Human Resources

Human Resources

Human Resources

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Mortality Indexation Adjustments

Background

  • For pensions which commence after September 1, 2012, the indexing adjustments are determined based on excess fund returns and mortality experience adjustments
    • The Plan text specifies that pensions will be adjusted based on:

      “(d) the excess of the average of the rates of the Fund Interest for the Plan Year ended and the immediately preceding five years over 6%; and

      (e) to reflect the gain or loss resulting from the average mortality experience of the members whose pensions commence after Sept. 1, 2012, as determined by the Actuary”
       

  • The first such adjustment was made on September 1, 2014
     
  • The indexing adjustments for this group applies to the total money purchase pension and the portion of any minimum guarantee pension accrued up to September 1, 2012
     
  • The Non-reduction provisions continue to apply so pensions in payment will not be reduced

Detailed methodology for mortality indexation adjustments

The indexing adjustments are determined using the following approach:

  1. Determine the total annual Plan mortality experience gain/loss in respect of pensioners who commenced their pension after September 1, 2012 (Post Sept. 1, 2012 pensioners
     
    1. The amount is determined in respect of the 2012-2013 cohort and each subsequent cohort at the end of each plan year
       
    2. Mortality experience gains or losses are measured relative to the mortality table used for determining money purchase pensions in effect at the time the mortality indexing adjustment is being determined
       
    3. The one-time impact of any changes to the mortality table used for administration purposes is reflected in the mortality experience for the year. Future mortality experience adjustments are then measured against the new table.
       
    4. The mortality gain or loss is only measured for members who have been retired for at least a full year (since those retired for less than a year do not receive adjustments at the first year end after retirement)
       
  2. Determine mortality experience gain/loss for the year as a proportion of the total liabilities for these pensioners at the beginning of the year
    1. Liabilities determined based on a discount rate of 6% per year and the mortality table used for determining money purchase pensions at the beginning of the year
       
  3. The mortality experience gain/loss expressed as a percentage of the post-2012 pensioner liability (determined in Step 2) for each year, is recognized over a 6-year period consistent with the determination of the excess interest indexing adjustments. The unrecognized portion of the mortality experience gain or losses determined at the end of each plan year is rolled forward using a discount rate of 6% per year.