Public Service Pension Plan History

As an employer, the federal government has been providing its employees with a pension plan since 1924.

The table below traces the evolution of the current federal public sector pension plan and improvements made since 1870.

Figure 1: History of the public service pension plan
Year Description
1870 The first superannuation act was passed by Parliament on that paid an annual allowance upon retirement on account of age (60) or disability. There were no survivor benefits provisions. Contribution rates varied during the life of the Act from 2% to 3.5% per annum on salary below $600 and 4% per annum on salary above $600. Benefits were only granted by the Governor in Council (GIC). The pension formula was 1/50 x final three year average salary x years of service (maximum 35).
1898 The Civil Service Retirement Act was passed on , establishing the Retirement Fund.
1924 The Civil Service Superannuation Act (CSSA) was passed on by Parliament. Its objective was to provide public servants with suitable income upon retiring from the public service. The pension plan established in 1924 was a defined benefit plan and remains so today. Benefits were based on a pension formula calculated as 2 percent of the 10-year average salary and a minimum 10 year service requirement up to a maximum of 35 years. The retirement age was 65, and the pension plan provided survivor benefits for widows and children of male plan members only. The employee contribution rate was set at 5 percent of salary.
1944 Amendments were made to the CSSA including the removal of the 10 year service requirement for granting a benefit upon resignation. The change provided a plan member who left with less than 10 years of service with a return of contributions.
1947 The CSSA was amended again to lower the retirement age from 65 to 60 without a reduction in pension benefits. The 1947 amendments also introduced the concept of deferred annuity and set a ceiling of $15,000 on salary for contributions and benefit calculation purposes.
1954 The Public Service Superannuation Act (PSSA) came into effect on and replaced the CSSA. A major change in pension policy stemming from the new legislation was that benefits became a right upon termination of employment rather than a grant approved by the Governor-in-Council. The PSSA also extended coverage to include temporary employees. Contribution rates for all male plan members were established at 6 percent of salary while those for females remained unchanged at 5 percent. Plan members became eligible to choose a pension benefit on termination after 5 years of service, rather than 10 years.
1959 Parliament legislated, on a one-time basis, a permanent cost-of-living increase in the pensions paid under the PSSA through the Public Service Pension Adjustment Act. Assumed entirely by the Government, this increase was designed to compensate for post-war inflation.
1960 The ceiling of $15,000 on salary was removed, and the benefit formula was changed from a 10 year to a 6 year average salary basis. This adjustment to the pension formula was accompanied by an increased rate of contribution for male plan members to 6.5 percent of salary. There was no change in the existing 5 percent rate for female plan members.
1966 Major amendments were made to the PSSA, including:
  • The coordination of the public service pension plan contribution rates and benefits with the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP);
  • Term employees became eligible to contribute after six months of continuous employment instead of the previous twelve month requirement.
1970 The Government introduced indexing through the Supplementary Retirement Benefits Act. The new Act provided for increases in the pensions of retired members and their surviving dependents. Benefits payable under the Act were automatically and annually indexed to protect against cost-of-living increases. These increases were subject to a 2 percent ceiling under the legislated indexing formula, and employees were required to pay an additional contribution equal to 0.5 percent of their salary.
1971 Early retirement provisions were introduced, whereby an unreduced benefit at age 55 with at least 30 years of pensionable service became possible.
1974 The 2 percent ceiling on annual pension indexing increases was removed and a provision was made for a further 0.5 percent employee contribution increase, effective .
1975 Interest of 4 percent per year became payable on returns of contributions.
1976 Since benefits for survivors of female employees were introduced, contribution rates under the PSSA were equalized at 6.5 percent of salary for both male and female members, less CPP or QPP contributions. Re-employed pensioners were allowed to receive their pension benefit while employed as a non-contributor.  The election period was extended for transferring service of former CF and RCMP members employed in the Public Service. The requirement for Treasury Board approval for payment of annual allowances in cases with less than 20 years of service was removed.  The five year minimum benefit was introduced for members who died without a survivor or eligible children.  Under Part II of the Act, amendments were made that allowed a member to name a beneficiary for the Supplementary Death Benefit payment.
1977 The indexing contribution (SRBA) was increased to 1%.
1981 The PSSA was amended to allow Transport Canada air traffic controllers access to early retirement benefits.
1983-1984 As part of the general restraint program introduced by the Government in 1982, indexing was capped at 6.5 percent in 1983 and 5.5 percent in 1984.
1986 Mandatory retirement was abolished.
1989 Statutory amendments were made to ensure that those receiving survivor benefits would continue to receive them even if they re-married.
1991 The PSSA and SRBA accounts were amalgamated.
1992-1994 Parliament enacted the Special Retirement Arrangements Act in September. Important changes stemming from this Act in relation to the pension plan included:
  • Supplementary death benefit (SDB) improvements - coverage was increased to 2 times an employee's salary rounded up to the next $250, SDB coverage was reduced by 10% for each year after age 60, SDB minimum coverage increased to 1/3 of salary and free paid-up coverage at age 60 to $5,000 and the contribution rate was reduced from 10 cents to 5 cents per month for each $250 of coverage.
  • Increased flexibility, including coverage for part-time employees, more flexible leave-without-pay provisions, early retirement provisions for Correctional Service Canada (CSC) workers, optional survivor benefits for members who married after retirement and the division of pension benefits on marriage breakdown under the Pensions Benefits Division Act.
  • Authority to provide benefits in excess of those allowed by the Income Tax Act (ITA).
1996 Pension benefits became vested and locked in after two years of service.
1997 Pension transfer values were introduced to allow lump-sum values of pension benefits on termination under age 50 to be transferred to locked-in RRSPs. Interest on returns of contributions became based on the interest rates credited to the Superannuation Account from time to time, instead of 4 percent.
1999 The Government made changes to the pension plan with the introduction of the Budget Implementation Act and the Public Sector Pension Investment Board Act. Benefit improvements stemming from these Acts included:
  • Pensions calculated on the average salary of the five years of highest consecutive earnings, rather than the former six-year average.
  • Average maximum pensionable earnings (AMPE) based on a five-year AMPE instead of a three-year.
  • Improvements to the Supplementary Death Benefit Plan.
  • Survivor benefits for the same-sex partner of a plan member who died on or after .
  • Employees dismissed for misconduct given the same benefit options as for those leaving for any other reason.
2000 Amendments were made to the Act that established a new Public Service Pension Fund on .  The employee contribution rates are no longer tied to the Canada / Quebec pension plan contribution rates.  The Public Sector Pension Investment Board was enacted that allowed net employer and employee contributions to be invested in the markets as of .
2003 The Pension Benefits Division Regulations were amended effective to allow the option to request a division of pension benefits to extend to same-sex common-law partners, under the same rules as apply to opposite-sex common-law partners.
2005 The Treasury Board Secretariat announced a series of employee contribution rate increases starting in January 2006 with the objective of reaching a more balanced cost sharing ratio for employer/employee contribution rates. In 2006, the employee contribution rate was increased to 4.3 percent on salary up to the year's maximum pensionable earnings (YMPE) under the CPP or QPP and 7.8 percent on salary over the YMPE, up from 4.0 percent and 7.5 percent respectively in 2005.
2006

