Account A

 

Actuarial Valuation Results – Account A (Member Account)

The most recent actuarial valuation of TRAF prepared by the independent plan actuary for funding purposes was as at January 1, 2018, which included an assessment of the financial condition of Account A. The valuation results for Account A are summarized in the following table.

pg 24 Account A Funded Status as at Jan. 1 2018

The next actuarial valuation is scheduled to be performed as at January 1, 2021.

Actuarial valuations of the fund, including Account A can be found here.

On a going-concern basis, as at January 1, 2018, Account A was determined to have total liabilities that exceeded its total assets, resulting in a deficit of $34.6 million (which is an improvement over the $77.4 million deficit at January 1, 2015). This equates to a funded ratio of 99.3%. It is noted that there was a surplus of $125.0 million in respect of service accrued as of the valuation date, but this surplus was more than offset by the deficit of $159.6 million in respect of future service.

The fact that the present value of future contributions from current members (ie. assets) is $159.6 million (or 13.7%) less than the present value of the corresponding liabilities related to benefits for future service indicates that, based on the assumptions used in the valuation, future contributions from current members are not expected to be sufficient to fund their expected future benefits. This shortfall will need to be covered by accrued surplus and excess investment returns. If excess investment returns do not occur, then increased member contributions and/or benefit reductions may be necessary.

Reconciliation to the Prior Valuation

The table below reconciles the items that contributed to the Account A total deficit decreasing from $77.4 million as at January 1, 2015 to $34.6 million as at January 1, 2018.

 pg 24 Reconciliation of Account A surplus deficit

The primary contributor to the improved funded status was the strong investment returns for the years 2015 to 2017. Our annualized return during this period was approximately 7.97% net of expenses, which was higher than our assumption of 6.00%. The impact in dollar terms was $200.0 million. The primary factor with a negative impact on the funded status of Accont A was the change in the discount rate assumption. The discount rate was reduced from 6.00% to 5.75%. This resulted in the Account A deficit increasing by $173.0 million.

January 1, 2019 Extrapolated Results

The total funded ratio of Account A (excluding the PAA) was extrapolated to be 96.8% as at January 1, 2019. This figure was based on an extrapolation of the January 1, 2018 funded status. An extrapolation incorporates actual investment results, contributions received and benefits paid since the last formal valuation. The limitations are that the plan's actual experience with respect to mortality, retirement and termination since the date of the last valuation will not be accounted for until the next formal actuarial valuation (ie. the extrapolation will continue to rely on assumptions for these variables). The formal actuarial valuation as at January 1, 2018 revealed a total funded ratio of Account A (excluding the PAA) of 99.3%. The primary reason for the decline is due to the investment return in 2018 of 3.05% (approximately 2.74% net of investment-related fees), which is less than the current assumed rate of 5.75% per annum.