Plan Financial Highlights
This report highlights PSPP’s Financial Statements as at December 31, 2022.
The accounting financial position is based on the market value of the assets as of the date of the statements. The financial statements report the Plan’s financial position and surplus on an accounting basis; however, it is important to note that the accounting financial position is not the same as the Plan’s funded status determined by an actuarial funding valuation.
The total accounting pension obligation is based on the estimated net present value of future pension benefits to be paid to Plan members. Retirement benefits earned by employees provide a lifetime pension for each year of pensionable service based on a specified percentage applied to the average salary for the five highest consecutive years, subject to the maximum benefit limit allowed under the Canadian Income Tax Act. The estimated pension obligation increases annually for each additional year of pensionable service earned by employees. The pension obligation is an estimate, because it is based on various assumptions used by the Plan’s actuary.
For example, an estimated discount rate is used to determine the present value of future retirement payments. A lower estimated discount rate will increase the total pension obligation. Similarly, a higher estimated life expectancy will also increase the pension obligation.
$17.117Billion
Fair value of Plan's net assets (as of December 31, 2022)
As at December 31, 2022, the fair value of the Plan’s net assets totaling $17.117 billion was higher than the estimated pension obligation of $12.858 billion resulting in a surplus of $4.259 billion. The discount rate for accounting purposes increased from 5.9% to 6.5%. Other major assumptions for accounting purposes were unchanged from 2021.
As at December 31, 2022, the financial position of the Plan shows that 133 per cent of the total pension obligation was supported by net assets.
Percent of Pension Obligations Supported by Net Assets
(per audited financial statements)
Plan funding is based on the actuarial valuation of the Plan. The actuarial funding valuation differs from the financial statements as the actuarial funding valuation incorporates a margin to buffer against unfavourable results in the rate of return or other factors affecting the Plan. The margin is one of the tools to help achieve the funding objectives of contribution stability and fully funded benefits. When a plan is considered fully funded, it means that the pension plan has enough assets on hand to satisfy all obligations to current and future retirees.
The actuarial funding valuation also uses an actuarially accepted practice of smoothing fund returns over a five-year period to even out the impact from the volatility of market returns on the Plan’s funded status and contribution rates. This practice produces a funding value of assets that can be higher or lower than the market value in any given year. Contribution rates are set based on the funded status and funding requirements set out in the actuarial funding valuation.
The audited PSPP Corporation financial statements are separate from the Plan financial statements. PSPP Corporation is the Trustee and administrator of the Plan. The Corporation has a duty to act in the best interest of Plan members and is responsible for the Plan fund, including the investment of Plan assets.
The Corporation is responsible for ensuring the Plan is in compliance with all provincial and federal laws. It provides timely information to members and employers and supports the PSPP Sponsor Board with analysis and information to make better decisions. It oversees the preparation and audit of both the Plan and Corporation financial statements as well as other services that help communicate the benefits of the Plan for its members - such as this annual report - and ensures the Plan is secured for years to come.