SHEPP is a defined benefit pension plan, which means your benefit amount is determined by a formula based on eligible earnings and service. This defined benefit formula means that you can expect a predictable monthly income for life when you retire with a SHEPP pension.

As a result, SHEPP must consider how it will fund benefit obligations that exist 70 or so years in the future as today's youngest members near the end of their lives. Funding is truly a long-term and ongoing consideration that requires careful monitoring to ensure SHEPP is securing member benefits now and into the future.

Funding Your Pension Benefit

Your SHEPP pension is funded through a combination of contributions and investment returns, which are referred to as the Plan's assets. SHEPP's liabilities are the benefit obligations we have to our members.

Under The Pension Benefits Act, 1992 (Saskatchewan), SHEPP is required to perform an actuarial valuation at least every three years, which looks at the Plan's assets and liabilities to determine if sufficient funds have been set aside to cover future benefit obligations. These valuations determine the financial position of the Plan and the contribution levels required to maintain long-term funding. In the end, the Plan is shown to either be fully funded, in a surplus position, or have an unfunded liability.

The Funding Challenge

Many defined benefit pension plans, including SHEPP, have faced funding challenges. Market volatility and interest rates directly impact the financial health and management of the Plan, while changes in the discount rate along with longer life expectancies affect the pension liabilities. In SHEPP's most recent valuation performed as at December 31, 2022, the Plan's funded ratio remained strong at 98% on a going-concern basis and the unfunded liability decreased to $175 million. As a result, no increases to contributions were required.


The rate required to fund the new pensions being earned by members from
this point forward. This is called the current service cost and you
can think of it as the normal or ongoing cost of the Plan.

(must be eliminated by Dec. 31, 2025)

The rate required to fund any unfunded liability or deficit for pensions
already earned by members. This is the past service cost that requires
special temporary contributions to eliminate any unfunded liability within a
specific period.

Combined Employer and Member Going-Concern Contribution Rate 18.30%

SHEPP has been permanently exempt from having to fund on a solvency basis. However, a solvency valuation must be completed to determine a solvency ratio used in calculating current transfer deficiency holdbacks.

The Plan's solvency ratio was 98% as at December 31, 2022. Therefore, SHEPP is required to apply a holdback of 2% to certain termination benefits. Holdbacks are paid, with interest, five years from the initial transfer or when the Plan becomes fully funded, whichever occurs first.

SHEPP is working hard to eliminate the unfunded liability and return the Plan to fully funded status. The next actuarial valuation is required as of December 31, 2025.

Our Funding Philosophy

The primary objective of the Board of Trustees' Funding Policy is to secure member benefits, and the secondary objective is to stabilize contribution rates. SHEPP's Board and Administration continue to work closely with the Plan actuary and investment consultant to manage investment risk and optimize the Fund's asset mix to ensure a sufficient rate of return without exposing the Plan and its members to excessive volatility.

With this policy in place, the Fund has more than doubled between 2012 and 2022 from $4.1 billion to $9.3 billion, and SHEPP continues to make meaningful progress toward fully funded status.

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