Directive on Accounting Standards: GC 3250-3255 Retirement and Post-Employment Benefits

Supports the Public Sector Accounting Handbook (PSAH) in stating the Government's accounting policies for retirement and post-employment benefits.
Date modified: 2017-04-01
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This document is part of the Appendix A of the Directive on Accounting Standards.

A. Primary PSAS references

  • PS 3250 Retirement benefits
  • PS 3255 Post-employment benefits, compensated absences and termination benefits

B. Effective date

C. Government of Canada Consolidated Financial Statements

  1. Public sector pensions and other employee and veteran future benefits are measured on an actuarial basis in the consolidated financial statements. The actuarial valuations estimate the current value of benefits earned and use various actuarial assumptions in the process. When actual experience of the plans varies from estimates or when actuarial assumptions change, actuarial gains or losses arise.
  2. Actuarial gains and losses related to pension and other employee future benefits are recognized over the expected average remaining service life (EARSL) of the employees. Actuarial gains and losses related to veterans’ future benefits are recognized over the average remaining life expectancy (ARLE) of the benefit recipients under wartime veteran plans. Recognition of actuarial gains and losses commences in the year following the effective date of the related actuarial valuations. In addition, an unrecognized net actuarial loss is recognized immediately upon a plan amendment, up to the one-time past service cost reduction; similarly, an unrecognized net actuarial gain is recognized immediately up to the one-time past service cost. The unrecognized net actuarial loss or gain, relating to the obligation that is curtailed or settled, is recognized immediately upon a plan curtailment or settlement.
  3. Investments held by the Public Sector Pension Investment Board (PSPIB) are valued at market related value, a five-year smoothed value. Under this method, the expected return on investments is recorded immediately while the difference between the expected and the actual return on investments is recorded over a five-year period through actuarial gains and losses. The market related value of investments is adjusted, if necessary, to ensure that it does not fall outside a limit of plus or minus 10 percent of the market value of investments at year end; any difference is recorded immediately through actuarial gains and losses.
  4. Contributions receivable from employees for past service buy-back elections are discounted to approximate their fair value.

D. Departmental Financial Statements

  1. Retirement and post-employment benefits, with the exception of severance benefits, are not under the responsibility of departments; they are managed and recorded centrally. The following must be disclosed in the Departmental Financial Statements:
    1. The department’s employees participate in public sector pension plans (e.g. public service, Canadian Forces – Regular Force and Royal Canadian Mounted Police pension plans), which are sponsored and administered by the Government of Canada. Both the employees and the department contribute to the cost of the plan. The department’s responsibility with regard to the plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the Consolidated Financial Statements of the Government of Canada, as the plan’s sponsor. As a result, PS 3250 Retirement benefits is not applicable to departments. Further direction on the contribution rates is provided annually to departments and agencies in the Year-End Call Letter issued by the Office of the Comptroller General of Canada.
    2. The obligation related to the severance benefits earned by employees of a department should be recorded. The determination of the obligation is based on a whole of government actuarial valuation and distributed across departments on a percentage basis. For this obligation, the Government Accounting Policy and Reporting Division of the Treasury Board of Canada Secretariat provides guidance to departments on an annual basis.
    3. The obligation for termination benefits associated with workforce adjustment should be recorded in compliance with PS 3255 Post-employment benefits, compensated absences and termination benefits. When applicable, guidance is provided as part of the Year-End Call Letter issued by the Office of the Comptroller General.
    4. Further disclosure guidance is provided in the Illustrative Departmental Financial Statements.

E. Other related references

  • Receiver General Manual - Chapter 15 - Public Accounts Instructions
  • Office of the Comptroller General Year-End Call Letter
  • GC 4500 Departmental Financial Statements
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