CAAT Pension Plan funded status grows to 118%
The CAAT Pension Plan stands 118% funded on a going-concern basis, with a funding reserve of $2.3 billion, based on its latest actuarial valuation (January 1, 2018).
This is an improvement over last year’s valuation that showed the Plan 113% funded with a funding reserve of $1.6 billion.
Under the Plan’s Funding Policy, Plan governors can apply any combination of building additional reserves, prefunding conditional inflation protection, and reducing contributions. The Plan governors determined that allocating additional reserves to further strengthen benefit security and contribution stability is the most prudent option at this time. Reserves are available as a cushion against unexpected investment market declines or liability growth.
The valuation will be filed with the regulator in the coming weeks. By opting to file this valuation, the Plan will not be required to file another one before 2021, ensuring that contribution rates remain steady until at least 2022, and conditional inflation protection will be paid on pensions in payment until at least 2021.
Realistic assumptions foundational to benefit security
Each funding valuation includes a review of the economic and demographic assumptions used, to ensure they continue to be realistic and appropriate for the Plan’s risk tolerance.
The discount rate, which reflects asset mix, long-term market returns on the investment portfolio, and the Plan’s risk tolerance, was held at 5.6%.
The valuation assumes that members currently retiring will live to 89 years on average while collecting their pensions.
The CAAT Plan’s 2017 investment results will be released with its annual report in April.
The Plan’s ongoing stability is the result of strong investment performance, realistic assumptions, and setting contribution rates at a level adequate to secure pension benefits over the long term. Maintaining a healthy funding reserve to manage through unforeseen economic and demographic shocks reflects the desire for a secure and sustainable pension plan. These factors are enshrined in a well-thought-out Funding Policy developed by the joint sponsors.