Canada Post Pension Plan 2022 year-end results
A message from Jan Faryaszewski, Chief Financial Officer
In 2022, the surplus in the defined benefit (DB) component of the Canada Post Pension Plan grew from $4.9 billion to $6.5 billion on a going-concern basis. The funded ratio, or the Plan’s financial position expressed as a ratio between assets and liabilities, was 127% at the end of the year, an improvement from 120% in 2021. 2022 was a turbulent year for financial markets. The value of assets in the DB component of the Plan fell from $32.3 billion to $29.5 billion. At the same time, the DB component showed strong relative performance. The annual rate of return for the DB component was -6.7%, compared to our benchmark’s return of -11.7%.
This going-concern valuation indicates the DB component of the Plan continues to have more than enough assets to meet its obligations to Plan members over the long term. In 2022, the solvency position (market value) improved from a deficit of $2.6 billion to a surplus of $2.4 billion, improving the funded ratio from 92.6% to 108.7%.
For the defined contribution (DC) component, assets grew from $139.7 million to $153.5 million. This partly reflects the growing number of employees who are members of the DC component of the Plan, with Canada Life as our service provider. We encourage DC members of the Plan to review their statements to see the personal rate of return on their assets and consider speaking with a financial advisor to get personalized advice about their Plan investments. These statements are mailed to employees’ homes or can be viewed online by signing in at mycanadalifeatwork.com.
Check out the 2022 Report to Members under Publications. It provides you with information about the Plan’s performance, investments and services to members, as well as an update on the funded status of the Plan.
In April 2023, Canada Post filed the actuarial valuation of the Canada Post Corporation Registered Pension Plan (RPP) as at December 31, 2022, with the federal pension regulator, the Office of the Superintendent of Financial Institutions. The valuation disclosed a going-concern surplus of $6.5 billion (ratio of 127%) and a solvency surplus of $2.2 billion (using market value of plan assets; ratio of 108%). As these ratios exceed 125% and 105%, respectively, Canada Post is required to make mandatory use of the surplus and is not permitted to make further employer current service contributions. This position will be reassessed when the December 31, 2023, valuation is completed in 2024. The solvency deficit (using the three-year average solvency ratio basis) is $1.8 billion (solvency ratio of 94%) at December 31, 2022. However, under the Canada Post Corporation Pension Plan Funding Regulations, Canada Post has temporary relief from its solvency funding obligations until December 31, 2024. Without this relief, Canada Post would be required to make special solvency payments of $354 million for 2023.