President of the Treasury Board and Transport Minister Anita Anand rises during Question Period on Nov. 26 in Ottawa.Adrian Wyld/The Canadian Press
Ottawa could potentially reap a $9-billion boost to its bottom line over the next few years, federal documents show, thanks to a growing surplus in the pension fund for public servants, prompting a standoff with unions over what should be done with the windfall.
Treasury Board President Anita Anand upset the major public-sector unions earlier this week when she announced that about $1.9-billion in the Public Service Pension Fund from the previous fiscal year will be shifted to general revenues. Labour leaders say workers also contributed to the fund and should benefit from any surplus, rather than having the money go toward other priorities such as new spending or reducing the size of the deficit.
The minister said the change is because the size of the surplus in the $186.4-billion fund has exceeded allowable levels.
However, in an analysis to be released Friday by the Public Service Alliance of Canada (PSAC), the union points out that new federal records show the government is projecting changes totalling $9.2-billion through 2028.
The figure is contained in a table from a special actuarial report that was also released this week showing that if the existing surplus continues to grow as projected, the federal government could partly pause its contributions to the fund in 2025, fully pause them the next two years and have a partial pause for 2028.
“I was quite shocked and disappointed that the government flat out omitted one major point: that they plan to give themselves the biggest holiday present,” said Sharon DeSousa, national president of PSAC, which is the largest of the unions representing federal public servants.
Ms. DeSousa said in an interview that rather than shifting funds out of the pension plan, PSAC would prefer to see changes to address an inequity in the current pension rules that requires newer workers to work more years to qualify for a full pension. She said any contribution holiday should also apply to public servants.
Ms. DeSousa said PSAC has been urging the government for months to consider such options in anticipation of a pension surplus decision. Instead, she said Ottawa is using the funds to improve its bottom line.
“They plan to do this on the backs of workers,” she said.
The special actuarial report, prepared by the Office of the Chief Actuary, said the value of the pension fund as of March 31, 2024, is $186.4-billion. The fund has a surplus of $38.8-billion over $147.6-billion in liabilities, which is a funded ratio of 126.3 per cent.
Federal rules say the plan cannot hold a surplus of more than 125 per cent of liabilities, defining such amounts as a “non-permitted surplus.”
The actuarial report said the fund’s return on investment earnings was 7.2 per cent in 2024, compared with the expected return of 5.8 per cent.
Each year that a projected surplus above the 125-per-cent threshold does in fact materialize, the government is required to take action to bring the surplus back within the limit. The actuarial report presents a government contribution freeze as a default scenario, but the government could choose to repeat this year’s practice of shifting the surplus to the consolidated revenue fund.
Myah Tomasi, a spokesperson for Ms. Anand, the Treasury Board President, said the government’s $1.9-billion transfer “will be held while next steps are considered,” in accordance with federal legislation governing the fund.
“Once this transfer is made, there will no longer be a non-permitted surplus in the pension plan, allowing the government to continue its contributions,” she said.
It is not immediately clear how these accounting adjustments will affect the Liberal government’s bottom line.
Finance Minister Chrystia Freeland has yet to announce a date for the fall economic update. The House of Commons is scheduled to sit until Dec. 17.
In last year’s fall update, Ms. Freeland pledged that the deficit for the fiscal year that ended in March, 2024, would not exceed $40.1-billion. Parliamentary Budget Officer Yves Giroux released a report in October that said it appears the government is heading toward a $46.8-billion deficit, meaning Ms. Freeland has missed her fiscal target.
Ms. Freeland has repeatedly declined to clarify whether her update will in fact show the target was missed.
Former parliamentary budget officer Kevin Page, who is now founding president and CEO of the University of Ottawa’s Institute of Fiscal Studies and Democracy, said only the $1.9-billion transfer announced by the minister this week is confirmed. The remaining amounts are projections.
“We might only know in the next federal budget whether the figures presented in the table represent a source of funds for other measures,” he said in an e-mail.
“It is the minister’s prerogative to use funds for other policy priorities as long as the fund requirements are met. Given that the increase in the funded ratio above 125 per cent is due to over-contribution by both employees and the government, one might expect that the contribution holiday could be shared by both parties.”