Public service superannuation
| Author | Christopher Rootham |
| Pages | 501-523 |
PUBLIC SERVICE
SUPERANNUATION
A. HISTORY OF SUPERANNUATION IN THE FEDERAL
PUBLIC SERVICE
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 icant 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 benets, then the government would simply ma ke up the dierence. e
British government, for exa mple, abolished employee contributions i n , and
did not reinstate them unti l aer .
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
benets provided: Public Se rvice Superannuation Act, R.S.C. , c. P-, s. .
501
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 benets in
the short term, but the superan nuation plan was meant to be sel f-supporting in
the long run. e basic benet 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 aer 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 oce. 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 sucient to fund pension
payments, and the government was eect 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 benets 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
deciency in the fu nd, based on an actuarial va luation of the prospective a nnu-
ities payable from that fu nd. In eect, 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 atised 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 conned 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
To continue reading
Request your trial