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March 2020

New mandatory disclosures to include in actuarial reports for defined benefit pension plans

The Canadian Institute of Actuaries (CIA) recently modified the standard of practice regarding the disclosures to include in actuarial valuation reports for the funding of pension plans.

These new disclosures are intended to make plan sponsors aware of the various funding risks to which their pension plans are exposed. Plan sponsors will have to consider threats to their plans’ future financial condition under plausible adverse scenarios that include:

  • interest rate risk, more specifically the potential that interest rates will be lower than expected;
  • deterioration of asset values;
  • longevity risk, more specifically the potential that pension plan members will live longer than expected; and
  • the potential that the contributions will be lower than expected, for pension plans in which contributions are fixed or restricted by the terms of the plan or other governing documents.

The new standard of practice concerns all plans, except:

  • designated plans;
  • pensions plans that are not registered under a federal or provincial pension benefits standards act; and
  • reports for which the valuation is based on an extrapolation of results disclosed in a previous report.

As concern is increasingly growing for pension plan sponsors regarding the volatility of their plan cost, risk management strategies have gained popularity in recent years.

To that end, Normandin Beaudry assists its clients in carrying out personalized analysis in order to closely monitor the main risks to which they are exposed. Some examples include:

  • Liability-driven investment strategies which optimize the plan’s investment strategy based on the funding objectives and risk tolerance of the parties responsible for the plan’s funding.
  • Segmentation, developed by Normandin Beaudry, is a new strategy designed to efficiently manage the risks of a pension plan’s maturity. Read our May 2019 bulletin for more information.

Want to learn more? 
Contact your Normandin Beaudry consultant or email us.