The median solvency ratio for defined benefit plans regulated by the Financial Services Commission of Ontario was 94 per cent in the last quarter of 2017, up from 91 per cent at the end of September, according to the organization’s quarterly report.
More than half (57.2 per cent) of plans had a solvency ratio between 85 and 100 per cent, down slightly from 58.3 per cent in the previous quarter. One in four (25.1 per cent) plans had more than 100 per cent solvency compared to about one in five (18.2 per cent) in the previous quarter.
Strong domestic and international equity returns strengthened assets, offset by slightly declining Canadian bond yields, according to the report, which noted “the slight decrease in fourth-quarter Canadian bond yields led to lower commuted-value interest rates, against which solvency liabilities are highly negatively leveraged.”
The resulting median gross expected return was 4.8 per cent and median net after-expense expected plan return was 4.5 per cent in the fourth quarter. For 2017, median plan gross expected returns were 9.1 per cent and median net after-expense expected plan returns were eight per cent.
Meanwhile, the report noted that consultations on proposed regulation amendments to implement the province’s new solvency framework for defined benefit plans began in December 2017 and closed on Jan. 29, 2018.