Funding Position

  • A lower premium level has reduced estimated revenue to the Plan by $5.6 million in 2009 and, it is expected that the benefit changes will increase the cost of new claims by approximately $3.2 million in the first year.
  • The total impact of these changes is estimated to be $8.8 million in 2009. Morneau Sobeco notes that, even after these changes, annual premiums are expected to be sufficient to fund the full cost of new claims in 2009 plus provide a reasonable margin for adverse deviation.
  • During 2009 investment market performance was substantially better than 2008 and produced returns well in excess of the valuation rate of 5.5%. This has resulted in an increase in the Plan’s estimated funded position due to the additional investment returns generated in 2009.
  • To maintain maximum financial flexibility, claims in payment are increased for inflation retroactively after confirming the Plan’s continuing financial strength.
  • After reviewing the 2009 results, the Board recommended that claims that have been in force for 24 months or more as of December 31, 2009 be indexed for increases in the Consumer Price Index since December 31, 2008, or the date when claims exceeded 24 months, whichever is later. Reflecting the very modest level of inflation recently, this change has increased Plan liabilities by only $0.2 million.

The following table shows the funding position of the LTD Plan for the last four years

YEAR END 2006 2007 2008 2009
Assets (minus accounts payable) $ millions 68.6 77.5 74.9 92.3
Accrued Liabilities for Benefits $ millions 63.7 59.6 60.4 64.7
Surplus/Deficit $ millions 4.9 18.0 16.6 27.6
Funded Ratio 108% 130% 128% 143%

Source: Morneau Sobeco

On December 31, 2010 the next formal actuarial valuation will be performed to show financial health of the Plan.