Estimated solvency ratio results (May 2019)

OSFI regularly estimates the solvency ratio for pension plans with defined benefit provisions. The Estimated Solvency Ratio (ESR) results help us identify any solvency issues that could affect the security of members' promised pension benefits, before a plan files their actuarial report. The ESR results also help identify broader trends.

The ESR results are calculated using the most recent actuarial, financial and membership information filed with OSFI for each plan before the analysis date. Assets are projected based on either the rate of return provided on the Solvency Information Return or an assumed rate of return for the plan. Solvency liabilities are projected using relevant Canadian Institute of Actuaries' commuted value and annuity proxy rates. Expected contributions, benefit payments, and expenses are taken into account and an ESR, based on the estimated adjusted market value of the fund, is then calculated for each plan.

The median ESR for all 361 plans was 0.94 as at December 31, 2018, down from 0.96 at the end of 2017. The liability-weighted average ESR for all plans was 0.98 as at December 31, 2018, down from 1.02 at the end of 2017. The graph below shows the current and previous ESRs and median ESRs dating back to December 2009.

The bar graph below illustrates the distribution of the ESR results for federal pension plans with defined benefit provisions as at December 31 of each year since 2009. It shows the percentage of plans with ESRs below 0.80, between 0.80 and 0.90, between 0.90 and 1.00, and over 1.00 in each year. The most recent ESR results indicated that 74% of defined benefit plans were underfunded as at December 31, 2018, up from 63% at the end of 2017. In addition, there has been an increase of the number of plans that are more significantly underfunded (ESRs below 0.80), from 13% at the end of 2017 to 16% at the end of 2018.