OTF/FEO - Pensions – Current Issues

pensions
Current Issues

Pension funding status
In January each year, the Ontario Teachers’ Pension Plan (OTPP) has an independent actuary conduct a funding valuation of the plan. To determine the financial health of the plan, the actuary compares assets to liabilities. For the pension plan, the liabilities are the dollar values of all benefits to be paid out by the plan until its obligations to the last person hired on valuation day are fulfilled - some 70 years. It includes pensions, disability and spousal pensions, survivor pensions and commuted value transfers for all members - active or retired. The liabilities vary according to economic conditions.

If the assets match the liabilities, the plan is fully funded. If the assets are greater than the liabilities, the plan has a surplus. If the liabilities are greater than the assets, the plan has a deficit or funding deficiency.

Investment performance
The plan reports on how well its investments did over the year. During 2008, the plan earned negative returns. For 2009, the plan had a return of 13.0% on investments. This helped the plan regain much of the ground lost on the asset side during the difficult markets of 2008. For the details on the 2009 plan results, go to www.otpp.com. At the same time, however, the low interest environment, so helpful in many other aspects of members' lives, continues to cause an increase in the cost of providing pensions. Put simply, the lower the interest rates; the greater the liabilities.

Filing
By law, OTPP must file a funding valuation (a statement of assets and liabilities) with the Financial Services Commission of Ontario once every three years. It is this filing that may trigger action. OTPP filed a January 2009 funding valuation. The filing, for January 1, 2009, was completed by September 30, 2009.

By law, the next filing will be required by September 30, 2012 for January 1, 2012. The partners in the plan may choose to file a valuation before that date.