The CAAT Funding Policy was built upon the Plan’s fundamental principles of paying both promised and conditional benefits, and its commitment to equity across the entire membership and from generation to generation.
The CAAT Pension Plan Funding Policy defines six levels of Plan financial health and sets guidelines for the Plan governors to use reserves and conditional benefits to manage through periods of volatility, to keep the Plan sustainable over the long term to secure benefits while balancing fairness across the membership.
Each filed actuarial funding valuation determines the Plan’s funded status and accordingly where the Plan sits within the levels of the Funding Policy. The chart below shows the options available at each funding level.
Funding Policy at a glance
Read the full Funding Policy
Revised effective June 1, 2018
There are six funding levels that help the Plan maintain a long-term focus and achieve its key strategic goals of benefit security and equity.
At Level 1
If the Plan has a deficit after using all reserves and contributions being paid by active members, the Plan would not pay post-retirement conditional inflation protection to retired and deferred members and will not pay pre-retirement benefit increases to active members. The Plan will also temporarily remove any early retirement subsidies. The Plan may consider reductions to future benefits by reducing the lifetime annual pension factor below 8.5%.
At Level 2
With the contributions being paid by active members and the Plan’s funding reserves being fully used, the funding level exceeds provincial minimums, meaning the Plan has a small surplus. The Plan will provide the current year of conditional inflation protection increases to retired and deferred members and would restore the annual pension factor to 8.5% for future benefits while considering restoring any prior pension factor reductions in previous years (if any). The subsidized early retirement reduction rate will be set at 5%. Pre-retirement benefit increases for active members will not be made.
At Level 3
The Plan will apply conditional inflation protection increases for retired and deferred members for the current period plus make additional increases for past years of inflation rate increases missed (if any). Pre-retirement benefit increases for active members will be applied. The subsidized early retirement reduction rate will be 5% and the lifetime annual pension factor will be 8.5%. Surplus funds over provincial minimums will also be allocated into funding reserves to withstand up to a 0.5% reduction in the discount rate.
At Level 4
The Plan will pay current period pre-retirement benefit increases to active members and consider providing increases for past years of pre-retirement benefit increases that were missed (if any). The lifetime annual pension factor will be 8.5%. In addition, the Plan will consider early retirement reduction factors of 3%, 4%, or 5%. Post-retirement conditional inflation protection will be applied and surplus funds over provincial minimums will be allocated into reserves to withstand up to a 1% reduction in the discount rate and build reserves to fund future conditional inflation increases.
At Level 5
Pre-retirement benefit increases for active members and post-retirement conditional inflation protection for retired and deferred members will be applied, while the early retirement reduction factor will be 3%. The Plan will consider a lifetime annual pension factor to a rate of 8.5% or 9.5%. The Plan has the reserves required to fund future conditional inflation protection increases and can withstand a 1% reduction in the discount rate. Additional funding reserves are being built to withstand up to a 7.5% increase in liabilities as an additional cushion for securing promised benefits.
At Level 6
Full funding reserves have been built. The lifetime pension factor is at least 9.5%. Conditional inflation protection for retired and deferred members and pre-retirement increases for active members will be made. The Plan has sufficient surplus to consider any combination of the following changes:
- Provide post-retirement inflation protection increases above 75% of CPI
- Increase the lifetime annual pension factor beyond 9.5%
- Improve other benefits on an ad hoc basis