Every three years an independent actuary assesses the long‑term financial health of the plan. The valuation is like a report card showing whether the plan is on track for meeting its pension promise.
Working from a number of assumptions, the actuary compares money coming into the plan through current and future contributions and investment returns (assets) against the money that will be paid out in the future for pension benefits (liabilities). If the assets are the same as the liabilities, the plan is fully funded. A shortfall in assets is an unfunded liability; an excess in assets is a surplus. The board must address an unfunded liability by adjusting contribution rates for both members and employers.
The most recent actuarial valuation (as at December 31, 2011) showed an unfunded liability for basic pension benefits. Effective July 1, 2013, member and employer contributions each increased by 1.3 per cent of salaries. The contribution rate increase restores the plan to full funding.