Actuary

An actuary is a specialist who is skilled in the application of mathematics to financial problems faced by individuals, regulators, pension plans and insurance companies with respect to property loss and damage, retirement, sickness, disability, investment risk and other area.

In some legislations and regulations, the term "actuary" is specifically defined as a Fellow of the Canadian Institute of Actuaries (FCIA).

Actuarial evidence

This is one of the practice areas of actuaries.  The actuarial evidence practice covers a broad range of technical advice to the courts, other tribunals and to the parties involved in legal actions. Such advice may include testimony as an expert witness (extract from the CIA website).  Actuaries practicing in actuarial evidence will combine the use of probability and statistics, compound interest, life contingencies, and finance and risk theory to calculate the present value of streams of payments associated with uncertain future events associated with divorce, personal injury, disability, fatality, wrongful dismissal and others.

Actuarial equivalent

The condition in which two or more payment streams have the same present value based on the appropriate valuation assumptions.

Actuarial present value

See present value.

Actuarial valuation

We use this term to refer to reports prepared by actuaries practicing in the area of actuarial evidence.  An actuarial valuation for the purpose of marriage breakdown (also called a pension valuation) will present the capitalized value of the pension asset subject to division.  In cases of personal injury, disability, fatality and wrongful dismissal, an actuarial valuation will address the present value of the financial losses sustained by individuals and/or their families.

Bridge benefit

A bridge benefit is a benefit provided by some pension plans to members who retire prior to normal retirement age. It is often provided to supplement the member’s pension until the age of 65.

Canadian Institute of Actuaries (CIA)

The Canadian Institute of Actuaries is the national organization of the actuarial profession in Canada. The CIA is dedicated to serving the public through the provision, by the profession, of actuarial services and advice of the highest quality.
 
The CIA establishes the Rules of Professional Conduct, guiding principles and monitoring processes for qualified actuaries. The CIA also assists the Actuarial Standards Board in developing standards of practice applicable to actuaries practicing in Canada.

Canadian/Quebec Pension Plan (CPP/QPP)

The Canada/Quebec Pension Plan is a contributory, earnings-related social insurance program. It provides benefits to a contributor and his or her family in Canada/Quebec in the event of retirement, disability and death.

Capitalized value

We primarily use this term in actuarial valuations for marriage breakdown purposes. The capitalized value represents the present value at the date of separation of the pension entitlements accrued by the member spouse assuming the member spouse will retire at a specific age.  The capitalized value is set in accordance to the Practice-Specific Standards for Actuarial Evidence established by the Canadian Institute of Actuaries.

Commuted value

This term is commonly used to represent the present value of the pension entitlements accrued by the member at the member’s actual or assumed date of termination of employment.  The commuted value is set in accordance to Practice-Specific Standards for Pension Plans established by the Canadian Institute of Actuaries.

Consumer Price Index (CPI)

A statistic that measures the change in the cost of living for consumers. It is often used to measure inflation.

Date of valuation

In marriage breakdown, the date of valuation corresponds to the date of separation.

In civil litigation cases, the date of valuation often corresponds to the mediation date or trial start date.  Losses incurred before that date are referred to as past losses.  Those expected after the date of valuation are future losses.

Defined Benefit pension plan (DB)

A Defined Benefit plan is a plan that defines and guarantees specific pension benefits that the member will receive at retirement based on years of plan membership, average earnings, etc., in accordance with the terms of the plan.

Defined contribution limit

The maximum dollar amount of contribution that can be contributed to a defined contribution pension plan on behalf of a member. The contribution limit (the total of employer regular, employee regular and employee voluntary) is $19,000 for 2006, $20,000 for 2007, $21,000 for 2008 and $22,000 for 2009.  After 2009 the limit will increase at the rate of increase for the Average Industrial Wage Index for Canada.

Defined Contribution pension plan (DC or Money purchase pension plan)

Under a DC plan, participating employees accumulate individual accounts by way of employer/ employee contributions, often expressed as a percentage of salary. Funds grow until retirement. The benefit the member will receive on retirement is calculated at the date of retirement and depends on the sum accumulated in the member individual account and the annuity rate at retirement. If a plan is registered for tax purposes, the maximum contribution amount (or defined contribution limit) is defined by tax regulations.

De-linked pension

This term is used in the context of marriage breakdown when the pension was accrued under a defined benefit plan regulated by the Pension Benefits Act of Ontario (PBA).  It refers to an additional option offered by some pension plans (ex: the Ontario Public Service Pension Plan) whereby the payment of the portion of the member spouse pension that was assigned to the non member spouse under an “if and when” agreement can be contingent upon the non member spouse’s life (as opposed to the member spouse’s life).

Elective service

Elective service is any period of qualifying employment that occurred before the member joined the pension plan. The member may choose to count these periods of prior service as pensionable service.

Full pension

This term is used in the context of a pension accrued under a Defined Benefit plan.  A plan may limit the number of years of pensionable service that members can accrue under the plan.  The member has at that point accrued a full pension.  Beyond that point, the member’s pension entitlements can only increase as a result of an increase in salaries.

“If and when” agreement

This term is used in the context of marriage breakdown when the pension was accrued under a defined benefit plan regulated by the Pension Benefits Act of Ontario (PBA).  It is an agreement entered by the parties that defers satisfaction of the equalization requirement until the member spouse pension is actually in pay. The agreement may require that the plan member pays part of each pension payment received over to the non member spouse or alternatively, that the plan administrator divide the pension payments at source. The payments are contingent upon the survival of the member spouse.  However, some pension plans have started to offer de-linked pensions.

