RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/BFA/W/166 
21 February 2008 
 (08-0786) 
Committee on Budget, Finance and Administration  
  
 
POSSIBLE ADVERSE IMPACT OF MANAGEMENT DECISIONS 
ON THE ACTUARIAL BALANCE OF THE WTO PENSION PLAN 
 
Communication from the Chairman  of the Management Board
 
 
 
1. In 2007, the Management Board of the WT O Pension Plan submitted a communication 
(WT/BFA/W/162) to the Committee on Budget, Finance and Administration with a view to drawing the attention to the Committee to the possible adve rse impact of certain management decisions on the 
actuarial balance of the WTO Pension Plan.  The Management Board proposed that the Plan 
Regulations should be amended in order to ensure th at the Plan was adequately protected against such 
an impact.  The Committee had a first exchange of views on the basis of document WT/BFA/W/162 
and decided to revert to the issue at the beginning of 2008. 
2. The purpose of the present communication is to provide the Committee with additional 
background information in support of the above  proposal by the Management Board for an 
amendment to Article 9 of the Plan Regulations. 
3. The general background to the proposal is a recognition that pension funds may encounter 
financial difficulties by absorbing early retirement costs consequent on manage ment decisions on staff 
restructuring measures.  The aim of the proposal is  to avoid such additional burdens being placed on 
the Plan. 
4. Article 9 of the Plan Regulations concerns the actuarial valuation of the Plan.  Such 
valuations are carried out at regular intervals in order to ensure that the actuarial balance of the Plan is 
being maintained over time.  The valuation is carri ed out on the basis of a series of assumptions 
concerning, inter alia , mortality, disability, price inflation, salary inflation, investment returns and 
early retirement rates.  Depending on the outcome of such valuations, the Management Board may 
recommend such action as may be required in order to ma intain or restore the actuarial balance.  Such 
action may include an adjustment to c ontribution rates and/or benefit levels. 
5. The assumptions underpinning an actuarial valu ation are necessarily based on the most 
probable scenarios for the evolution of the various  factors cited above.  Where events beyond the 
control of the Management Board and/or Organiza tion conspire to invalidate those assumptions, then 
it is quite normal that the burden of the necessar y corrective action should be shared by the Plan 
sponsor and its participants, through an adjustment  to contribution rates and/or benefits as provided 
for under Article 9(d) of the Plan Regulations. 
6. Where, however, an assumption is invalidated as a result of a specific management decision, 
then it is not appropriate to have recourse to the concept of burden-sharing between the Plan sponsor 
and its participants.  For example, in the case of  a restructuring exercise, where the Organization 
decides to have recourse to the early separati on of staff, the normal assumption regarding early 
retirement rates is invalidated.  In such a case, the resulting adverse impact on the actuarial balance of 
the Plan is directly attributable to a specific mana gement decision.  In other words, the pension benefit 
payable to a staff member immediately following hi s/her separation may be used in the Organization's WT/BFA/W/166 
Page 2  
 
  negotiation stance with the individual.  The Manageme nt Board is of the view that it would not be 
appropriate to invoke Ar ticle 9(d) of the Regulations in these situations. 
7. The Management Board wishes, therefore, to propose the introduction of a new provision in 
Article 9, in order to cover the situation where a specific action by the employer creates an additional 
liability for the Plan and where the resulting cost sh ould be borne exclusively by the employer.  The 
precise impact of that cost on the Plan, in terms of an increase in required contributions, would be 
determined by the Management Board in the light of a report by the Consulting Actuary. The inclusion of this provision in the Plan Regulations  should also ensure that the pension consequences 
of early retirement proposals, a component of the overall cost, are considered by the Organization 
before decisions are taken. 
8. For the convenience of the Committee, the proposed  amendment to Article 9 is reproduced in 
the attachment. 
9. Pursuant to Article 43(a) of the Plan Regula tions, and subject to the concurrence of the 
Committee, the Management Board wishes to reco mmend this amendment to the General Council for 
approval.  WT/BFA/W/166 
 Page 3 
 
 
  ANNEX 1  
 
 
AMENDMENT TO ARTICLE 9 OF THE PLAN REGULATIONS1 
 
Article 9 
Actuarial valuation of the Plan  
 
(a) The Management Board shall have an actuarial va luation made of the Plan at least once every 
three years by the consulting actuary. 
(b) The report on the actuarial valuation shall e xplain the assumptions on which the calculations 
are based, describe the method of valuation used, and state the results and conclusions. 
(c) The Management Board shall, in the light of the report of the consulting actuary, recommend 
such action as it deems desirable to the Gene ral Council through the Committee on Budget, 
Finance and Administration, which shall both be  provided with copies of the report.  In 
making its recommendations, the Management Bo ard shall provide a best estimate of the 
possible implications for the funding of benefits  of maintaining contributions at the existing 
level, and for the funding of contributions of maintaining benefits at the existing level. 
(d) In the particular case of an actuarial deficit or surplus, the Management Board shall 
recommend to the General Council any necessary co rrective action.  Such action may include 
an adjustment to contributions and/or benef its or any other measure which the Management 
Board deems appropriate to restore an actuarial balance. 
(e)  Notwithstanding the provisions of paragraph (d), if a participant is awarded benefits 
under Article 24 as a consequence of the termination of that participant's employment by, or with the inducement of, the WTO,  then the WTO shall cover the additional 
contributions necessary to meet any consequential increase in the actuarial value of the 
liabilities of the Plan.  The Management Board shall determine the additional 
contributions in the light of a report from the Consulting Actuary. 
 
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1 Amended text in bold