More than meets the eye

New mortality asumption could significantly impact pension plan administration
By Paul Christiani and Paul Migicovsky
|Canadian HR Reporter|Last Updated: 06/07/2016

Recent updates to the actuarial Standards of Practice published by the Canadian Institute of Actuaries (CIA) introduced a new mortality assumption with respect to commuted value calculations. While this change is important from an actuarial point of view, it may also significantly impact pension plan administration. So organizations need to be prepared.

Members of defined benefit pension plans in Canada have the right to transfer the value of their pension as a lump sum amount into some form of tax-sheltered arrangement. This right generally applies upon termination of employment prior to eligibility for an early retirement pension, although some plans have extended this right to retirements that occur from the active workforce after the eligibility conditions for an early retirement pension have been satisfied.

The lump sum payment represents the commuted value of the monthly pension payments otherwise owed to the plan member, and the rules for calculating commuted values are determined by referencing the standards.