≥ (1 + SP − 5%) x Liabilities^DB_gc

where	Assets^DB_gc	=	assets established on a going-concern basis
	SP	=	target percentage of the stabilization provision
	Liabilities^DB_gc	=	liabilities established on a going-concern basis, excluding the value of the additional obligations resulting from any amendment to the plan considered for the first time on the valuation date

Then, the actuary must establish the new actuarial deficiencies on a going-concern basis.

Remember...

When filing a partial actuarial valuation, which is limited to determining the value of additional obligations, or of the variation of the current service contribution resulting from an amendment, the actuary cannot eliminate the amortization payments established before the date of the valuation or establish new technical or stabilization deficiencies.

Going-concern deficiencies

The Supplemental Pension Plans Act has provided for 3 types of deficiencies on a going-concern basis, which must be established as follows:

Technical deficiency
= Max {0; Liabilities^DB_gc − [Assets^DB_gc + CV(A_iul)]}

Stabilization deficiency
= Max {0; (SP − 5%) x Liabilities^DB_gc − Max [0; Assets^DB_gc+ CV(A_iul) − Liabilities^DB_gc ]}

Improvement unfunded liability
= Max {0; (1 + SP) x W_gc − X_gc}

where	Liabilities^DB_gc	=	liabilities established on a going-concern basis, excluding the value of the additional obligations resulting from any amendment to the plan considered for the first time on the valuation date
	Assets^DB_gc	=	assets established on a going-concern basis
	CV(A_iul)	=	the commuted value of the amortization payments for improvement unfunded liabilities established before the actuarial valuation date and not eliminated on that date
	SP	=	target percentage of the stabilization provision
	W_gc	=	the value, on a going-concern basis, of the additional obligations resulting from amendments considered for the first time on the valuation date
	X_gc	=	the surplus assets, on a going-concern basis, used to fund the amendment

Important

Where an amendment is considered for the first time in an actuarial valuation that shows the plan is less than 90% funded, a special improvement payment is established in lieu of an improvement unfunded liability.

Legal references

Sections 122.1, 130 to 135 and 139 of the Supplemental Pension Plans Act