Funding beliefs

The Board believes that:

1. Benefits should be pre-funded (Account A and Account B); and

2. Funding concerns should be addressed on a timely basis. 

If these beliefs are fulfilled, the Fund is more likely to be sustainable.

These funding beliefs are based on the following objectives of the Board:

1. Benefit security

Without pre-funding, or if funding concerns are not addressed on a timely basis, there is a higher risk that the Fund's assets will not be sufficient to fund the accrued and future basic benefits. If the gap between the Fund's actual assets and the level required to fund projected basic benefits becomes significant, there is a heightened risk that the gap could be reduced, in whole or in part, through a reduction in basic benefits, including accrued benefits. In that scenario, the basic benefit would not be secure.

2. Intergenerational equity

If contributions are increased or if basic benefits are reduced as a result of a policy not to pre-fund (or due to delays in addressing any funding concerns), the cost from one generation could be shifted to the next generation. Material shifts of this nature would not be equitable.

3. Industry best practice

Being a pre-funded plan would ensure that the funding mechanism is consistent with industry best practices, including those adopted by virtually every other public sector pension plan in Canada. Pay-as-you-go funding is now extremely rare in Canada.