Note 8. Accrued Pension Benefits

a) Accrued Pension Benefits

Accrued pension benefits are based on management’s assumptions as described in note 8(c) and include an implicit provision for expenses. The Plan provisions considered in the valuations were those in effect at the valuation dates.

b) Actuarial Methodology for Financial Reporting

For the determination of the actuarial present value of accrued pension benefits as at December 31, 2007, an actuarial valuation was conducted by Towers Perrin Inc. The valuation uses the projected accrued benefit method (pro-rated on service) with respect to all benefits and assumes that the Plan will continue on a going-concern basis. The data used in the valuation was based on member’s demographic data provided by the Hospitals of Ontario Pension Plan as at December 1, 2007 and members’ pay data which was provided as at December 31, 2006, all of which was projected to December 31, 2007 using management’s estimates of experience for the intervening periods. The earnings estimates were determined based on 2006 experience and estimate assumptions.

Using this method and data, the accrued pension benefits at December 31, 2007 were $28,683 million (2006: $25,808 million).

c) Actuarial Assumptions

Estimates used for financial reporting purposes reflect management’s expectations of long-term economic and demographic conditions. To determine the accrued pension benefits as at December 31, 2007 and December 31, 2006, the following economic assumptions were analyzed and reviewed by management and the Plan’s actuarial advisors for reasonability and approved by the Board for financial reporting purposes:

December 31	2007		2006
Rate of return(1)	6.00%	(2)	6.25%
Rate of price inflation	2.25%		2.25%
Real interest rate(1)	3.75%	(2)	4.00%
Salary escalation rate	4.75%		4.75%

⁽¹⁾Net of allowance for expenses of 0.40% [2006: 0.40%]
⁽²⁾Changes from actuarial assumptions used in the previous year resulted in an actuarial loss of $1,008 million [2006: loss of $890 million]

d) Data Adjustment Experience Gains and Losses

Data adjustment experience gains and losses represent the difference in accrued pension benefits based on using projected data versus actual data, including any change in pension benefits payable on a year over year basis. Projected data is used for determining the accrued pension benefits. Once actual data is available a subsequent valuation is conducted on the same basis. The difference in results is the data adjustment experience gain or loss and is recorded in the year in which it is measured. The 2007 data adjustment resulted in an experience gain of $38 million (2006: experience gain of $322 million).

e) Estimated Experience Gains and Losses

Estimated experience gains and losses represent the change in accrued pension benefits due to the difference between actual economic and demographic experience and expected experience. During 2007, there was an estimated experience loss of $96 million (2006: gain of $142 million).

f) Plan Provisions

As discussed under the Description of the Plan, the Board has the authority to provide ad hoc indexing for retirements and deferred retirements for service after 2005. For 2007, the Board granted 75 percent of the 2007 CPI increase, to a maximum CPI increase of 10 percent. This resulted in an increase in the Plan’s accrued pension benefits of approximately $2 million.