Management and Reporting of the Federal Public Sector Pension Plans

1. Management and Reporting of the Federal Public Sector Pension Plans Presentation by Phil Charko November 29, 2006

2. 2 Objectives of Presentation To provide an overview on the reporting of federal public sector pension plans and how they have evolved in the context of: Legislative Requirements Accounting Practices Canadian Institute of Chartered Accountants (CICA) professional standards

3. 3 Types of Pension Plans There are two broad categories of employer sponsored pension plans in Canada: Defined Benefit (DB) � plan that promises a certain level of pension based on salary and years of service; benefits paid to plan members are not tied to the amount of money contributed by the plan member � there is a defined benefit Defined Contribution (DC) - pension schemes where the final entitlement is not certain and dependant on employee and employer contributions and investment returns 40% of working Canadians have access to these employer sponsored plans

4. 4 Defined Benefit Plans Today�s presentation will focus on Defined Benefit (DB) plans Most DB plans are: Regulated under federal or provincial pension benefits standards legislation such as the Federal Pension Benefit Standards Act (PBSA) Required to be funded with assets set aside and segregated from the operations of the plan sponsor to secure payment of future benefits against possible insolvency of employer Reported as per CICA standards 3461and Public Sector Accounting standard 3250

5. 5 Uniqueness of Federal Public Sector Pension Plans The three large federal public sector pension plans belong to the defined benefit category These plans are unique They are statutorily exempted from legislation such as the Federal Pension Benefits Standards Act (PBSA) They are legislated Public Service Superannuation Act (PSSA) Canadian Forces Superannuation Act (CFSA) Royal Mounted Canadian Police Superannuation Act (RCMPSA) Reporting requirements were first defined in the Civil Service Superannuation Act (CSSA) of 1924 Federal public sector plans were not funded prior to 2000 Obligation to pay defined benefits established by legislation and secured by the credit of the Government of Canada

6. 6 Federal Public Sector Pension Plans: All Unfunded Before 2000 Setting aside of assets determines if a plan is funded or unfunded Up to April 2000, the Government relied upon its ability to raise funds in the future from tax revenues or external borrowings to pay benefits as they became due The Government had not set aside any money into a separate fund or separate legal entity The Government did not have a segregated pool of assets for the payment of pension benefits