Board Communique: November 22, 2021
Valuation surplus is good news for members
Member News: Valuation surplus is good news for retired members
In January 2021, the Public Service Pension Board of Trustees announced the 2020 valuation, which determined the plan is fully funded with surplus funds of $2.7 billion. This surplus allowed the board to make a number of plan improvements that will contribute to the long-term stability of your pension.
Inflation adjustment account
Active members and employers contribute to the inflation adjustment account, and this account funds the inflation adjustments the board grants to your pension. The good news is that the 2020 valuation determined the plan’s inflation adjustment account is fully funded and sustainable. No surplus funds were required to further fund this account.
What this means: Inflation adjustments help your pension keep pace with increases in the cost of living. While inflation adjustments are not guaranteed, once the board grants an inflation adjustment it becomes part of your basic lifetime pension.
The board is making some changes that will help to ensure a stable and fully funded pension plan for both you and future retired members. Of note to retired members, the board will:
- Set aside $1.1 billion of the surplus for the plan’s rate stabilization account (RSA). The RSA is a rainy-day fund that may be used to help reduce future contribution rate increases for active members and employers. This fund will be drawn from if future valuations determine the plan has an unfunded liability and requires contribution rate increases.
- Focus on contribution rate stability. Some of the surplus funds will be used to offset contribution rate increases for active members and employers.
Stable contribution rates are part of what makes the plan a valuable tool for attracting and retaining new plan members and plan employers. This helps to ensure the long-term sustainability of the plan.
Please note the board is not permitted to use surplus funds to support or improve retirement group health benefits. These benefits have a different funding source and are not a guaranteed benefit.
Read the Winter 2022 issue of Pension Life to learn more about plan improvements and the 2020 valuation, published mid-January 2022.