The impacts of climate change and federal super-priority legislation on Canadian pension plans are among the issues that the Canadian Institute of Actuaries is monitoring in 2024, says Simon Nelson, a principal at Eckler Ltd. and chair of the CIA’s pension practice committee.

While climate change is a consideration across all of the CIA’s practice areas, he says for pension plan sponsors, the issue impacts how actuarial assumptions are set, as well as how scenario testing is conducted.  “In the pension world, [climate change] can impact both our economic assumptions and how we set asset returns. But it also impacts how we set demographic assumptions such as mortality — that’s sort of an emerging area where there’s a fair bit of work being done.”

The CIA is also studying the role of gender identity in determining longevity risk. While the value of pension benefits have traditionally been calculated using gender as the main factor in predicting longevity, evolving views are impacting this practice.

Read: Climate, cybersecurity risks increasing for federally regulated pension plans: OSFI outlook

“We’ve assumed that gender and sex at birth are the same thing and we’ve assumed that gender is binary,” says Nelson. “Today we have a better understanding of gender and how it impacts individuals and, as a result, we need to re-examine our approaches so that the benefits that are ultimately paid to individual members of pension plans are fair and equitable.”

As legislative changes pave the way for the widespread availability of variable payment life annuities, this developing area will require further actuarial guidance in regards to administration and reporting, says Alyssa Hariton, an associate partner and defined benefit consulting lead at Telus Health and chair of the CIA’s pension plan financial reporting committee.

“I think regulators are looking for this [guidance] as well. They’re looking for the actuarial profession to provide some oversight of this and so [actuaries] are responding. It’s in part in response to needs around decumulation.”

Read: Employers increasingly aware of lifetime pension pools, but more work to be done: report

Similarly, the CIA is also monitoring the development of target-benefit pension plan legislation across the country and is establishing a subgroup to provide guidance to actuaries who aren’t familiar with this type of arrangement. “There’s some specialized knowledge that’s needed there in order to understand how target-benefit plans work and there’s likely to be sort of specialized guidance as needed around that.”

While Bill C228 — a controversial law giving super-priority to DB pension plan members during plan windups and insolvencies — received royal assent at the end of April, most of its measures won’t come into force for another four years. However, the requirement that all federally regulated pension plans produce annual reports on plan solvency is now in effect.

Hariton says the CIA will continue to monitor the rollout of the legislation to determine its full actuarial impacts. “I think we still need to see what’s kind of going to happen in practice — what are the implications going to be and whether there’s going to be some kind of need for the actual professional to respond or provide guidance to practitioners. I think it’s still early stages [and] there’s still lots of different opinions on it.”

Read: Controversial super-priority pension bill receives royal assent