Document 2882224

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HOOPP
Healthcare of Ontario Pension Plan May 19, 2011
Financial Services Commission of Ontario
Attention: Pension Policy Unit
5160 Yonge Street, Suite 1600
Toronto ON M2N 6L9
Subject: ACTUARIAL GUIDANCE
Dear Sirs/Mesdames:
Thank you for the invitation to provide comments on Actuarial Guidance Note #1 - Canadian Institute of
Actuaries, Practice-Specific Standards for Pension Plans effective on December 31, 2010, which was
recently posted to the FSCO website.
HOOPP is one of the country's largest pension plans, serving 375 participating employers and nearly
260,000 plan members, with assets of approximately $36 billion. Consistent with our mandate and
mission, we have focused our attention and comments on the draft Actuarial Guidance.Note mainly on
those issues of particular relevance and importance to HOOPP.
Our comments/questions are as follows:
Unrelated to a specific section
• The timing of this consultation may be problematic for HOOPP and for many other pension plans which
are in the process of considering the filing of recent valuations or preparing their valuations for filing.
Certain pension plans may have filed these valuation results already. HOOPP has already completed
and reviewed the plan's December 31, 2010 results and its Board of Trustees has approved them.
While we do not believe HOOPP's valuation results would be impacted by the draft Actuarial Guidance
Note, we also do not believe HOOPP should be required to have its 2010 results reviewed again and
perhaps revised by our external actuaries, nor revisited with our Board. We would ask that the timing of
the implementation of a final Actuarial Guidance Note be such that valuations with an effective date
before January 1, 2011 will not be affected. Of course, the implementation date should ultimately be
determined based on when the Actuarial Guidance Note is actually finalized.
• It is not clear to us how FSCO intends to apply the Actuarial Guidance Note. We believe greater clarity
is required as to the regulatory protocols which will apply to it. Will these be guidelines which FSCO
may consider in reviewing/approving a valuation report similar to other FSCO guidelines or, is the
Actuarial Guidance Note to be used as an extension of the PBA and its Regulations?
See your future. Now.
2. General
"FSCO considers whether actuarial assumptions have been chosen with
with the plan's funding objectives".
a level of prudence consistent
As a formal funding policy is not required to be filed with FSCO, it is not certain how FSCO would make
this determination. Without a formal funding policy, how would FSCO determine a pension plan's funding
objectives? Is it FSCO's intention that the reference in the Actuarial Guidance Note to ''the plan's funding
objectives" will be interpreted to mean the plan's minimum funding requirements?
Discount Rate Selection and the Investment Policy
Uln the actuarial report filed in respect of a plan, the actuary should provide comments on the potential
risks related to meeting the plan's funding objectives, due to the investment policy adopted by the plan
administrator. "
•
Not all pension plans provide their actuaries with investment policy information beyond the filing of their
Statement of Investment Policies & Procedures. This raises the question whether actuaries will have
access to the necessary investment information to fulfill this new requirement.
•
In the case of HOOPP, there is a great deal of information generated about the potential funding risks.
However, providing to the actuary the volume of information that would be required to enable the
actuary to provide such comments may be a very onerous and expensive change to the valuation
report preparation process. We will require further direction from FSCO about this' provision in the
Actuarial Guidance Note to ensure this request will truly accomplish the objectives which FSCO intends
and does not result in significant additional fees to plan administrators or plan sponsors with no
substantive benefit to the plan membership.
Active Management
u••• the guidance may not be complete in all circumstances and FSCO may request additional information
from the actuary, administrator, investment manager and/or plan sponsor for the justification of an
assumption of additional returns from active management. "
The primary concern we raised with the CIA when the new Standards were published for consultation
was that "active management" is simply not well enough defined. We believe there are many
justifications for including in the discount rate assumption what may be termed by many as "active
management" .
3. We would be happy to meet with you to discuss our comments and to further discuss the draft Actuarial
Guidance Note. Thank you again for the opportunity to express our views with respect to this
consultation draft.
F ONTARIO PENSION PLAN
David Miller
General Counsel and Senior Vice-President, Governance
Cc: John A. Crocker
Greg Tebbutt