Quarterly Update on Estimated Solvency Funded Status of Defined Benefit Plans in Ontario

Update as at December 31, 2016

 

  • The median solvency ratio is 91% (compared to 79% as at September 30, 2016)
  • 62% of plans had a solvency ratio between 85% and 100%
  • 16% of plans had a solvency ratio greater than 100%

The 12% increase in the estimated median solvency ratio since September 30, 2016 was due to the following:
 

  • investment return on the model pension fund of 0.8% in the fourth quarter of 2016 as well as data corrections and modelling changes caused the ratio to increase by 5%;
  • the change in solvency liabilities due to changes in the Commuted Value Discount Rate and the Annuity Purchase Discount Rate resulted in a 7% increase in the ratio.

Assets, Liabilities and Median Solvency Ratio

 Assets, Liabilities and Median Solvency Ratio

 

 

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

Distribution of Solvency Ratio 

Distribution of Solvency Ratio 

 

View accessible description of Distribution of Solvency Ratio Bar Chart

Methodology and Assumptions:  

 

  1. The results reported in the last filed actuarial valuation reports (assets and liabilities) were projected to December 31, 2016 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.
  1. The assumed quarterly asset class returns for 2016 are shown in the table below. The model pension fund earned a yearly rate of return of 8.0% in 2016. 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.

2016

​TSX Canada​MSCI World​FTSE TMX Bond​Total Return on model pension fund
​1st Quarter​4.5%​-7.2%​1.4%​0.2%
​2nd Quarter​5.1%1.4%​2.6%​3.1%​
3rd Quarter​5.5%6.1%​1.2%​3.7%​
4th Quarter​4.5%3.9%​-3.4%0.8%​

 

  1. 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
September 30, 2016
Interest:  1.70% for 10 years
              3.00% thereafter
Mortality: CPM2014 generational
Interest:  2.75%
 
Mortality: CPM2014 generational
December 31, 2016

​Interest:  2.20% for 10 years, 

              3.50% thereafter
Mortality: CPM2014 generational 

​​Interest: 3.11%

 
Mortality: CPM2014 generational 

 

 

1 based on a medium duration illustrative block

 
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