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CIA Pension Seminar April 15, 2009 Colloque sur les régimes de retraite de L’ICA Le 15 avril 2009

CIA Pension Seminar April 15, 2009 Colloque sur les régimes de retraite de L’ICA Le 15 avril 2009. Promises to Keep The Final Report of the NS Pension Review Panel. Peter C. Hayes, FCIA, FSA Eckler Ltd., Halifax, NS. Topics. Background Process Themes. Background. Societal changes

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CIA Pension Seminar April 15, 2009 Colloque sur les régimes de retraite de L’ICA Le 15 avril 2009

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  1. CIA Pension Seminar April 15, 2009 Colloque sur les régimes de retraite de L’ICA Le 15 avril 2009

  2. Promises to KeepThe Final Report of the NS Pension Review Panel Peter C. Hayes, FCIA, FSA Eckler Ltd., Halifax, NS

  3. Topics • Background • Process • Themes

  4. Background • Societal changes • Declining pension coverage • One of 3 Panels/Commissions

  5. Process • Created February, 2008 • 2 actuaries and a lawyer! • Rounds of discussion papers, submissions, and meetings • Final report January, 2009

  6. Themes • Hopes and promises • Funding • Flexibility • Governance

  7. Flexibility and governance; hopes and promises • Flexibility • Types of plans • Target benefit • Jointly sponsored • Governance • Advisory Committee • Governance Plan • Hopes and promises

  8. Funding • Current regime • Going concern and solvency • Criticisms • Exceptions • Universities, SMEPPs, Municipalities • Going concern • Too much discretion • Solvency • Too conservative

  9. Funding (cont’d) • Proposed New Minimum Funding Standard • Must include ALL promises • Less conservative than solvency, less discretion than going concern • Same for all plans • Doesn’t preclude higher funding (per plan’s funding policy)

  10. New Minimum Funding Standard • Method and Assumptions • What’s in the weeds? • Consequences

  11. Method and assumptions • Accrued benefit method • Unprojected • Including ancillary benefits* • Introduces MFCSC * Relationship between plan-mandated eligibility requirements and whether to reflect early retirement subsidies

  12. Method and assumptions (cont’d) • Discount rate: CIA CV rate, plus • 0.6% to NRD, 0.3% t/a for actives • 0.3% for pensioners

  13. Which means … what?? *CIA annuity rates were 4.50% and 4.55% at June 30th and December 31st, respectively.

  14. Method and assumptions (cont’d) • Discount rate: CIA CV rate, plus • 0.6% to NRD, 0.3% t/a for actives • 0.3% for pensioners • Mortality: per CV Standard • Terminations: none • Retirement: use plan experience, but … • Adjust for plan with subsidies • Inflation: 2% • Assets: at market (no smoothing)

  15. What’s in the weeds? • Funded ratio between 95% and 105% • Minimum contribution = MFCSC • Otherwise … • Add deficit amortization piece, or • Subtract surplus amortization piece • Amortization is over 10 years, with interest (one exception)

  16. What’s in the weeds (cont’d) • Terminations: CVs calc’d according to NMFS • “Top-ups” paid within 1 year • No partial wind-ups • Target benefit plans (including MEPPs) • 95% test, then • Compare PVFB to assets-plus-PVFC

  17. What’s in the weeds (cont’d) • MEPPs: funding and benefit levels

  18. Consequences • Indexed plans or plans with generous early retirement benefits • Heavier contribution burden (in some cases significant) vs current regime • Non-indexed, no heavy subsidy • It depends! • MEPPs • More stability vs current regime (depending on plan design)

  19. Other stuff • Member issues • Promotion • Province-wide plan • Transition rules

  20. Promises to KeepThe Final Report of the NS Pension Review Panel Questions Peter C. Hayes, FCIA, FSA Eckler Ltd., Halifax, NS

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