The Funding Policy highlights the Plan’s long term focus of protecting promised benefits and minimizing contribution rate volatility, while recognizing the desire to achieve intergenerational equity. To deliver on these longer term goals while managing through short term volatility a blend of stability contributions, conditional benefits, and reserves are used.
Learn how the Plan Governors use the Funding Policy to make decisions.
Revised effective December 31, 2012
At each valuation period the financial health of the Plan is measured and the actions required at each level are implemented.
At Level 1
If the Plan has a deficit after using all reserves and the 3% stability contributions being paid by active members. Provincial law would require contributions to be increased temporarily and/or that benefits members build in future be reduced. Inflation protection on post-2007 service would not be paid.
At Level 2
With the 3% in stability contributions being paid by active members and the Plan’s funding reserves being fully used, the funding level exceeds provincial minimums, meaning the Plan has a small surplus. The Plan will provide the current period of inflation protection increases to pensions in pay, on the part of the pension that is based on post-2007 service.
At Level 3
3% in stability contributions are required from active members. On the part of the pension in pay that is based on post-2007 service, the Plan will provide increases for the current period of inflation plus make additional increases for past years of inflation missed (if any). Surplus funds over provincial minimums will also be allocated into funding reserves to withstand up to a 0.5% change in the discount rate.
At Level 4
Stability contributions of 1% or 2% are required from active members. All periods of inflation protection increases on the part of the pension that is based on post-2007 service have been made. Surplus funds over provincial minimums will also be allocated into reserves to withstand up to a 1% change in the discount rate and build reserves to fund future inflation increases on post-2007 service.
At Level 5
Active members will be contributing at basic contribution levels only, no stability contributions are required. The Plan has the reserves required to fund future inflation protection increases on post-2007 service and withstand a 1% change in the discount rate. Additional funding reserves are being built to withstand up to a 7.5% increase in liabilities as an additional cushion for securing promised benefits.
At Level 6
Full funding reserves have been built. The Plan has sufficient surplus to consider any combination of the following changes:
- Provide ad hoc inflation protection increases on the part of pensions based on pre-1992 service
- Put additional funds into reserves – up to the federal tax limit
- Reduce contributions below basic contribution levels
- Improve benefits.