In 2003, the sponsors adopted a Funding Management Policy (FMP). The FMP provides the sponsors with a guidance framework for decision-making when there’s a funding surplus or shortfall.
The guidance framework in the FMP is robust, transparent and based on strong actuarial and economic principles. These mechanisms have been utilized by the sponsors for many years, providing guidance in their decisions related to valuation filings. The FMP framework has proven to be very effective and has contributed to the current strong position of the plan.
A key component in the FMP is the concept of funding zones, each defined by a range. The funding zones provide a point of reference for whether action is required by the sponsors. If action is required, guidance is provided on how to use any surplus funds or resolve any shortfall. Specifically, the FMP helps answer the question – when is it possible or necessary to increase or decrease benefits, lower or raise contribution rates or simply conserve assets for an uncertain time?
During 2012 through 2018, the focus of the sponsors was to return the plan gradually over time to be fully funded with base provisions – an average contribution rate of 11% and full inflation protection on all pension credit.
Since January 1, 2018, the plan has been providing base provisions to all members. As of January 1, 2021, the plan remains in the “Conserve assets for an uncertain time” funding zone within the FMP. This means that any surplus funds are reserved to facilitate stability in contribution and benefit levels.
While the FMP outlines preferred mechanisms associated with its various funding zones, it’s ultimately the sponsors’ responsibility to decide which actions to take.