Federal government workers earn their pension income from a combination of the Canada Pension Plan or Quebec Pension Plan and their public-sector pension.Justin Tang/The Canadian Press
Ottawa is in talks with public-sector unions over plans to address an accounting issue that led to an estimated $2-billion in additional contributions to federal pensions from public servants and the government.
Federal government workers earn their pension income from a combination of the Canada Pension Plan or Quebec Pension Plan and their public-sector pension. Traditionally, those benefits are designed to add up to 2 per cent of a worker’s average salary for every year of service. But public-sector pension plans were not adjusted when Ottawa gradually expanded CPP and QPP retirement benefits for working-age Canadians between 2019 and 2025.
That means federal workers have been paying more than needed into their public-sector pensions, and in return, building slightly richer benefits, with the government matching those higher contributions – costs funded by taxpayers.
A 2025 report from the Parliamentary Budget Officer found that under a hypothetical scenario in which the public-sector pension was adjusted to reflect the CPP enhancements, the contributions from both federal employees and the government would have been lower. Instead, the report estimates the difference grew over time, reaching a projected $616-million in 2025-26, and roughly $2-billion across the 2017-18 to 2025-26 fiscal years.
The government alone contributed an estimated $1-billion more than it would have under the current system compared to if the public-sector plan had been aligned with the CPP enhancements.
“I don’t know why the public-service plan was not adjusted,” said Yves Giroux, who was the Parliamentary Budget Officer at the time of the analysis, over e-mail. He said the government could have made changes when introducing the CPP enhancements or later through legislation, before higher contribution rates took effect.
The government is now trying to bring those benefits back to their original design, and has presented unions with options to do so, according to documents seen by The Globe and Mail. But public-sector unions have pushed back on any changes, arguing the proposed changes would reduce the value of benefits workers earn going forward, compared to what they currently get.
In a statement late last year, the Public Service Alliance of Canada said “any proposal that reduces the value of members’ pensions – while framing it as a cost saving for workers – is unacceptable." The Canadian Union of Public Employees said in November it’s concerned that the government may reduce the pension benefits federal workers earn through their workplace plans, effectively cancelling out the gains recently made through the expansion of CPP and QPP benefits.
However, changes to the public-service pension plan ultimately require legislation under the Federal Public Sector Labour Relations Act, meaning the federal government can move ahead without union agreement, according to Stephanie Ross, an associate professor of labour studies at McMaster University.
“It’s not going to be negotiated at the bargaining table,” she said.
The Treasury Board of Canada Secretariat has been meeting with a public-service pension advisory committee and presenting two options to bring the pension plan back in line with its intended design, according to documents reviewed by The Globe.
The first option would keep the current structure but adjust the formula, according to documents seen by The Globe. It would reduce the portion of the pension tied to earnings already covered by the CPP, while increasing a temporary benefit paid before age 65 to keep income steady.
The second option would take a more sweeping approach, applying a flat pension rate across all earnings and eliminating the bridge benefit, resulting in lower income before age 65, but higher combined income after the CPP begins.
Both approaches are designed to bring the plan back to its intended 2-per-cent level, meaning workers would earn slightly less in pension benefits going forward than they do under the current structure.
The Treasury Board of Canada Secretariat did not respond to a request for comment.
The proposed change comes amid the government’s plan to cut 40,000 public-service jobs from a peak in 2024 over five years as it seeks to find nearly $60-billion in internal savings.
The roughly $2-billion difference is comparable to the cost of a major federal affordability measure. Ottawa’s plan to remove federal excise tax on gas and diesel, for example, is expected to cost an estimated $2.4-billion.
In late 2025, the government said it would initiate consultations to “account for CPP and QPP enhancements and ensure that federal employees continue to receive the same pension benefits, without overcontributing.”
It projects $384-million in savings once the proposed change is in place, and no current retiree would be affected.
While the mismatch resulted in higher contributions than necessary, it did not create a funding problem. The additional contributions were matched by higher benefits, meaning the public-service pension plan remains financially sound, according to the PBO.
