Board Approves Continued Subsidization Of LTD Premium Rate

With continued positive plan experience in the Long-Term Disability Plan, the Pension and Benefits Board of Directors has approved a motion to continue subsidizing premium rates.

The difference between what we have in the fund (i.e., assets) and what we expect to need in the fund i.e., liabilities) is called surplus. Three years ago, the Board established a policy to help manage the Plan’s surplus to ensure it did not get too big or too small. At that time, the Board decided to improve some Plan provisions and to subsidize premium rates for members to help bring the surplus back within a target funding range. While the surplus has fluctuated since that time, it remains above the target range. With that in mind, the Board agreed that the best way to bring the surplus back within the target funding range was to continue subsidizing rates for members at 1.00 percent of salary, 0.87 percent below the true cost of the Plan. This means the Plan is paying for 0.87 percent of salary for each member out of the surplus.

While this will surely come as good news to members who will continue to pay below cost for LTD coverage, there are many unknowns regarding future disability claims. It’s tough to predict liabilities for disability plans at the best of times, but with a lingering pandemic impacting mental health and contributing to significant delays in accessing non-emergency medical diagnoses and treatments, there is a general sense that disability plans will see cost increases over the next number of years which could have a negative effect on funding levels.

With that in mind, the Board continues to keep a watchful eye on the Plan’s funded status and will continue to review LTD premium rates on an annual basis.