In the dynamic world of Canadian pensions, the Canadian Institute of Actuaries (CIA) is gearing up for a transformative year ahead, according to insights shared by Simon Nelson, the chair of the pension practice committee at the CIA and a principal at Eckler Ltd. Let's delve into the key focus areas that will shape the pension landscape in 2024.
Climate Change's Ripple Effect on Pension Plans
Nelson underscores the profound impact of climate change on actuarial assumptions and scenario testing for pension plan sponsors. Beyond its influence on economic assumptions and asset returns, climate change plays a pivotal role in shaping demographic assumptions. This is particularly evident in the evolving area of mortality, where significant work is underway to adapt to changing realities.
Rethinking Gender and Longevity Risk
In a noteworthy move, the CIA is exploring how gender identity contributes to gauging longevity risk. Traditionally, pension benefit calculations predominantly relied on gender as the primary factor in forecasting lifespan. However, Nelson points out, "With an improved comprehension of gender and its diverse impacts on individuals, it's crucial to revisit our strategies. This ensures that the benefits allocated to participants in pension plans are unbiased and fair."
Target-Benefit Pension Plans on the Radar
The CIA is actively monitoring the progression of target-benefit pension plan legislation across the nation. To assist actuaries unfamiliar with this specific arrangement, the institute is in the process of forming a subgroup. Nelson emphasizes, "Specialized knowledge is essential to grasp the intricacies of target-benefit plans, and there's likely to be a demand for tailored guidance in that regard."
Bill C228 and Super-Priority Legislation
Addressing a recent development, Bill C228, a controversial law granting super-priority to Defined Benefit (DB) pension plan members during plan windups and insolvencies, received royal assent in late April. However, most of its measures won't take effect for another four years. Despite this, the requirement for all federally regulated pension plans to produce annual reports on plan solvency is now in effect.
Hariton, another key figure at the CIA, assures that the institute will closely monitor the legislation's implementation to gauge its complete actuarial implications. "We still need to observe the practical developments, assess the potential implications, and determine whether there will be a need for actuaries to respond or offer guidance to practitioners. It's still in the early stages, and there are varying opinions on it."
As the pension landscape continues to evolve, the CIA remains at the forefront, adapting to emerging challenges and ensuring that pension plans stay resilient and equitable for all participants. Stay tuned for more updates as these initiatives unfold throughout the year.