2008 General MeetingAssemblée générale 2008

Toronto, Ontario

2008 General MeetingAssemblée générale 2008

Toronto, Ontario

Canadian Institute

of Actuaries

Canadian Institute

of Actuaries

L’Institut canadien desactuaires

L’Institut canadien desactuaires

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• Notice of Intent• Issued: September 3, 2008• Comment deadline: November 14, 2008• Covers:

• SOP Section 3000

• Except Commuted Values

• Draft Standards are appended• Generally consistent with PPFRC Working

Document of March 2007

Actuarial Standards Board – Pension Specific Standards

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Actuarial Standards Board – Pension Specific Standards

• Role of Actuarial Standards re: Funding• Determination of minimum/maximum

contributions per legal requirements• Advice regarding alternative funding levels

per terms of engagement• Required disclosures regarding funded status

and associated risks

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Actuarial Standards Board – Pension Specific Standards

• Enhanced Disclosures (External User Report)• Required in all reports, unless wind-up benefit are not

defined or a designated plan covering only “connected” persons

• Hypothetical wind-up funded status under a maximum cost scenario (currently required)

• Hypothetical wind-up or solvency valuation simplified gain/loss

• Hypothetical wind-up or solvency service cost

• Risk analysis

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Actuarial Standards Board – Pension Specific Standards

• Going Concern Valuations• May be required by terms of engagement or by law (as

currently required for registered plans) but not by SOP

• Assumptions, best estimate or including margins for adverse deviations (MFAD)

• Separate General SOP project likely to require “Independently Reasonable Assumptions” before Pension SOP is concluded

• Discount rates may reflect expected return on pension fund assets but CIA guidance on maximum discount rates is contemplated

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Actuarial Standards Board – Pension Specific Standards

• Going Concern Valuations (Continued)• MFADs may not be required depending on

circumstances

• The extent of MFAD in each significant assumption is to be disclosed

• Smoothed asset values permitted but disclosure of funded status using market value required

• Concept of consistency between asset valuation method and discount rate is removed

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Actuarial Standards Board – Pension Specific Standards

• Draft SOP Contents

3200 Advice on the Financial Condition, Financial Position, Funded Status or

Funding of a Pension Plan• includes going concern, hypothetical wind-up

and solvency valuations• includes external user reporting requirements

3300 Full or Partial Wind-up of a Registered Plan

3400 Accounting for Pension CostsSubstantial re-organization from current SOP, a cross reference table is provided

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Actuarial Standards Board – Pension Specific Standards

• Other Draft SOP Changes• Circumstances of the Work

• Whether advice relates to the financial condition, financial position, funded status, funding or a combination thereof

• The terms of engagement (may include a formal or informal funding policy)

• The law

• The objectives of funding (if the work is related to funding)

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Actuarial Standards Board – Pension Specific Standards

• Other Draft SOP Changes• Objectives of Funding

• Primary: systematic accumulation of dedicated assets (security)

• Other: may be specified by terms of engagement e.g. orderly and rational allocation, inter generational equity

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Actuarial Standards Board – Pension Specific Standards

• Other Draft SOP Changes• Actuarial Cost Methods

• Not restricted to going concern valuations

• Limitation that forecast method not to be used for registered plan valuations is eliminated

• Specification that forecast period sufficiently long that the “valuation reflect the long term cost allocation pattern” is eliminated

• Specific requirement to include salary projection for final average plans is eliminated

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Actuarial Standards Board – Pension Specific Standards• Other Draft SOP Changes

• Terminology

• Definition of funded status is introduced relative to going concern valuation

• difference between value of assets, and actuarial present value of projected benefits allocated to periods up to the calculation date

• No reference to “liabilities” which are reflected in a statement of “financial position”

• The actuarial present value of projected benefits allocated to periods up to the calculation date is more in the nature of a “funding target” than a “liability”

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Actuarial Standards Board – Pension Specific Standards

• Other Draft SOP Changes• Hypothetical Wind-up Valuations

• Assets valued at Market Value vs. Liquidation Value for actual wind-up

• Explicit assumption for expenses is required

• Details on postulation of scenarios, recognition of contingent benefits, disregard of extremely unlikely scenarios

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• Other Draft SOP Changes• Actual Wind-up Valuations

• Contemplates possibility of unspecified settlement methods other than commuted value or annuity purchase

• Eliminates proviso that wind-up expenses may be ignored if funded ratio over 100%

Actuarial Standards Board – Pension Specific Standards

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Actuarial Standards Board – Pension Specific Standards

• Other Draft SOP Changes• Accounting Valuations

• Reporting requirements may be satisfied by reference to a funding valuation report e.g. data or plan provisions

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Actuarial Standards Board – Pension Specific Standards

• Educational Guidance• The following topics are contemplated:

• Hypothetical wind-up service cost and gain/loss

• Risk analysis

• Discount rates for going concern valuations

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Actuarial Standards Board – Pension Specific Standards

Future Timeline

Comment Deadline: November 14, 2008

Release of Exposure: Draft, targeted

March 2009

Final Decisions of: ASB

2009

Implementation Date: TBD

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Actuarial Standards Board – Pension Specific Standards

• Process• Joint ASB/PPFRC Working Group established by ASB

as the “designated group” for the Standard

• The Working Group is supported by Chris Fievoli, CIA Resident Actuary to compile comments

• PPFRC responsible for developing Educational Notes for approval by Practice Council