Life Expectancy

Life expectancy corresponds to the number of years a person is statistically expected to live. Life expectancy calculations are based on mortality tables.

Maximum Transferable Amount (MTA)

This term is strictly used in the context of a division of pension accrued under the federal public service plans in the case of marriage breakdown.  The MTA is the maximum amount that will be paid under the Pension Benefits Division Act (PBDA).

Normal Retirement Age

The age, as established by a pension plan, when an unreduced pension is payable.

Old Age Security Program (OAS)

The Old Age Security basic benefit is a monthly payment that is made to people who are 65 years of age and over who meet the Canadian residency requirements

Pension Adjustment (PA)

A pension adjustment (PA) exists if contributions to a registered pension plan (RPP) have been made on behalf of a contributor. It is the deemed value of the amount of pension earned by a member of a defined benefit plan in a calendar year.  It is related to the pension plan formula but does not represent the real value of the member’s benefit from a particular plan.  The PA reduces the amount that a contributor may pay into a registered retirement savings plan (RRSP). The PA is indicated on the T4 slip.

Pension Benefits Act of Ontario (PBA)

PBA is the Ontario legislation that sets out the rules for pension plans registered in the Province of Ontario. The act establishes minimum standards for administering and funding pension plans and benefits that are subject to the PBA. The Financial Services Commission of Ontario (FSCO) ensures of the compliance of pension plans to the standards set out in act and regulations.

Pension Benefits Division Act (PBDA)

PBDA is the act that provides a mechanism for recognizing court orders or spousal agreements that require division of pension benefits accrued under a federal public service plan (e.g. federal public service, RCMP, Canadian Forces, MP’s).

For more information about the PBDA, please use this link http://www.tpsgc-pwgsc.gc.ca/remuneration-compensation/lppr-pbda/

Pension Benefits Standard Act (PBSA)

PBSA is managed by the Office of the Superintendent of Financial Institutions Canada.  The act outlines the rules regarding the registration, administration and benefits of pension plans in Canada.

Pension valuation

A pension valuation is an actuarial valuation for the purpose of marriage breakdown.  It will present the capitalized value of the pension asset subject to division. 

Practice-Specific Standards for Actuarial Evidence

This is the set of actuarial standards of practice that actuaries must comply with when calculating the capitalized value of pension plan benefits for a marriage breakdown, the present value of amounts other than pension plan benefits for a marriage breakdown and the computation of criminal rate of interest.

Practice-Specific Standards for Pension Plans

This is the set of actuarial standards of practice that actuaries must comply with when calculating pension commuted values and when performing wind-up, hypothetical wind-up or solvency valuation. 

Present value

The present value is the value on a given date of an amount or series of amounts payable or receivable at various times, and accumulated (for past amounts) or discounted (for future amounts) to reflect the time value of money and other factors (e.g. mortality risk for future amounts).  Where applicable, the present value is set in accordance to the Practice-Specific Standards for Actuarial Evidence established by the Canadian Institute of Actuaries.

 

Quebec Pension Plan (QPP)

The Quebec Pension Plan is a contributory, earnings-related social insurance program. It provides benefits to a contributor and his or her family in Quebec in the event of retirement, disability and death.

Reduced pension

This term is used in the context of a pension accrued under a Defined Benefit plan.  Such plan will define the amount of pension payable at the normal retirement age.  If the member retires before the normal retirement age, the pension will generally be reduced to reflect the fact that payments will start sooner and be made for a longer time period.  The reduction may be calculated so that it has an actuarially equivalent value to the normal pension or can be a fixed percentage per month by which the early retirement date precedes the normal retirement date.

Registered Pension Plan (RPP)

A Registered Pension Plan (RPP) in Canada is a plan that is registered with Canada Revenue Agency for tax purposes under Section 147.1 of the Income Tax Act and if applicable the federal or provincial pension regulator.  The plan can be on a Defined Benefit (DB) or Defined Contribution (DC) basis.

Registered Retirement Savings Plan (RRSP)

A RRSP is a personal retirement savings account held in trust by a bank, trust or insurance company or other financial institution recognized by the Canada Revenue Agency (CRA).  Contributions to RRSP are tax deductible and income tax is also deferred on the investment income until such time as the funds are withdrawn or the owner of the RRSP reaches age 71, whichever is earlier. RRSPs are governed by the Income Tax Act.

RRSP deduction limit

The RRSP deduction limit for a year is 18% of prior year earned income up to the RRSP maximum dollar limit for the current year less Pension Adjustment (PA) for the prior year.  The maximum dollar limit for RRSP in years 2008 onward is:  $20,000 for 2008, $21,000 for 2009, $22,000 for 2010 and indexed thereafter. 

Unreduced pension

This term is used in the context of a pension accrued under a Defined Benefit plan.  A pension is said to be unreduced when it is paid without any penalty for early retirement.  A plan may provide for an unreduced pension payable before the normal retirement age if the member meets certain age/service requirements.

Vested or non vested

A member’s entitlement under a pension plan depends on the member’s vested status.  A member becomes vested upon satisfying specific age and/or service requirements.  A vested member who terminates employment is entitled to the accrued pension entitlements under the plan as opposed to a non vested member who is only entitled to a refund of member contributions plus interest.

Year’s Maximum Pensionable Earnings (YMPE)

The YMPE are the earnings on which Canada/Quebec Pension Plan (CPP/QPP) contributions and benefits are calculated. YMPE changes every year based on a formula using average wage levels. YMPE is published annually by the Canada Customs and Revenue Agency. The YMPE is $44,900 in 2008 and $46,300 in 2009.