Board Communique: July 26, 2021

Good news! More protection from future contribution rate increases

Effective January 1, 2020, we increased funding to the Teachers’ Pension Plan’s rate stabilization account (RSA). This decision was made on June 28, 2021, and applied retroactively.

We use funds in the RSA to help mitigate any significant increases to contribution rates that may result from future valuations.

One per cent of member contributions and one per cent of employer contributions are now being rerouted to the RSA from the inflation adjustment account (IAA), which is the account used to fund cost-of-living adjustments for retired members.

Total contribution rates for members and employers are not changing.

Is the IAA still healthy?

Yes. The plan’s last actuarial valuation, measured as at December 31, 2017, showed the IAA is healthy. Shifting funding to the RSA will not change this. Providing sustainable, non-guaranteed cost-of-living adjustments to retired members remains a priority for the board.

If any future valuation shows the IAA requires additional funding, we can shift contributions back.

What is a valuation?

A valuation is the most important measurement of plan health. It determines how much money the plan needs to pay current and future pensions. An independent actuary does a valuation at least every three years. An actuary has specialized training in financial modelling and risk management.

Our last valuation showed the plan had sufficient funds to pay all current and projected pensions. We were also able to reduce member and employer contribution rates on January 1, 2019, and establish the RSA.

The next valuation will be measured as at December 31, 2020. The results will be announced later in 2021.