Public service superannuation

AuthorChristopher Rootham
 
e federal government has been providing super annuation to federal public ser-
vants in one form or another since . e rst federa l government wanted
to encourage the retirement of a sign icant number of civil ser vants who had
been taken over as part of t he transfer of certain se rvices from the provinces to
the new post-Confederation federal government. erefore, in  t he federal
government appointed a commission of senior civi l servants (the Langton com-
mittee, named for its chai r, John Langton) to exa mine the problem. At that time,
the common method of run ning superannuation pla ns was to provide retiring
allowance s based on length of ser vice. ose retiri ng allowances were somet imes
nanced throug h employee contributions (of up to  percent of a civil serva nt’s
salary), and someti mes nanced entirely through t he government. Governments
at that time d id not maintai n separate interes t-earning f unds to nance sup er-
annuation plans: i f employee contributions could not pay for that year’s retire-
ment benets, then the government would simply ma ke up the dierence. e
British government, for exa mple, abolished employee contributions i n , and
did not reinstate them unti l aer .
e Langton commit tee, on the other hand, recommended a compulsor y
contribution scheme whereby employees would bear hal f the cost, and the public
SeeSee Margolis v. Canada, [] F.C.J. No.  (T.D.) [Margolis]. Superannuation plans
have always been est ablished by legislation. e te rms of those plans are not subjec t to
collective ba rgaining: Publi c Service Labour Rel ations Act, S.C. , c.  , s. ; s. ()
[PSLRA]. e public service sup erannuation plan is monitore d by a Pension Advisory
Committee, w hich has the mandate to rev iew the operation, design, a nd funding of
benets provided: Public Se rvice Superannuation Act, R.S.C. , c. P-, s. .
502           
would bear the other ha lf of the cost. e government rejected that rec ommenda-
tion, and decided that employees should bea r a greater proportion of the costs.
erefore, when it enacted the Superannuation Act in , it set out contribution
rates that were designed to cover the f ull cost for new employees: employee con-
tributions were  percent on salar ies of  and above, and . percent on lower
salaries. ese contributions would not cover the full cost of pension benets in
the short term, but the superan nuation plan was meant to be sel f-supporting in
the long run. e basic benet formula i n  was  percent of the average salary
over the last three year s of service for each year of service w ith a  percent max-
imum. Contributions therefore cease d aer thirt y-ve years. e Act contained
special provisions for gratuities or pensions in the case of compulsory retirement
before age sixty w ith service of less than ten ye ars, or on abolition of oce. ere
was no return of contribution in t he case of death or termination of serv ice which
did not qualif y for a pension or gratuity. One of the stated purposes of the super-
annuation plan wa s to encourage people to join the civ il service: by ref using to
return their supe rannuation contributions, the Act a lso discouraged people from
leaving the civ il service.
By , employee contributions were no longer sucient to fund pension
payments, and the government was eect ively paying for half the cost of the
superannuation plan (as suggested by t he Langton committee). By , the total
contributions by employees were ,, and the total p ension payments were
,: so much for the “pay as you go plan.” In , the federal government
closed the old superan nuation plan to new employees, and star ted a new plan
with a contribution rate of  percent on sala ries under , and . percent for
salaries over . Employee contribut ions were put in a fund (the Supera nnua-
tion Fund No. ), and their benets were to be charged to t his fund. Unlike t he
original supera nnuation plan, this fu nd earned interest at the rate of  percent
per annum. e government was requi red to make good the full amount of any
deciency in the fu nd, based on an actuarial va luation of the prospective a nnu-
ities payable from that fu nd. In eect, the government had to make good any un-
funded liabil ities in the fund each year. is usef ul change to the law was quickly
overturned when the Liber als won election in , and in , the government
closed the Act to new entrants c ompletely. Civil servants at the time d id not all
protest this decision. Civ il servants were diss atised with the supera nnuation
plan at the time, especially concerning the strict conditions for eligibility, the
lack of survivor pension bene ts, and the non-return of contribut ions for those
who did not qualif y for pensions. Moreover, the plan was conned to “perma-
nent” employees, leavi ng “temporary” employees wit h no retirement income for
their work. e  “reforms” did address the concer n about return of contribu-
tions at least. e new sup erannuation plan re quired employees to contribute 
percent of their salar y each year to the plan, and the plan ear ned interest at the
rate of  percent per annum, compounded biannua lly. Employees who died in

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