Note 9. Funding Valuation (Regulatory Filing Valuation)

In accordance with the Pension Benefits Act of Ontario and the Income Tax Act (Canada) and Regulations , an actuarial valuation is required to be filed at least every three years to estimate the Plan’s surplus or deficit, and to determine the Plan’s funding requirements. The last actuarial valuation for regulatory funding purposes was prepared by Towers Perrin Inc., as at December 31, 2006, and a copy of this valuation was filed with the Financial Services Commission of Ontario and CRA.

The funding valuation method used to determine the Plan’s pension liabilities is the projected accrued benefit actuarial cost method (pro-rated on service). Under this method, pension liabilities are determined by calculating the actuarial present value of benefits based on the projected final average earnings. The actuarial present value of benefits is then pro-rated to determine the actuarial current service cost of benefits, a portion of which is covered by member contributions.

The economic and demographic assumptions used for regulatory funding valuations can vary from those used to determine amounts disclosed for financial statement purposes. The funding valuation may use actuarial assumptions that are more conservative since the primary purpose of the funding valuation is to promote benefit security. These actuarial assumptions are recommended by the external actuary, in consultation with management, to ensure there is sufficient funding to meet all long-term liability requirements. The economic assumptions used for the previous year’s regulatory funding valuation are as follows:

Rate of return	6.25%
Rate of price inflation	2.25%
Real interest rate	4.00%
Salary escalation rate	4.75%

The most recent regulatory funding valuation conducted as at December 31, 2006 disclosed actuarial assets of $25,205 million with accrued pension liabilities of $25,454 million, resulting in a deficit of $249 million. This funding valuation also confirmed that the Plan is fully funded on a solvency basis.