The Association of Canadian Pension Management is urging Retraite Québec to streamline its approach to actuarial solvency valuations for pension plans with members outside of the province.
In an open letter, the ACPM requested the regulator either reconsiders its position on actuarial solvency valuations or grant exemptions to allow only one valuation to be carried out. When determining solvency valuation, actuaries assume what would happen in the event of an actual termination of the plan, including the payment option that would be chosen by active and deferred plan members, it noted.
In Quebec, the only option available to members is the transfer value, while outside of the province, members can choose between the transfer value and the purchase of a deferred or immediate annuity. In this case, the actuaries establish appropriate assumptions to determine what percentage of members outside of Quebec would choose these options.
“We understand that Retraite Québec considers that, given the wording of the Supplemental Pension Plans Act and the 2020 agreement respecting multi-jurisdictional pension plans, the solvency liabilities of all active and deferred members should be valued using transfer value assumptions, regardless of whether they are in Quebec or outside Quebec,” said the letter. “Retraite Québec therefore expects actuarial solvency valuations to be carried out using this approach for members outside Quebec.”
This approach results in the need for separate valuations made on a solvency basis and on a hypothetical windup basis, said the letter, adding it directly impacts pension plan sponsors with increased costs and has the potential to confuse pension committee members and plan members. Similarly, the ACPM requested that previous valuations not be modified, due to costs and the potential for confusion.
“It is worth remembering that, since 2016, solvency valuations for Quebec-registered pension plans have little purpose and are mainly used to calculate the degree of solvency. It is also worth pointing out that the differences would, in most cases, be minimal between the solvency valuation carried out according to Retraite Québec’s position and the valuation on a hypothetical windup basis carried out in accordance with [Canadian Institute of Actuaries] standards.
“Also, this difference would not be systematic or biased — that is to say, it could be positive or negative depending on the circumstances.”