CAAT Pension Plan Hits 118% Funded

According to its latest actuarial valuation in January, the $9.4 billion Colleges of Applied Arts and Technology Pension Plan (CAAT) is 118% funded, with a $2.3 billion funding reserve.

While this is not just an upgrade of the previous year, when it was 113% funded with a $1.6 billion funding reserve, the valuation will be filed with the regulator sometime in the next few weeks.  By choosing to file the actuarial valuation, CAAT will not have to file another valuation until 2021, keeping flat contribution rates for its 46,000 members and 41 employers until 2022.

To guarantee economic and demographic assumptions are still realistic and appropriate for CAAT’s risk tolerance, each funding valuation includes a review of each of the aforementioned assumptions. According to the valuation, the discount rate remained at 5.6%

“As of January 1, 2018, our funded ratio, the core measure of benefit security, reached 118%—the strongest position since becoming jointly governed 22 years ago,” Derek W. Dobson, CAAT’s CEO and plan manager, said in a statement.

“Research shows that Canadians want the adequate and predictable retirement income that a well-governed and expertly managed defined benefit plan delivers and they are willing to make meaningful contributions to it. Employers benefit through lower operating costs, stable contribution rates, and lower risk by exiting the pension management business,” he said. “Long-term projections show the plan’s financial health should remain resilient into the future providing benefit security and contribution stability to our members and employers.”

The fund—a modern defined benefit plan—has been jointly governed since 1995, meaning that government, community, and private sectors work together to achieve the goals of the overall fund rather than just focus on individual sectors. The plan is also jointly sponsored by three entities: the College Employer Council, the Ontario Public Service Employees System, and the Ontario College Administrative Staff Association.

When it comes to building additional reserves, prefunding conditional inflation protection, and reducing contributions, the CAAT’s plan governors can utilize any combination under the plan’s funding policy. The plan governors currently decided that the best move at this time is continuing to allocate additional reserves to ensure benefit security and contribution stability.

The plan has also continued to grow by adding new employers, including the Youth Service Bureau (YSB) of Ottawa, whose plan members voted in favor of a merger of the YSB’s defined benefit plan with the CAAT’s. If the regulator approves of the asset transfer, it will be second time a single employer defined benefit pension plan will merge with the CAAT, the first being the 2016 merger of the Royal Ontario Museum pension plan.

“The CAAT Plan is open and ready for growth in membership where it is beneficial. This includes workplaces with single-employer defined benefit pension plans, defined contribution plans, and those without a pension plan, including those in the private and not-for-profit sectors,” said Dobson. “We are in discussions with several organizations and employee groups about them joining the CAAT Plan and are excited to be able to offer our successful model for sustainable defined benefit pensions.”

Alongside its annual investment report, the CAAT will release its 2017 investment results in April.