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Actuarial Report on the Pension Plan for the Public Service of Canada (PSPP) Was Made Pursuant to the Public Pensions Reporting Act (PPRA)

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Actuarial Report on the Pension Plan for the Public Service of Canada (PSPP) Was Made Pursuant to the Public Pensions Reporting Act (PPRA) ACTUARIAL REPORT on the Pension Plan for the PUBLIC SERVICE OF CANADA as at 31 March 2017 Office of the Chief Actuary Office of the Superintendent of Financial Institutions Canada 12th Floor, Kent Square Building 255 Albert Street Ottawa, Ontario K1A 0H2 Facsimile: 613-990-9900 E-mail: [email protected] Web site: www.osfi-bsif.gc.ca © Her Majesty the Queen in Right of Canada, 2018 Cat. No. IN3-16/10E-PDF ISSN 1701-8269 ACTUARIAL REPORT Pension Plan for the PUBLIC SERVICE OF CANADA as at 31 March 2017 7 September 2018 The Honourable Scott Brison, P.C., M.P. President of the Treasury Board Ottawa, Canada K1A 0R5 Dear Minister: Pursuant to Section 6 of the Public Pensions Reporting Act, I am pleased to submit the report on the actuarial review as at 31 March 2017 of the pension plan for the Public Service of Canada. This actuarial review is in respect of pension benefits and contributions which are defined by Parts I, III and IV of the Public Service Superannuation Act, the Special Retirement Arrangements Act and the Pension Benefits Division Act. Yours sincerely, Jean-Claude Ménard, F.S.A., F.C.I.A. Chief Actuary Office of the Chief Actuary ACTUARIAL REPORT Pension Plan for the PUBLIC SERVICE OF CANADA as at 31 March 2017 TABLE OF CONTENTS Page I. Executive Summary ............................................................................................................... 7 A. Purpose of Actuarial Report ............................................................................................. 7 B. Valuation Basis ................................................................................................................ 7 C. Main Findings .................................................................................................................. 8 II. Valuation Results ................................................................................................................. 12 A. PSSA – Financial Position ............................................................................................. 12 B. PSSA – Reconciliation of the Changes in Financial Position ........................................ 14 C. PSSA – Cost Certificate ................................................................................................. 18 D. Sensitivity of Valuation Results to Variations in Longevity Improvement Factors ...... 20 E. Sensitivity of Valuation Results to Variations in Key Economic Assumptions ............ 21 F. RCA – Financial Position ............................................................................................... 22 G. RCA No. 1 Current Service Cost ................................................................................... 22 H. Summary of Estimated Government Costs .................................................................... 23 III. Actuarial Opinion ................................................................................................................. 24 APPENDICES Appendix 1 Summary of Pension Benefit Provisions ............................................................ 25 Appendix 2 Retirement Compensation Arrangement Benefit Provisions ............................. 35 Appendix 3 Assets, Accounts and Rates of Return ................................................................ 37 Appendix 4 Membership Data ............................................................................................... 42 Appendix 5 PSSA Valuation Methodology ........................................................................... 49 Appendix 6 PSSA Economic Assumptions ........................................................................... 54 Appendix 7 PSSA Demographic and Other Assumptions ..................................................... 64 Appendix 8 Transfer Value Valuation Methodology and Assumptions ................................ 79 Appendix 9 RCA Valuation Methodology and Assumptions ................................................ 82 Appendix 10 Public Service Pension Plan Projection .............................................................. 84 Appendix 11 Uncertainty of Results ........................................................................................ 87 Appendix 12 Detailed Information on Membership Data ........................................................ 93 Appendix 13 Acknowledgements .......................................................................................... 103 4 ACTUARIAL REPORT Pension Plan for the PUBLIC SERVICE OF CANADA as at 31 March 2017 TABLES Page Table 1 Ultimate Best-Estimate Economic Assumptions ............................................................8 Table 2 Member Contribution Rates ............................................................................................9 Table 3 PSSA Current Service Cost on a Calendar Year Basis ...................................................9 Table 4 PSSA Current Service Cost on a Calendar Year Basis – Group 1 ..................................9 Table 5 PSSA Current Service Cost on a Calendar Year Basis – Group 2 ................................10 Table 6 RCA No. 1 Current Service Cost on a Calendar Year Basis .........................................11 Table 7 State of the Superannuation Account ............................................................................12 Table 8 Balance Sheet – Pension Fund ......................................................................................13 Table 9 Reconciliation of PSSA Financial Position ..................................................................14 Table 10 Experience Gains and (Losses) .....................................................................................15 Table 11 Revision of Actuarial Assumptions ...............................................................................17 Table 12 Current Service Cost for Plan Year 2019 ......................................................................18 Table 13 Reconciliation of PSSA Current Service Cost ..............................................................19 Table 14 Projection of Current Service Cost on a Plan Year Basis .............................................19 Table 15 Pension Fund Administrative Expenses ........................................................................20 Table 16 Estimated Contributions for Prior Service BuyBack ....................................................20 Table 17 Sensitivity of Valuation Results to Variations in Longevity Improvement Factors .....20 Table 18 Sensitivity of Valuation Results to Variations in Key Economic Assumptions ...........21 Table 19 State of the RCA No. 1 Account ...................................................................................22 Table 20 State of the RCA No. 2 Account ...................................................................................22 Table 21 RCA No. 1 – Current Service Cost ...............................................................................23 Table 22 Estimated Government Cost ..........................................................................................23 Table 23 Member Contribution Rates ..........................................................................................26 Table 24 Reconciliation of Balances in Superannuation Account ...............................................38 Table 25 Reconciliation of Balances in Pension Fund .................................................................39 Table 26 Reconciliation of Balances in RCA No.1 Account .......................................................40 Table 27 Reconciliation of Balances in RCA No.2 Account .......................................................41 Table 28 Rates of Interest (Return) ..............................................................................................41 Table 29 Summary of Membership Data .....................................................................................44 Table 30 Reconciliation of Group 1 Contributors ........................................................................45 Table 31 Reconciliation of Group 2 Contributors ........................................................................46 Table 32 Reconciliation of Pensioners .........................................................................................47 Table 33 Reconciliation of Surviving Spouses ............................................................................48 Table 34 Reconciliation of Children Survivors ............................................................................48 Table 35 Reconciliation of Pensioners with ERI Benefits ...........................................................48 Table 36 Actuarial Value of Pension Fund Assets .......................................................................50 Table 37 Asset Mix .......................................................................................................................57 Table 38 Real Rate of Return by Asset Type ...............................................................................59 Table 39 Rates of Return on Assets in Respect of the Pension Fund ...........................................61 Table 40 Transfer Value Real Interest Rates ................................................................................62 Table 41 Economic Assumptions .................................................................................................63 Table 42 Sample of Assumed Seniority and Promotional Salary Increases ................................64
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