HALIFAX, NS - Public Service Superannuation Plan Trustee Inc. (PSSPTI) has completed its comprehensive funded-health review (2020 Funded-Health Review) of the Public Service
Superannuation Plan (Plan). The 2020 Funded-Health Review was conducted in accordance with provisions in the Public Service Superannuation Act (PSSA), which mandates PSSPTI to review the Plan’s funded health every 5 years.
The purpose of a funded-health review is to determine the Plan’s ability to afford indexing (also known as cost-of-living adjustments, or COLA) for the next 5 years and assess if any change is required to Plan benefits and contribution rates.
The 2020 Funded-Health Review was based on the Plan’s funded status as at December 31, 2019, which was 98.5%. The results are:
- As the Plan’s funded status was below 100%, indexing is mandated to be zero for the next 5-year cycle (starting January 1, 2021 and ending December 31, 2025). Under the PSSA’s funding policy, when the funded status is below 100% on a stipulated valuation date there can be no indexing paid during the following 5-year cycle.
- As the Plan’s funded status was above 96% but below 100%, it was required that PSSPTI consider whether to adjust contribution rates. Upon its analysis and with advice provided by the Plan’s actuary, PSSPTI determined that no change in contribution rates is warranted at this time.
Given the results of the 2020 Funded-Health Review, the PSSPTI Board appreciates that the Plan’s inability to provide indexing is disappointing for retirees. “The Plan’s funding policy was constructed for the long-term and it has always been understood that there will be fluctuations in the amount of indexing the Plan can afford to pay,” stated Ron Smith, PSSPTI Board Chair.
PSSPTI’s next review of the Plan’s funded health will be in 2025, for the 5-year cycle starting January 1, 2026 to December 31, 2030. The stipulated valuation date for that review is December 31, 2024. For more information about the 2020 Funded-Health Review, please refer to the following link on our website: www.nspssp.ca/publicservice/about/psspti-reviews/funded-health-review
2019-2020 PSSP Annual Report Results:
In fiscal year 2019-2020, the Plan’s funded status decreased from 101.9% as at March 31, 2019 to 91.4% as at March 31, 2020. Plan liabilities were valued at December 31, 2019, with a funded ratio of 98.5%.
As at March 31, 2020, the Plan’s net return on investment assets was -0.19% (gross of investment management fees was -0.02%). The total net assets for the Plan were approximately $6.403 billion, liabilities were $7.007 billion, equaling unfunded liabilities of $604 million. The discount rate used for the PSSP’s valuation as at March 31, 2020 was 5.50%, being a significant reduction from the 2019 discount rate of 6.00%. This resulted in a large increase in the Plan’s liabilities. The actuarial value of those liabilities increased by $543.4 million from December 31, 2018 to December 31, 2019.
“The reduction in the discount rate is not specific to the PSSP. Rather, it is reflective of the PSSP actuary’s forecast of a protracted lower interest rate environment and a prolonged slowdown of global economic activity,” stated Ron Smith. It is anticipated that most defined benefit plans in Canada will be booking declines in their discount rates this year.
“The 2019-2020 fiscal period was an unprecedented one for the global economy and financial markets. The impact of the COVID-19 pandemic on the stock market led to the largest one-quarter drop in the past 40 years. The PSSP did not escape this drastic market decline, but fared relatively well compared to many other plans,” added Smith. “The PSSP continues to be in overall healthy shape and members’ pensions are safe.”
The Annual Report also provides an update on PSSPTI’s membership growth initiative which has now expanded the Plan’s membership by 3,050 members.
The full 2019-2020 PSSP Annual Report, as well as the PSSP’s audited financial statements, are available online at: www.nspssp.ca/publicservice/about/plan-performance
For more information, contact:
Senior Communications Advisor Conseillère
principale en communication Nova Scotia
Pension Services Corporation
Société des services de pension de la Nouvelle-Écosse
P: 902-429-6432 | email@example.com | www.novascotiapension.ca