May 10, 2006

Federal budget proposes changes to pensions

The federal budget plan tabled in Parliament last week contains proposals on pensions that are of interest to PSAC members.

The federal government aims to improve the benefits of plan members of three public sector pension plans (i.e. Public Service Pension Plan, Canadian Forces Pension Plan and Canadian Mounted Police Pension Plan). The government proposes to change the formula that calculates the reduction of the benefits a member receives from one of the public sector pension plans once they begin receiving the Canada Pension Plan or the Quebec Pension Plan. The effect of the change in the formula will be a slight increase in pension benefits. The proposed change is part of an amendment to legislation covering the three public sector pension plans that has to be enacted by Parliament. More information can be obtained by visiting the Treasury Board's web site at:
http://www.tbs-sct.gc.ca/pubs_pol/
/hrpubs/Pensions/nppm-aprp01_e.asp.

The federal budget also proposes to provide solvency funding relief to employers contributing into federally regulated private pensions. More and more employers, or pension plan sponsors, are finding their pension plans in significant solvency deficits. A solvency deficit occurs when, based on actuarial calculations, a pension plan's liabilities exceed its assets. Under the Pension Benefits Standards Act and Regulations, solvency deficits have to be funded over five years. One of the government's proposals is to relax this requirement by extending solvency funding payments over 10 years, with the buy-in of plan members and retirees. This is a potential area where the PSAC, which also represents private pension plan members, will have to deal with government and employers to ensure that their members' pensions are well protected and guaranteed upon retirement.