Funding
In early 2010, the Plan formed a Funding Task Force. It took a comprehensive look at the Plan's situation, with a view to moving the Plan closer to the goal of full funding with stable contribution rates, while continuing to provide the great value of a well-established defined benefit plan.
Funding webinar
On May 31, Derek Dobson, CEO and Plan Manager hosted a webinar to update members on Plan funding. After the webinar, he answered your questions.
Task Force results
The primary job of the Task Force was to determine how to use the available tools – contribution increases, adjustments to future benefits, and changes to risk tolerance as measured by actuarial assumptions - to resolve the funding issues while considering equitable treatment for all members.
Ensuring that the Plan’s actuarial assumptions were accurate and reflected recent and expected future Plan experience was an important factor. The principal change from this review was the recognition of the improved longevity of Plan members. Member life expectancy now sits at 87.7 years for the typical member who retires at age 60.
To determine the best options for closing the resulting funding gap, the Task Force considered how much value members place on the Plan’s benefits. They balanced this against the low tolerance that members and employers may have for contribution rate increases. Ultimately, the Task Force determined that members would prefer to pay slightly more in contributions than see any benefits reduced.
Therefore, a 1.6% increase in contributions, phased in over three years beginning in 2012, was recommended. The Task force felt it appropriate to reflect the increased cost of funding benefits due to mortality improvements in ongoing contribution costs (“basic contributions”) rather than as further increases to stability (or “supplemental”) contributions.
The Plan had previously taken action to help protect the pension promise. These actions include extending the duration of the bond portfolio, increasing the allocation to infrastructure, real estate and real return bonds, and introducing currency hedging.
The changes made resulted in the January 1, 2011 required funding valuation showing a small going-concern surplus of $88 million.