Assets and Liabilities of Registered Pension Programs

A registered Pension Program is a form of guardianship that provides pension benefits for company employees at retirement. RPP is registered with the government. Employees and employers, or only employers who contribute to this pension program until employees leave the company or retire. Contributions to RPP can be deducted from taxes for employees and employers. Contributions to plans and profits from primary assets are tax-deferred, so funds are taxed when withdrawn from the project. In this article, we will discuss the assets and liabilities of a registered pension program.

Every three years, a registered pension program must have an actuarial evaluation by an independent actuary company, because it is crucial to test the solvency of the program and adjust the level of contributions needed to fulfill future obligations. In other words, this is a test to examine future liabilities and assets to meet future requirements to fund pensions for company employees.

1. Assets
   Assets calculated by an independent actuary company will provide assumptions for future income using the same interest rate as the assumptions used in the payment of funds. This will give us a far more accurate assumption than if we count using book values ​​or market values.
2. Liabilities
   The actuary will make a rather conservative estimate in preparing the present value assumption for future payments, using the assumptions below:

a) Moderate level of funding income, including interest, capital gains, and dividends.
b) Increasing employee salaries, the relationship between salary increases, and the assumption that the pension fund’s return is the main calculation.
c) Estimates of the future level of government pension benefits and efforts to integrate them into the plan.
d) The level of employee termination.
e) Death of participants and retirees in the future to fund death benefits.