Evidence of meeting #94 for Government Operations and Estimates in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was plan.
A recording is available from Parliament.
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
That's right.
Conservative
Kelly Block Conservative Saskatoon—Rosetown—Biggar, SK
Okay, thank you.
My second question has to do with the relationship of this crown corporation to other crown corporations and what sorts of strategies you may be developing or have in place to ensure that these crown corporations move to a 50-50 sharing of costs. An alignment of the age of retirement has been built in, but I wonder about the changes that have been passed in Bill C-45.
Director, Pensions and Benefits Sector, Treasury Board Secretariat
We would have to get back to you with an answer on the crowns. We're here for the public service pension plan.
Conservative
Kelly Block Conservative Saskatoon—Rosetown—Biggar, SK
So you don't have a specific responsibility or working relationship with other crown corporations to help them move to the implementation of....
Director, Pensions and Benefits Sector, Treasury Board Secretariat
In the area that I'm with at Treasury Board, we do not.
Liberal
Judy Sgro Liberal York West, ON
Thank you, Mr. Chair.
On the issue of the unfunded liabilities, Mr. Ménard, can you speak today to the total unfunded liabilities, not just the public service?
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
Well, there is a deficit of about $4.4 billion for the public service. I will have to get back—
Liberal
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
Right in my head, no.
As a rule of thumb, when you look at the public service, it's about 70% of the total liabilities of the RCMP, the Canadian Forces, and the public service. So if you do the math, you could do $4.4 billion divided by .07 and you would have a sense of the current deficit of all the public sector pension plans, for service after the year 2000. The rest is still on the books of the government.
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
It is the result of the credits made by employees and the government in the past.
Liberal
Judy Sgro Liberal York West, ON
When you've made the estimates of the contribution rates for 2013, 2014, and 2015 to the Treasury Board, I assume at that point they will be re-evaluated as to whether they need to be increased more at that time, depending on how things are going or the state of the economy.
Director, Pensions and Benefits Sector, Treasury Board Secretariat
When the three-year period is up, at that point in time, Mr. Ménard will have another actuarial valuation that will allow us to assess if we're on target for the 50-50 in 2017 and adjust our rates accordingly for 2016 and 2017.
Liberal
Liberal
Judy Sgro Liberal York West, ON
—in order to reach that. It's a fairly significant amount of money. It increased a lot after 2008. I mean, you had a small surplus in 2008—and you know we had a bit of a recession issue, a few things here and there, in spite of people denying we had one at one point—but it seems to have grown quite substantially. I don't know—you're doing the numbers—but it seems that it really grew a lot from 2008 to 2011. In three years it went from a small surplus of a $1 billion to a deficit of $4.4 billion.
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
Yes. There are two aspects to it, because you could say we had a small surplus in 2008. If I look at a longer period and I start with the 1999 report until now, at that time we projected that the life expectancy of public service men who were 65...that they would live until 85. In the most recent report, it's 87. So we have changed our assumptions, because people are living longer than expected. That's one aspect.
The other thing is that the 2008-09 crisis was a game changer. One difficult assumption to make, of course, is the discount rate or the expected rate of return on assets, and since then we have reduced our expectation from 4.3% to 4.1%, and this has also increased the liabilities. When I do that, first I compare the assumptions with my peers. At 4.1% it's well-aligned with the other public sector pension plans in Canada.
The other thing we are looking at is the work done by Credit Suisse. They released a report in February 2013. There's an interesting article about the “low-return world”. We have taken this into consideration and reduced accordingly the expectations on the assets side, which means that it increases the liabilities and therefore the deficit.
Liberal
Judy Sgro Liberal York West, ON
In spite of the fact that we expect that more people are going to be working longer—one of your comments earlier was about the number of people who are not retiring at 65, who are choosing to work to 69, or whatever the number.
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
In terms of this part of my statement, I will say that it has a much more positive impact on the financial sustainability of the Canada Pension Plan, the fact that people are working longer.
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
Yes, and the government has introduced, with the agreement of the provinces, what we call the post-retirement benefit. In 2012, the work cessation test was removed from the Canada Pension Plan. Therefore, all Canadians have the choice and the flexibility between retirement income and working earnings. If they ask for their CPP benefit, they are free to do so. If they continue to work, they contribute, and there's a post-retirement benefit that is helping them increase their benefits if they continue to work after they ask for their CPP benefits.
NDP
Conservative
Jay Aspin Conservative Nipissing—Timiskaming, ON
Thanks, Mr. Chair.
Thanks to our guests. This has been a very enlightening morning, indeed.
As we know, these types of liabilities have to be closely monitored. They can get away on you quickly. By this morning's testimony, I have assurance that the situation is well in hand.
I have a question of possibly Mr. Leroux. You indicated in your brief that the chief actuary has determined that this requires achieving a 4.1% rate of return after inflation. Is that a real return? Is that 4.1% after inflation of 2%, or does that include a 2% inflation rate?
