How pension contributions work
You contribute to your pension through automatic payroll deductions. Your employer also contributes to your pension.
Will my contribution rate increase?
It is possible that your contribution rate may increase in the future, depending on the outcome of future actuarial valuations. However, you will be notified in advance.
Valuation: what it is and what it does
A valuation is required by law and BC's Municipal Pension Plan Joint Trust Agreement (JTA), and is an important tool the board uses to monitor the health of the plan.
Every three years an independent actuary (a professional with specialized knowledge of the mathematics of finance, statistics and risk theory) analyzes the plan's funding and economic and demographic data. This analysis is called a valuation. Valuations help the board make sure there is enough funds available to meet plan members’ basic pension promise.
How valuations determine contribution rates
If the valuation determines the plan has a funding shortfall, your and your employer’s contribution rates may increase to bring the plan back to full funding. This ensures the Municipal Pension Plan remains fully funded. Contribution rate increases are shared equally by members and employers.
The 2018 valuation determined the plan has a funding ratio of 105.1 per cent. This means the plan is fully funded on the basis that current contributions continue.
In addition, two accounts help offset future contribution rate increases:
- The rate stabilization account has a balance of about $2.5 billion, which helps the board keep contribution rates stable when there is a funding shortfall
- A group contribution rate rebalancing account (effective January 1, 2022) helps to protect against potential future contribution rate increases for both employees and employers in group 2 and group 5 because rebalancing disproportionately affects these smaller groups
The next valuation will occur as at December 31, 2021. Results will be announced in fall 2022.