Pension Life - Winter 2020
Building for tomorrow
Your plan is fully funded and remains sustainable
You can continue to depend on a lifetime Municipal pension. The December 31, 2018, valuation shows the plan is on track to remain sustainable. The plan is fully funded at 105.1 per cent on the basis that current contributions continue.
The valuation showed the plan’s basic account, which pays lifetime pensions, had actuarial assets of $58.53 billion and actuarial liabilities of $55.66 billion. There is a surplus of $2.87 billion. In addition, the rate stabilization account, which was set up to help offset potential future contribution rate increases, has a balance of about $2.5 billion.
When there is a valuation surplus, the Municipal Pension Board of Trustees is guided by specific instructions outlined in the Municipal Pension Plan Joint Trust Agreement (JTA), which is jointly managed by the plan partners. To meet JTA instructions, a surplus must pay off liabilities from previous actuarial valuations and simultaneously decrease contribution rates and improve benefits by changing the normal form of pension and the benefit formula. The current surplus is not large enough to meet these conditions, so it will be kept in the basic account. This will help support contribution rate stability for the future.
Valuations are required by provincial pension regulations and the JTA. But more than that, they are an important way the board monitors the health of the plan. Every three years, an independent actuary (a specialist in financial modelling, the laws of probability and risk management) performs a valuation. It helps the board make sure there are enough funds available to pay plan members’ lifetime pensions.
We’re continuing to celebrate that the plan has provided a reliable retirement income for members for 80 years. We intend to keep it secure for all of our members. This past year also marked the 20th anniversary of the Public Sector Pension Plans Act, which set out the framework for negotiating the joint trusteeship of the plan. This act also created the BC Pension Corporation and the British Columbia Investment Management Corporation.
Sustainable COLA cap set for next three years
After reviewing the valuation report, the board decided to keep the cost-of-living adjustment (COLA) cap at 2.1 per cent through 2022. COLAs help protect pensions from rising inflation, and the cap helps make COLAs more sustainable. The actuary reviews the COLA cap as part of the valuation, and based on the valuation results, the board sets the cap for the next three years.