Pension Funding

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OPTrust engages independent actuaries to perform regular valuations of the Plan to ensure there are sufficient assets to meet the projected cost of members’ and retirees’ lifetime pensions. These valuations provide a snapshot of the Plan’s financial position and ability to meet its pension obligations, while providing a review of gains and losses experienced since the last valuation.

The Plan’s 2016 funding valuation showed it remained fully funded as of December 31, 2016. The funding valuation also confirmed deferred (or “smoothed”) investment gains of $681 million, which will be recognized over the next four years and should further improve the Plan’s funded status in years to come.

Consistent with our approach over the past few years, OPTrust’s 2016 funding valuation strengthened the Plan's real discount rate to further improve its long-term sustainability. The Board of Trustees approved the following economic assumption:

  • Reducing the Plan's real discount rate to 3.40%, net of inflation, down from 3.55% in 2015. This change reflects the expectation of lower long-term investment returns and reduces the risk of future losses due to investment returns falling short of the expected cost of members’ and retirees’ future pensions.

The net effect of the real discount rate change increased the total fund liabilities by $502 million to add additional margins for conservatism for the purpose of strengthening the Plan’s long-term sustainability.

Funding Highlights
At December 31 ($ millions)   2016 VALUATION   2015 VALUATION
Net assets available for benefits   $19,045 $18,399
Actuarial smoothing adjustment   (681)   (1,102)
Present value of future contributions   5,395   5,062
TOTAL ASSETS   23,759   22,359
Present value of future benefits and expenses   (23,332)   (21,942)
Rate stabilization reserves   (294)   (289)
TOTAL LIABILITES   (23,626)   (22,231)
TOTAL SURPLUS   $133 $128
2016 Funded Status Report pages