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ARCHIVED - Audit of the Treasury Board of Canada Secretariat's Management Control Framework of the Public Service Pension Plan


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1. Introduction

The Public Service Pension Plan is one of three main public sector pension plans in the federal government (i.e., the public service, the Canadian Forces, and the Royal Canadian Mounted Police). Its objective is to pay out a source of lifetime retirement income for retired and disabled Public Service Pension Plan members.

The Public Service Pension Plan was established in January 1954 under the Public Service Superannuation Act. Membership is compulsory for all eligible employees of the federal public service and includes substantially all full- and part-time employees of the Government of Canada, certain Crown corporations and the territorial governments.

The Public Service Pension Plan is the largest pension plan in Canada. As at March 31, 2010, the plan had 561,395 members and accrued pension benefits of $126.7 billion. It received $4.3 billion in employee and employer contributions, and it paid $5.0 billion in benefits.[1]

The Public Service Pension Plan is a contributory defined benefit pension plan, that is, a plan to which both the employer and the employee make contributions. A defined benefit plan specifies its benefits in the plan document, in this case, the Public Service Superannuation Act and its regulations. These benefits, which are payable on death, disability, termination of service or retirement, are directly related to the employee's salary based on the number of years of pensionable service to a maximum of 35 years. The benefits are determined by a formula set out in the Public Service Superannuation Act; they are not based on the financial status of the plan. The basic benefit formula is 2 per cent per year of pensionable service times the average of five consecutive years of the highest paid service. Using a legislated formula, benefits are coordinated with the Canada Pension Plan and the Québec Pension Plan, and are fully indexed to the increase in the consumer price index.

The plan's benefits are financed through contributions from both the employer (i.e., the Government of Canada) and plan members. As of 2010, members contribute 5.5 per cent of earnings up to the yearly maximum of pensionable earnings ($47,200) and 8.4 per cent of earnings above the yearly maximum.

Operating Environment

The Public Service Pension Plan is complex. While it is commonly referred to as a plan, it differs from many private and public sector plans in the following ways:

  • It is not subject to the standard legislation of federal and provincial pension benefits;
  • It is not externally regulated and supervised;
  • There is no distinct legal entity or plan, separate from the Government of Canada, in which pension assets are held and invested, and from which pension benefits are paid;
  • There is a statutorily independent asset manager, the Public Sector Pension Investment Board, established in April 2000 that invests funds transferred from the Consolidated Revenue Fund and manages them on behalf of the government. This role did not exist prior to April 2000;
  • The government's liability for pension benefits is owed directly to beneficiaries, not to a plan, and benefits are paid out of the Consolidated Revenue Fund; and
  • Primary responsibility for the plan is shared by five organizations—the Secretariat, Public Works and Government Services Canada, the Public Sector Pension Investment Board, the Office of the Chief Actuary and the Public Service Pension Advisory Committee;[2] the roles and responsibilities of these five organizations are outlined in Appendix 1.

Three areas within the Secretariat are involved in supporting the plan:

  • The Pensions and Benefits Sector provides strategic direction and leadership through public service pension policies, and employee and pensioner programs;
  • The Office of the Comptroller General provides advice on accounting and financial issues, and advises Public Works and Government Services Canada regarding the preparation of pension plan financial statements. The Comptroller General of Canada also provides a certification of pension assets as per legislation; and
  • The Corporate Services Sector provides a service for the recovery and remittance of employer contributions from government departments to Public Works and Government Services Canada.

The Pensions and Benefits Sector is a primary participant in a number of key, plan-related activities. These include annual reporting, communicating with plan members and beneficiaries, providing support to the Public Service Pension Advisory Committee, setting policy and creating and interpreting legislation and regulations, and advising on the day-to-day administration of the plan.