Steady-state contribution rate and incremental full funding
The actuarial examination of the Canada Pension Plan (CPP) involves projections of its revenues and expenditures over a long period of time, so that the future impact of historical and projected trends in demographic and economic factors can be properly assessed.
The steady-state contribution rate is defined in the regulations as the lowest level of contribution rate applicable after the end of the three-year review period that results in the assets/expenditure ratio being the same in the 10th and 60th year following the end of the review period.
In addition to the steady-state contribution rate, full funding was introduced to improve fairness among generations and to ensure that changes to the CPP that increase or add new benefits be fully funded, i.e. that their costs be paid as the benefit is earned and that any costs associated with benefits that are paid but have not been earned be amortized and paid for over a defined period of time consistent with common actuarial practice.
The minimum contribution rate is therefore the sum of the steady-state contribution rate and the full funding rate.
2OCA-steady state-Canada.pdf 71.16 kB