An actuarial valuation is a mathematical analysis of the financial condition of a pension plan. An external actuary (called the Plan Actuary) prepares an actuarial valuation for the Public Service Pension Plan (PSPP or Plan) at least once every three years. The valuation determines the financial position of the Plan and the future contribution rates needed to ensure its long-term funding. The actuary determines how much money the Plan needs to pay pension benefits by making assumptions about future investment returns, future inflation rates, future increases in salaries, expected retirement ages, life expectancy and other factors.
By legislation, an actuarial valuation must be conducted at least once every three years and filed with the Canada Revenue Agency (CRA). However, the Board may conduct actuarial valuations more frequently to continually monitor the financial health of the Plan.
An actuarial extrapolation is also a mathematical analysis of the financial condition of a pension plan, but it does not use the most current membership data. An extrapolation gives useful insights into the Plan’s overall financial position but cannot be filed with the CRA for Plan funding.