Pension plan sponsors have until Feb. 15, 2015, to provide comments to the Actuarial Standards Board (ASB) about its recent proposal to update Canada’s current mortality table for pension funding valuation purposes.
The table is used for calculating the commuted value of pensions for members who terminate employment from pension plans.
Read: New all-Canadian pension mortality tables, improvement scales released
In a study from February 2014, the Canadian Institute of Actuaries (CIA) said the current mortality table is no longer an accurate reflection of life expectancy in Canada because the country’s retirees are living longer than the current mortality table assumes.
The new mortality table is expected to increase pension commuted values by 5% to 7% compared with the current mortality table, says a note from Buck Consultants.
Read: Pension commuted values expected to rise
The new mortality table will apply to pension commuted values calculated on or after Aug. 1, 2015. Retroactive application won’t be allowed.
This new table will apply to all pension plans even if an alternate mortality table suits a certain pension plan better.
Read: What can employers do to mitigate longevity risk?
In addition to the new mortality table, the ASB has proposed a new mortality improvement scale—a two-dimensional table that varies by age and cohort—to replace the current one-dimensional improvement scale, which uses age only.
The CIA will allow pension plans to use a new one-dimensional table as an improvement scale until Dec. 31, 2016, if these plans’ administration systems can’t yet handle a two-dimensional improvement scale.
The final communication of the new standard is expected to be released by May 1, 2015.