This educational note has been prepared by the Committee on Pension and Post-retirement Benefit Accounting Discount Rates (the committee).
When preparing pension-related information for their financial statements, pension plan sponsors are responsible for the selection of the assumptions used to value the plan liabilities. One of the most material assumptions that plan sponsors must select is the discount rate assumption (i.e., the assumption used to discount the projected pension plan cash flows to the accounting measurement date). Plan sponsors often engage actuaries to provide guidance on the selection of pension accounting assumptions. This educational note highlights some of the considerations of which an actuary ought to be mindful when engaged to provide guidance to a plan sponsor on the selection of the discount rate for a Canadian pension plan under accounting standards. In addition, this educational note describes an approach for extrapolating the long end of the high-quality corporate yield curve that the committee believes would be sufficiently robust to be appropriate in a variety of economic environments, including the current economic environment.