Amendments made in the Budget Implementation Act increased the pension payable after age 65 by lowering the factor used in the CPP or QPP coordination formula. The factor used will decrease for plan members reaching age 65 in 2008 or later. The reduction factor will be lowered from the current 0.7 percent to 0.625 percent by 2012.

The Public Service Superannuation Regulations (PSSR) was amended to allow Corrections Services employees with operational service to no longer pay the 1.25 percent additional employee contribution and to retire without penalty after 25 years, regardless of age. CSC employees with "deemed operational service" are able to retire without penalty after 25 years, at age 50 and the additional employee contribution was reduced to 0.62 percent.

2007 The PSSR was amended to comply with changes to the ITA. The amendment to the PSSR allowed members reaching the age of 69 in 2007 and later to continue contributing towards their public service pension until the end of the calendar year they reach age 71.
2008 Amendments were made to lower the reduction factor used to calculate pension benefits at age 65 from 0.7% to 0.625%.
2010 A further amendment to the PSSR was made to allow individuals who ceased contributing to the public service pension plan after reaching age 69 in the year 2005 or 2006 the opportunity to buy back service that was previously not considered pensionable.
2012

Important changes were made to the PSSA through the Jobs and Growth Act, 2012, including:

  • Contribution rates for all active and future public service pension plan members were increased effective January 2013 with the objective of reaching a more balanced cost-sharing ratio for employer/employee contribution of 50:50 over time; and
  • The age at which a new employee who began participating in the public service pension plan on or after can receive an unreduced pension benefit was raised from age 60 to 65.
2012

In late 1999, a group comprising of public sector unions, employee and retiree associations representing over 300,000 pension plan members launched three lawsuits against the Crown claiming a right to the excess credited amounts in the three federal Superannuation Accounts. In 2012, the Supreme Court of Canada dismissed the appeal as it found that the Superannuation Accounts are legislated records and do not contain assets. The Supreme Court found that the Government of Canada had fulfilled its obligations to the public service, Canadian Forces and the Royal Canadian Mounted Police pension plans.

2014

The Superannuation Accounts, reported as "other accounts available for benefits", were removed from the plans' financial statements to provide more reliable and relevant information to users of the financial statements. The pension obligations related to public sector pension plans are recognized in the Government of Canada's consolidated financial statements in the Public Accounts. The removal of the account did not impact the Government's deficit, nor plan members' benefits.

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