Actuarial valuations: points to consider
Below are a few points to consider with regard to actuarial valuations. The Supplemental Pension Plans Act remains the key resource to ensure an actuarial valuation complies with all requirements.
Interest rates on a solvency basis
The interest rate used to discount the amortization payments on a solvency basis must be prorated to the following, according to their respective liabilities:
- the interest rate for retired members (uninsured pensions)
- the interest rate for the other members.
Alternative settlement methods
In September 2013, the Canadian Institute of Actuaries (CIA) published 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 and whose benefits are indexed to the Consumer Price Index (CPI). 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.
The Régie wishes to inform actuaries that, pursuant to the Supplemental Pension Plans Act, the alternative settlement methods presented in the Educational Note of September 2013 cannot be used in Québec.
Residual benefits are the portion of member benefits that were not paid because the plan was not fully solvent. Such benefits must be paid within five years after the date of the initial payment or not later than the normal retirement age, if the members attain that age before the expiry of the five-year period.
The actuarial valuation report must give the amounts required to pay the residual benefits that are due in the fiscal year covered by the actuarial valuation. If no amount is required, the actuary must indicate it in his or her report.
The amounts required to pay the residual benefits must be paid in addition to current service contributions and amortization payments.
Actuarial Information Summary
The actuary who signs the actuarial valuation report must complete the Actuarial Information Summary and sign the declaration it contains in the following cases:
- The actuarial valuation is after 14 December 2009.
- The actuarial valuation is after 30 December 2008 in the case of pension plans for municipal and university sectors, as well as for the plan for early childhood centres (CPEs) and accredited private daycares in Québec.
- The actuarial valuation is after 30 December 2009 in the case of the pension plan for emergency medical technicians in Québec.
The Régie's specifications
The Régie gives guidance on certain lines of the Actuarial Information Summary as a complement to the instructions given on the form.
Partial actuarial valuation
Where the Actuarial Information Summary is related to a partial actuarial valuation, the actuary must fill out lines 001 to 014a, 185 to 190, 201, 204, and part VII of the summary.
In the case of pension plans for municipal and university sectors, as well as for the plan for early childhood centres (CPEs) or accredited private daycares in Québec, the actuary must fill out lines 196 and 198 of the summary instead of lines 201 and 204.
Relief measures for private sector pension plans
The actuarial valuation report prepared according to the conditions provided for in the regulations must meet the following two requirements:
- It must specify which temporary relief measures are used (assets smoothing on the basis of solvency, the consolidation of certain deficiencies or extension of the amortization period).
- It must contain a description of the asset valuation method, where the relief measure for assets smoothing on the basis of solvency is used.
The regulations in question are the Regulation providing temporary relief measures for the funding of solvency deficiencies and the Regulation providing new relief measures for the funding of solvency deficiencies of pension plans in the private sector.
References from the Canadian Institute of Actuaries
A municipal sector pension plan is a plan where the employer is a municipality, a body referred to in section 18 of the Act respecting the Pension Plan of Elected Municipal Officers or a municipal housing bureau.