The Ontario Teachers’ Federation (OTF) and the Ontario government, which jointly sponsor the Ontario Teachers’ Pension Plan, must file a funding valuation with the provincial pension regulator at least every three years. A valuation must be filed with assets and liabilities (the cost of future pensions) in balance.
The OTF and Ontario government can file a valuation earlier than required to help manage the plan’s funding status. For example, the 2011 valuation (3.44 MB PDF) was filed one year before its due date to extend the next mandatory filing date to 2014. The pension plan’s funding status was projected to deteriorate in 2012 due to low interest rates, recognizing 2008 investment losses and other factors, so an earlier filing avoided potentially more dramatic changes that could have been required if the sponsors decided to wait another year to file the valuation. Funding challenges continue because the cost of future pensions is growing faster than plan assets.
For more information about the 2011 valuation, consult Plan Funding News or Top Plan Funding Q&As
The following chart shows how the OTF and Ontario government used surplus funds or resolved funding shortfalls for each valuation filed with the regulator since the inception of the Teachers’ pension plan as an independent entity in 1990.
For more information on plan funding and valuations, see Funding 101.
Funding decisions
| Year | Valuation status and key decisions |
| 1990 | Unfunded liability of $7.8 billion to be amortized over 40 years by special payments from the Ontario government; basic contribution rate for plan members and the government increased to 8% from 7%. |
| 1993 | $1.5 billion surplus; $1.2 billion used to reduce government’s special payments; $0.3 billion used to offset government cost reductions in the education sector (social contract days). |
| 1996 | $0.7 billion surplus; $0.6 billion used to reduce early retirement penalty to 2.5% from 5% for each point short of 90 factor and lower the CPP reduction after age 65 (to 0.68% from 0.7%). |
| 1998 | $6.8 billion surplus; $2.2 billion to pay for the 85 factor window from 1998 to 2002 and further lower the CPP reduction to 0.6%; $4.6 billion to reduce the value of special payments owed by the government; OTF and Ontario government agree future surplus would be used to eliminate the government’s remaining special payments, and the next $6.2 billion would be available to the OTF for benefit improvements. |
| 1999 |
$3.5 billion surplus; $3.5 billion to eliminate government’s remaining special payments. |
| 2000 | $4.6 billion surplus; no changes to benefits or contribution levels. |
|
2001
|
$6.8 billion surplus; $6.2 billion to pay for benefit improvements: permanent 85 factor; 10-year pension guarantee; reduced pension as early as age 50; lower CPP reduction (to 0.45%); 5-year average Year’s Maximum Pensionable Earnings (YMPE) to calculate CPP reduction; pension recalculation based on approximate best-5 salary years for older pensioners; and top-up waived for Long-Term Income Protection (LTIP) contributions; $76 million was set aside in a contingency reserve to be used by the OTF at a later date. |
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2002
|
$1.9 billion surplus; no changes to benefits or contribution levels.
|
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2003
|
$1.5 billion surplus; no changes to benefits or contribution levels; Funding Management Policy adopted by plan sponsors. |
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2005
|
$6.1 billion preliminary funding shortfall resolved, leaving plan with a $0.1 billion surplus; plan sponsors introduced special contribution rate increases to resolve the shortfall, totalling 3.1% of base earnings for teachers, the Ontario government other employers; the OTF used the $76 million contingency reserve set aside in 2001 to reduce contribution rate increases for members in 2008. |
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2008
|
$12.7 billion preliminary funding shortfall resolved, leaving the plan in a balanced position; OTF and Ontario government introduce conditional inflation protection for pension benefits earned after 2009 and increased the basic contribution rate for members and the government to 9% from 8%. |
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2009
|
$2.5 billion preliminary funding shortfall resolved primarily by assuming a slightly higher long-term rate of return on investments: yield on real-return bonds plus 1.5%, versus real-return bonds plus 1.4%.Other minor changes made to assumptions to reflect recent plan experience. |
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2011
|
$17.2 billion preliminary shortfall resolved with 1.1% contribution rate increase (phased in over three years), slightly smaller annual cost-of-living increases for teachers who retired after 2009, and recognition of current contribution rate as the permanent base rate. |