PACP Committee Report

David Christopherson
Chair
Standing Committee on Public Accounts
House of Commons
Ottawa, Ontario
K1A 0A6

Dear Mr. Christopherson:

Pursuant to Standing Order 109, on behalf of the Government of Canada, I am pleased to provide the Government Response to the recommendations of the Ninth Report of the House of Commons Standing Committee on Public Accounts entitled, “Chapter 1, Public Sector Pensions Plans, of the Spring 2014 Report of the Auditor General of Canada.”

I appreciate the important work undertaken by you and the Standing Committee over the course of your study of the Auditor General’s findings on public sector pension plans.

I also appreciate the recognition from both the Standing Committee and the Auditor General that when compared on an international basis with other developed countries, Canada’s public sector pension plans are solid and liabilities are reported in a transparent fashion.

Recent changes to the public sector pension plans – such as increasing the contribution rates and raising the normal age of retirement from 60 to 65 under the public service pension plan – have demonstrated the Government of Canada’s commitment to ensuring the long term sustainability of the plans and to achieving fairness for both federal employees and Canadian taxpayers. As such, the Auditor General’s recommendations on the public sector pension plans lend support to the Government’s past and planned actions to meet the objectives of sustainability and fairness.

With respect to Recommendations 1 and 3, the Treasury Board of Canada Secretariat (TBS) agrees with the recommendations and, in collaboration with the Department of National Defence (DND), the Royal Canadian Mounted Police (RCMP), and other supporting entities as required, TBS will report back to the Standing Committee by December 31, 2015, on the progress made in formalizing a framework for conducting systematic assessments of sustainability for the three major public sector pension plans and on progress made in finalizing and implementing a funding policy for the three major public sector pension plans.

With respect to Recommendation 2, TBS agrees with the recommendation and, in collaboration with DND and the RCMP, will present to the Standing Committee by December 31, 2015, the results of its benchmarking study of pension plan governance structures and practices that can support plan sustainability.

With respect to Recommendation 4, TBS agrees with the recommendation and will report back to the Standing Committee by December 31, 2015, on progress in finalizing a proposal for a new consolidated and simplified report on the three major public sector pension plans, their sustainability, and their impact on the federal government's budgetary balance.

With respect to Recommendation 5, TBS and the Department of Finance agree with the recommendation and the Department of Finance, in consultation with TBS, will report to the Standing Committee, by December 31, 2015, on the results of its assessment of the funding of pre-2000 pension obligations.

I would like to take this opportunity to inform the Committee of an additional pension accounting issue that has been brought to my attention. Through the annual audits of the public sector pension plans’ financial statements, the Auditor General has questioned the long-standing accounting practice of presenting the Superannuation Account as an “Other Account” in the pension plans’ statement of financial position. This accounting practice, initiated by the previous Government, had the effect of treating the Superannuation Account akin to an asset available for the payment of pension benefits. The Treasury Board Secretariat undertook a thorough review of the accounting treatment of the Superannuation Account. The Secretariat consulted with the Comptroller General of Canada, the other two public sector pension plan administrators and pension experts. Following the review, the Secretary of the Treasury Board along with the other two plan administrators, with the support of the Comptroller General and Auditor General, directed that the Superannuation Accounts be removed from the public sector pension plans’ statement of financial position and only be disclosed in the notes to the financial statements.

While the presentation of the public sector pension plans’ financial statements will be impacted, this accounting policy change does not in any way affect the consolidated deficits or debt of the Government as reported in the Public Accounts, nor does it impact the plan members’ pension entitlements. This improvement in the presentation of the public sector pension plans’ financial statements supports the Government’s ongoing efforts towards enhancing governance and transparency. This is in keeping with the findings of the Committee which recognized “that, when compared to the public pension regimes in other developed countries, Canada’s public sector pension plans are solid and liabilities are reported in a transparent fashion.”

I would like to take the opportunity to thank you and the members of the Standing Committee again for your important work.

Yours sincerely,

The Honourable Tony Clement, P.C., M.P.