How inflation protection contributes to pension security

Independent experts do a financial check up of the pension plan every year. The check up is called a funding valuation. Financial Check Up 2 FUNDING VALUATION

The valuation compares projected pension assets to liabilities. Assets are what we own. Liabilities are what we owe in pensions to our members. Assets & Liabilities FUNDING VALUATION 3

Many factors affect pension assets and liabilities. Key ones include returns on plan investments, interest rates and member life expectancy. The valuation takes these and many other variables into account. Factors Affecting Assets & Liabilities FUNDING VALUATION 4

The valuation can show three key funding positions or outcomes: 1 A balanced state 2 A surplus 3 A shortfall Key Positions & Outcomes FUNDING VALUATION 5

The pension plan is balanced when projections show we have enough money to meet pension obligations looking out 70 years and beyond. A Balanced State THREE KEY FUNDING POSITIONS OR OUTCOMES 6

Even better is a surplus. This occurs when projections show we have more than enough money to meet all pension obligations. A Surplus THREE KEY FUNDING POSITIONS OR OUTCOMES 7

But when future pension costs are greater than pension assets, we have a projected funding shortfall. A Shortfall THREE KEY FUNDING POSITIONS OR OUTCOMES 8

Providing smaller cost-of-living increases can help lower pension costs and restore balance. Lower Pension Costs RESTORING BALANCE 9

When there’s a funding surplus, larger cost-of-living increases can be paid with confidence. Larger Increases RESTORING BALANCE 11

Making inflation protection conditional on the plan’s funding status is one way to keep the pension plan balanced. And that translates into retirement security for you. Conditional Inflation Protection RESTORING BALANCE 11

MORE INFORMATION Visit the pension plan’s website at Talk to your affiliate pension representative