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Supersized Superannuation:The Startling Fair-Value Cost of Canadian Public Service Pensions

9 Pages Posted: 1 Jun 2010  

Alexandre Laurin

C.D. Howe Institute

William B. P. Robson

C.D. Howe Institute

Date Written: Spring 2010

Abstract

Governments are major employers, and many provide defined benefit pension plans with full inflation indexing and generous early retirement provisions. Hence, changes in thinking about, and accounting for, the costs of defined benefit pension plans have major implications for government finances. Both past tallies on government balance sheets and current accruals on government income statements may understate the true cost of public-sector employment, and gradual recognition of changes in the financial status of government plans may understate the risks they create. Fair-value approaches are exposing higher costs, risks and funding deficits in defined benefit plans, raising concerns about the security of their promises for participants and the exposure they create for taxpayers. This article examines these issues in the context of the Canadian federal government’s major defined benefit pensions, principally the Public Service, the Canadian Forces, and the Royal Canadian Mounted Police plans.

Keywords: Fair-Value, Liability Discount Rate, Pension Fund, Public Accounts, Public Service Pensions

Suggested Citation

Laurin, Alexandre and Robson, William B. P., Supersized Superannuation:The Startling Fair-Value Cost of Canadian Public Service Pensions (Spring 2010). Rotman International Journal of Pension Management, Vol. 3, No. 1, 2010. Available at SSRN: https://ssrn.com/abstract=1618836 or http://dx.doi.org/10.2139/ssrn.1618836

Alexandre Laurin (Contact Author)

C.D. Howe Institute ( email )

67 Yonge St., Suite 300
Toronto, Ontario M5E 1J8
Canada

HOME PAGE: http://www.cdhowe.org

William Robson

C.D. Howe Institute ( email )

67 Yonge Street
Suite 300
Toronto, Ontario M5E 1J8
Canada
416-865-1904 (Phone)
416-865-1866 (Fax)

HOME PAGE: http://www.cdhowe.org

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