On Nov. 25, 2024, a non-permitted surplus in the Public Service Pension Fund was revealed in a statement by the then-Treasury Board president Anita Anand. At the same time, the federal government announced its intention to move approximately $1.9 billion from the Public Service Pension Fund to the Consolidated Revenue Fund and explore the next steps — effectively taking the surplus and moving it to the federal government’s central account at the Bank of Canada.

How can they do this? The rules that govern the Public Service Pension Plan are outlined in the Public Service Superannuation Act (PSSA). According to subsection 44.4 (5) of the PSSA, the plan is in a non-permitted surplus position when the plan is funded at over 125 per cent. The Public Service Pension Fund was found by the chief actuary of Canada to have a funded ratio of 126.3 per cent. In this case, the government is afforded a few options: a pause in contributions to the Public Service Pension fund from the employer, a pause in contributions from employees, and/or an immediate transfer of the non-permitted surplus to the Consolidated Revenue Fund. The government chose the latter. 

While these are the options that are explicitly outlined in the PSSA, the federal government is not prevented from considering other options that would allow plan members to share in the surplus.

While, according to the Treasury Board president, the issue of a non-permitted surplus would be resolved by Dec. 1, 2024, due to the $1.9 billion transfer, it would begin growing again immediately afterwards unless there were a pause in contributions (known as a "contribution holiday.") If the projections in the report from the chief actuary are accurate, the federal government would stand to reap $7.4 billion in saved contributions (while employees continued to contribute.) 

Due to a number of factors, pension surpluses have become more common in Canada. Canadian pension legislation allows for a variety of options to handle pension plan surpluses, such as contribution holidays (whether from the employer, the employees or both) or an increase in benefits or risk management (such as the purchase of group annuities.) It has become more common for surpluses to consider retirees, too. For example, in 2018, HOOPP (Healthcare of Ontario Pension Plan) introduced increases to survivor benefits at no extra cost.

All that to say, a fairer option for plan members, including retirees, could have been adopted. 

While the PSSA would need to be amended to increase pension benefits to retirees and employees, there are other avenues available to the government. As it chose to move the non-permitted surplus to the Consolidated Revenue Fund, those funds — currently around $1.9 billion — became part of general government revenue. Therefore, the funds could be used for any purpose, including payments to active members and retirees, an option that would not require amendments to the PSSA. The funds could also be used to the benefit of retiree plan members. They could, for instance, be used to fund an increase in dental benefits for federal retirees. These solutions would not require the government to review the pension legislation and could be accomplished as part of the fall economic update or through the Budget Implementation Act, for example. 

Some people worry that if amendments intended to increase pension benefits are made to the PSSA, that would immediately lead to fundamental changes to the way the pension plan works. But amendments to the PSSA do not need to be substantial — legislation is amended almost annually, with the most recent amendments being made in 2023's Fall Economic Statement Implementation Act, to increase the number of directors on the Public Sector Pension Investment Board. 

The government has said it plans on “engaging with all stakeholders” for “next steps” — though, at the time of writing, no invitations to discussions had been made to any stakeholders. The Treasury Board president received the report from the chief actuary 30 Parliamentary sitting days (nearly two months) prior to the federal government’s announcement in late November 2024. The high likelihood of a non-permitted surplus has also been known since the last actuarial report in February 2022. There was ample time to communicate intentions with stakeholders, including time to discuss next steps. The government chose not to do so. 

In response, labour unions, including the Public Service Alliance of Canada, Professional Institute of the Public Service and Canadian Association of Professional Employees, have released statements condemning the government’s actions. Federal Retirees was also critical of these developments and will continue to monitor the situation. The association's next steps will be considered by its board of directors when there is more information. Members will be updated as soon as possible.