Pension plan assets and liabilities

The actuarial valuation report must present the assets and liabilities of a pension plan on a going concern basis and on a solvency basis.

Since 1 January 2016, the plan assets and liabilities determined using the above two approaches have excluded:

• additional voluntary contributions
• amounts under the defined contribution component
• amounts received further to a transfer
• the special improvement payments determined on the actuarial valuation date
• the special annuity purchasing payments determined on the actuarial valuation date.

The assets and liabilities fall under the plan's defined benefit component.

On a going concern basis:

• Assets must include the value of irrevocable standby letters of credit that do not exceed 15% of the liabilities on a going concern basis.
• If the actuary considers that a smoothed value better represents the value of the plan's assets for an on-going plan, plan assets cannot be established using their market value. The period during which the market value is smoothed cannot exceed 5 years.
• Liabilities and assets exclude the value of guaranteed annuities.

On a solvency basis:

• Assets must include the value of irrevocable standby letters of credit that do not exceed 15% of the liabilities on a solvency basis.
• Assets must be established in accordance with their liquidation value, minus the estimated amount of the administration costs to be paid out of the pension fund in the event of plan termination.
• Liabilities and assets include the value of guaranteed annuities.
• Liabilities must be established assuming that the plan terminates on the date of the actuarial valuation and by using a sex-specific mortality assumption for all members and beneficiaries, including those subject to an Act other than the Supplemental Pension Plans Act.

For plan members and beneficiaries whose pension in payment is not guaranteed on the date of the actuarial valuation, the liabilities correspond to an estimate of the premium that an insurer would have required to guarantee the payment of the pension on the date of the valuation. For all the other members and beneficiaries, including those subject to an Act other than the Supplemental Pension Plans Act, the liabilities correspond to the commuted value of the pension calculated in accordance with the provisions provided for by the Supplemental Pension Plans Act and its Regulation.

Letters of credit

Plan assets on a going concern basis and on a solvency basis must include the value of irrevocable standby letters of credit that meet the following conditions:

• The letters were provided to the administrator in accordance with the Supplemental Pension Plans Act.
• They were provided on or before the actuarial valuation date.
• They are in effect for the fiscal year following that date.

Legal references

• Sections 42.1, 61, 122.1, 122.2, 127, 141, 142.2, 142.3, 211, 212 and 212.1 of the Supplemental Pension Plans Act 
• Section 67.4 of the Regulation respecting supplemental pension plans 
• Section 6 of the 2020 Agreement Respecting Multi-Jurisdictional Pension Plans
• Paragraph 6 of section 1 of Appendix B of the 2020 Agreement Respecting Multi-Jurisdictional Pension Plans

References from the Canadian Institute of Actuaries

• Standards of Practice  (paragraphs 3520.09 and 3520.11 and subsections 3530 and 3540)
• Final Communication of a Promulgation of the Mortality Table Referenced in the Standards of Practice for Pension Plans (Subsection 3530)  – Document 215046