Reform Proposal

for Addressing the Pension Plan's Funding Gap

Note by the Chairman of the WTOPP Management Board

This note updates document WT/BFA/W/613 of 2 November 2022 following further analysis and stakeholder consultations. The principal substantive difference is the change of one specific measure from the previous draft reform proposal. The new measure is described in section 2.2.5.

1  Background: the wto pension plan's funding gap

1.1.  The Pension Plan's latest full actuarial valuation based on 31 December 2020 data identified an actuarial gap of 10.5% (expressed in % of contribution rate).^[1] As a means of illustration, this gap would be closed by an increase of 10.5% of the actual pension contribution rate (from 23.7% to 34.2%, which is referred to as the "required contribution rate" or RCR), or by an increase in the Plan’s assets of CHF 380 million.

1.2.  The Pension Plan Management Board spent most of 2022 developing a draft reform proposal that aims at bringing the Plan back to a sustainable position. A draft reform proposal was presented to stakeholders in November 2022. Since the release of a draft reform proposal in November 2022, the Pension Plan Management Board has been engaging in a variety of formal and informal listening and consultation exercises with stakeholders, including participants, beneficiaries, the WTO administration and WTO Members.

1.3.  While the Management Board and its reform work have consistently targeted the objective of covering the 10.5% gap identified in the full valuation based on 2020 data, one should keep in mind that the 10.5% figure depends on best estimates of economic and demographic assumptions that are constantly changing, and the resulting estimates of actuarial balance will change from one actuarial valuation to the next. In fact, the interim valuation based on 2021 data^[2] showed a slightly reduced funding gap (9.4%). The latest interim valuation based on 2022 is likely to reflect a larger gap. These changing estimates reflect normal variability of actuarial valuation over the short term. While recognizing that the trend will be for the situation to deteriorate as long as the funding gap persists, the Board continues to target the 10.5% estimate from the full valuation based on 2020 data for practical reasons as the exact gap is a constantly moving target.

1.4.  The next full valuation will be produced in 2024 based on 2023 data.