Canadian Institute of Actuaries recommends increase in target retirement age

An in-depth look at this and other subjects in the current issue of the Morneau Shepell News & Views

TORONTO, May 22, 2019 /CNW/ - Morneau Shepell has released the May 2019 issue of its monthly newsletter, News & Views, in which the company looks at the following topics: 

• Canadian actuaries issue public statement recommending increase in retirement age – On April 18, 2019, the Canadian Institute of Actuaries (CIA) issued a public statement recommending that the federal government, with the consent of provincial governments, increase the target retirement age from 65 to 67 under the Canada and Quebec Pension Plans and Old Age Security. The public statement is intended to engage all Canadians in a discussion of changing societal needs and the best retirement program designs to support those needs. It encourages Canadians to consider starting their pension income later and to recognize that these programs are an excellent method for ensuring income security in later retirement. 
• Pension and benefit matters included in 2019 Ontario budget – The 2019 Ontario budget, introduced on April 11, 2019, included a number of items relating to pensions, benefits, executive compensation in the public sector and the funding of mental health initiatives. Specifically, the budget addressed target benefit pension plans, treatment of excess pension plan contributions, electronic communications for pension plans, retirement age in universities, and mental health funding, among other measures. 
• Ontario proposes regulations addressing variable benefits and discharge upon annuity purchase – The Ontario Ministry of Finance proposed two regulations affecting pension plans on April 11, 2019. The first draft regulation sets out rules for the payment of variable benefits to Ontario retired members from the defined contribution provision of a pension plan. The second amends the rules for obtaining a discharge upon purchase of an annuity to satisfy a defined benefit pension plan's obligation to pay a pension to an Ontario retiree or surviving spouse. 
• Risks of predatory marriages highlighted in recent case – A recent case in which an Ontario court voided a couple's marriage based on a claim of incapacity highlights the risk that predatory marriages can pose and the complexities they can raise for pension and benefit plan administrators. In Hunt v. Worrod, a court declared a marriage void, finding that the applicant did not have the mental capacity to consent to a marriage after having suffered a traumatic brain injury following an ATV accident. 
• Tracking the funded status of pension plans as at April 30, 2019 – Morneau Shepell describes the funded status of pension plans over the first four months of 2019 based on three typical investment portfolios. A graph shows the changes in the financial position of a typical defined benefit plan since the end of 2018. A table shows the impact of past returns on plan assets and the effect of interest rate changes on solvency liabilities of a medium duration pension plan. 
• The impact of pension expense under international accounting as at April 30, 2019 – Morneau Shepell has shown the evolution of the pension expense for a typical defined benefit pension plan. Since the beginning of the year, the pension expense has increased by 14 per cent (for a contributory plan) due to the decrease in the discount rates, despite the good returns on assets (relative to the discount rate).

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