2008 General Meeting Assemblée générale 2008 Toronto, Ontario

1. Canadian Institute of Actuaries L’Institut canadien des actuaires 2008 General Meeting Assemblée générale 2008 Toronto, Ontario

2. Actuarial Standards Board – Pension Specific Standards • Notice of Intent • Issued: September 3, 2008 • Comment deadline: November 14, 2008 • Covers: • SOP Section 3000 • Except Commuted Values • Draft Standards are appended • Generally consistent with PPFRC Working Document of March 2007

3. Actuarial Standards Board – Pension Specific Standards • Role of Actuarial Standards re: Funding • Determination of minimum/maximum contributions per legal requirements • Advice regarding alternative funding levels per terms of engagement • Required disclosures regarding funded status and associated risks

4. Actuarial Standards Board – Pension Specific Standards • Enhanced Disclosures (External User Report) • Required in all reports, unless wind-up benefit are not defined or a designated plan covering only “connected” persons • Hypothetical wind-up funded status under a maximum cost scenario (currently required) • Hypothetical wind-up or solvency valuation simplified gain/loss • Hypothetical wind-up or solvency service cost • Risk analysis

5. Actuarial Standards Board – Pension Specific Standards • Going Concern Valuations • May be required by terms of engagement or by law (as currently required for registered plans) but not by SOP • Assumptions, best estimate or including margins for adverse deviations (MFAD) • Separate General SOP project likely to require “Independently Reasonable Assumptions” before Pension SOP is concluded • Discount rates may reflect expected return on pension fund assets but CIA guidance on maximum discount rates is contemplated

6. Actuarial Standards Board – Pension Specific Standards • Going Concern Valuations (Continued) • MFADs may not be required depending on circumstances • The extent of MFAD in each significant assumption is to be disclosed • Smoothed asset values permitted but disclosure of funded status using market value required • Concept of consistency between asset valuation method and discount rate is removed

7. Actuarial Standards Board – Pension Specific Standards • Draft SOP Contents 3200 Advice on the Financial Condition, Financial Position, Funded Status or Funding of a Pension Plan • includes going concern, hypothetical wind-up and solvency valuations • includes external user reporting requirements 3300 Full or Partial Wind-up of a Registered Plan 3400 Accounting for Pension Costs Substantial re-organization from current SOP, a cross reference table is provided

8. Actuarial Standards Board – Pension Specific Standards • Other Draft SOP Changes • Circumstances of the Work • Whether advice relates to the financial condition, financial position, funded status, funding or a combination thereof • The terms of engagement (may include a formal or informal funding policy) • The law • The objectives of funding (if the work is related to funding)

9. Actuarial Standards Board – Pension Specific Standards • Other Draft SOP Changes • Objectives of Funding • Primary: systematic accumulation of dedicated assets (security) • Other: may be specified by terms of engagement e.g. orderly and rational allocation, inter generational equity

10. Actuarial Standards Board – Pension Specific Standards • Other Draft SOP Changes • Actuarial Cost Methods • Not restricted to going concern valuations • Limitation that forecast method not to be used for registered plan valuations is eliminated • Specification that forecast period sufficiently long that the “valuation reflect the long term cost allocation pattern” is eliminated • Specific requirement to include salary projection for final average plans is eliminated

11. Actuarial Standards Board – Pension Specific Standards • Other Draft SOP Changes • Terminology • Definition of funded status is introduced relative to going concern valuation • difference between value of assets, and actuarial present value of projected benefits allocated to periods up to the calculation date • No reference to “liabilities” which are reflected in a statement of “financial position” • The actuarial present value of projected benefits allocated to periods up to the calculation date is more in the nature of a “funding target” than a “liability”

12. Actuarial Standards Board – Pension Specific Standards • Other Draft SOP Changes • Hypothetical Wind-up Valuations • Assets valued at Market Value vs. Liquidation Value for actual wind-up • Explicit assumption for expenses is required • Details on postulation of scenarios, recognition of contingent benefits, disregard of extremely unlikely scenarios

13. Actuarial Standards Board – Pension Specific Standards • Other Draft SOP Changes • Actual Wind-up Valuations • Contemplates possibility of unspecified settlement methods other than commuted value or annuity purchase • Eliminates proviso that wind-up expenses may be ignored if funded ratio over 100%

14. Actuarial Standards Board – Pension Specific Standards • Other Draft SOP Changes • Accounting Valuations • Reporting requirements may be satisfied by reference to a funding valuation report e.g. data or plan provisions

15. Actuarial Standards Board – Pension Specific Standards • Educational Guidance • The following topics are contemplated: • Hypothetical wind-up service cost and gain/loss • Risk analysis • Discount rates for going concern valuations

16. Actuarial Standards Board – Pension Specific Standards

17. Actuarial Standards Board – Pension Specific Standards • Process • Joint ASB/PPFRC Working Group established by ASB as the “designated group” for the Standard • The Working Group is supported by Chris Fievoli, CIA Resident Actuary to compile comments • PPFRC responsible for developing Educational Notes for approval by Practice Council