WLU Pension Sustainability
In recent years, pension plans across Canada and globally have faced significant funding challenges. Low interest rates and investment returns coupled with the fact plan members are living longer has caused pension plan liabilities to far exceed the value of plan assets creating large deficits. Many plans have implemented significant changes to design and contribution levels to ensure they are able to meet the benefit promise to plan members now and in the future.
In 2012, changes were made to the Laurier pension plan to work towards improving the Plan's sustainability. The changes made to the Plan helped improve its sustainability (the Plan deficit would be $20 million greater if those changes were not made) but did not solve the problem. Low interest rates and lower than expected future investment returns combined with significant improvements in mortality rates for Canadians have substantially increased the cost to fund pension benefits in the future. This is a problem faced by defined-benefit and hybrid pension plans across Canada and around the world. The Canadian Institute of Actuaries conducted a recent study on mortality and has created the first-ever Canadian mortality tables. The results show longer life expectancy for Canadians, which will increase benefit obligations and costs for defined benefit pensions and other post-retirement benefits. These new mortality tables must be recognized in Laurier's next actuarial valuation (required at December 31, 2015) and will increase Plan liabilities by approximately 8%.
The most recent valuation of the WLU Pension Plan was performed at December 31, 2012. The results show the plan is just under 80% funded on a going concern basis (assets cover only 80% of the liabilities) with as deficit of $87 million. The University is required to make additional payments to the Plan to fund this deficit, and must also increase ongoing contributions to reflect the true cost of the Plan. Total University contributions will be over 18% of pay commencing in 2014 compared to employee contributions of 8% of pay, on average.
To assist in managing the substantial increase in funding requirements to the Plan, the University submitted applications to qualify for the Ontario Government's temporary solvency relief program. The University received approval for two stages of the relief program, which has assisted in managing some of the funding requirements. However, the relief program is only temporary, and only addresses solvency deficits. Going concern deficits (based on the assumption the Plan will continue indefinitely into the future) pose a greater challenge for the Laurier plan, and for these deficits no relief measures have been provided
For more information on Laurier's pension plan sustainability, temporary solvency relief and the 2012 valuation please see the links below: