Estimated Solvency Funded Status of Defined Benefit Plans in Ontario

Update as at June 30, 2015

 

  • The median solvency ratio is 88% (compared to 86% as at March 31, 2015)
  • 50% of plans had a solvency ratio between 85% and 100%
  • 13% of plans had a solvency ratio greater than 100%

The 2% increase in the estimated median solvency ratio since March 31, 2015 was due to:


  • investment return on the model pension fund of -1.5% in the second quarter of 2015 caused the ratio to drop by 2%
  • the net effect of the change in the Commuted Value Discount Rate and the Annuity Purchase Discount Rate resulted in a 4% increase in the ratio

Assets, Liabilities and Median Solvency Ratio

Assets, Liabilities and Median Solvency Ratio Line Chart

View accessible description of Assets, Liabilities, and Median Solvency Ratio Line Chart

 

Distribution of Solvency Ratios

Distribution of Solvency Ratios Bar Chart

View accessible description of Distribution of Solvency Ratios Bar Chart

 

Methodology and Assumptions:

 

  1. The results reported in the last filed actuarial valuation reports (assets and liabilities) were projected to June 30, 2015 based on these assumptions:

    • sponsors would use all available funding excess and prior year credit balance for contribution holidays, subject to any statutory restrictions;
    • sponsors would make the normal cost contributions and special payments, if required, at the statutory minimum level;
    • the amounts of cash outflow would equal the pension amounts payable to retired members as reported in the last filed valuation report. Plan administration costs were not reflected.
  2. The assumed quarterly asset class returns for 2015 are shown in the table below. The model pension fund earned a year-to-date rate of return of 4.0% to the end of the second quarter of 2015. These rates of return (Canadian $) were developed based on the following asset mix: 45% in fixed income, 30% in Canadian equities, and 25% in foreign equities.

    ​2015​TSX Canada​MSCI World​FTSE TMX Bond​Total Return on model pension fund
    ​1st Quarter​2.6%​11.9%​4.2%​5.7%
    ​2nd Quarter​-1.6%​-1.1%​-1.7%​-1.5%
    ​Year-to-date​0.9%

    ​10.6%

    ​2.4%​4.0%


  3. The estimated solvency liabilities were calculated based on the Canadian Institute of Actuaries Standards of Practice and, the Canadian Institute of Actuaries Educational Notes, with these key assumptions:

    ​Valuation Date​Commuted Value Basis​Annuity Purchase Basis 1
    ​March 31, 2015​Interest: 1.90% for 10 years, 3.40% thereafter

    Mortality: 1994 UP generational
    ​Interest: 2.11%

    Mortality: 1994 UP generational
    ​June 30, 2015​Interest: 2.20% for 10 years, 3.60% thereafter

    Mortality: 1994 UP generational
    ​Interest: 2.51%

    Mortality: 1994 UP generational

 

1 based on a medium duration illustrative block

 

 

 
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