TBAS 1.2 – Reporting Requirements for Fiscal Year ending March 31, 2012 for Accounting treatment related to Severance Pay Liability

Date sent: 

To:  Deputy Chief Financial Officers

Message sent on behalf of Sylvain Michaud, Executive Director, Government Accounting Policy and Reporting, Office of the Comptroller General

The purpose of this note is to:

  1. Provide guidance to departments on the calculation of the severance pay liability for eligible employees for inclusion in departmental financial statements; and
  2. Communicate the Government contribution rate for the public service pension plan for disclosure in departmental financial statements.

Severance Pay Liability

The information below provides additional guidance on how to calculate the severance liability and expense relating to severance for Public Service employees, coding for the accounting transactions and the financial statement disclosure requirements. Note that responsibility for the calculation of this liability was devolved to departments in 2005-06.

Departments should strive to record this adjustment in P12-1.

Pension Benefits – Government contribution rate for the Public Service Pension Plan

Both the employees and the department contribute to the cost of the plan. The 2011-12 expense for the Government contribution represents approximately 1.8 times (1.9 times for 2010-11) the contributions by employees. This rate should be disclosed in the relevant note of your departmental financial statements.

Should you have any questions related to the calculations for the severance pay liability, please contact Leona Melamed at (613) 946-7538 and for questions on the contribution rate, please contact Hélène Lecours at (613) 946-7368.  Questions related to presentation of these items in the departmental financial statements should be directed to Anne-Marie Dionne at (613) 952-1004.

Context and Application: In line with Treasury Board Accounting Standard (TBAS) 1.2, departments are reminded that they must account for their provision and related severance pay liability in their 2011-12 financial statements. This applies to all organizations defined as departments in accordance with section 2 of the Financial Administration Act (FAA).

Calculation: The determination of the liability relating to Public Service employees reflects the elimination of severance pay for certain employee groups in 2011-12. In order to perform the calculation, the annual gross payroll subject to severance pay, which is the total of annual salary rates for indeterminate employees as at , is to be divided as follows:

  1. Annual gross payroll for employees in groups where severance has been eliminated - these employee groups are indicated in the table below.
  2. All other employees.

The severance liability is calculated by multiplying each of these two payroll amounts by the applicable severance percentage factor as indicated in the table below:

  1. Employee groups with severance eliminated 2. All other employee groups
Employee groups included AI, UT, PE, OM, PMMC(01-04), PA, SV, EX & other senior employees (see Annex for more detail) All other groups
Severance % 2011-12 6.1% 25.3%
(Severance % 2010-11) N/A -23.79%

The severance percentages are derived from the actuarially determined liability for severance pay for the entire Public Service population taking into account the plan curtailments of the groups noted above. For the groups with severance elimination, the severance percentage is based on the assumption that 75% of participants will decide to receive their severance benefits on the date of the curtailment and 25% will receive the severance benefit on termination. The 2011-12 annual expense for severance pay is determined by the difference between your opening and closing liability, added to (or subtracted from) the actual severance expenditure for the year.

Employee groups for which the employee elections related to severance elimination (for immediate cash-out or payment on retirement) are not yet due as at are included in the “all other employee groups” category for the purposes of this calculation (NR group only).

The severance liability calculation above assumes that employees electing immediate cash-out of severance have been paid. Therefore, a payable must be established for employees who have elected to receive immediate cash-outs but are not yet paid as at .

In addition, actual severance benefits payable for severance payments to individuals who have been struck off strength by must also be accrued.

Process:  The following accounting entry should be included in CFMRS to record the change in the severance pay liability calculated above relating to Public Service employees for the department:

year-end entry (assuming an increase in the liability):

Item Amount FRA Auth Obj

Table 1 Notes

Table Note 1

51846 – Provision for severance benefits – Public Service

Return to table 1 note 1 referrer

Table Note 2

F124 – Allowances set up for severance pay

Return to table 1 note 2 referrer

Table Note 3

3469 – Charges to other liability accounts

Return to table 1 note 3 referrer

Table Note 4

21415 – Allowance for severance benefits - departments

Return to table 1 note 4 referrer

Table Note 5

F413 – Charges to accruals for severance pay

Return to table 1 note 5 referrer

Table Note 6

7023 – Allowance for employee benefits

Return to table 1 note 6 referrer

DR Provision for Severance Benefits - PS $XXX 51846 table 1 note 1 F124 table 1 note 2 3469 table 1 note 3
CR Allowance for Severance Benefits $XXX 21415 table 1 note 4 F413 table 1 note 5 7023 table 1 note 6

The coding for the accounting entries to record payables at year-end is described in the FIS Accounting Manual, Section 7.3 Scenario G – Payment of Termination Benefits.

Financial Statement Presentation: The presentation in departmental financial statements of the severance benefits and the related liability should be in line with TBAS 1.2.


Employee groups with severance elimination
Group BUD Code Agreement Signed Severance Accumulation Terminated Effective

Table 2 Notes

Table Note 1

NR group: Since employee elections related to severance are not yet due as at , these employees are included in the "all other employee groups" category for the purposes of this calculation.

Return to table 2 note 1 referrer

Air Traffic Control (AI) 402
University Teaching (UT) 227
Personnel Administration Group (PE) 307
Organizational and Methods Group (OM) OM
PMMC-(01-03) 30801
PMMC-04 30801
Program and Administrative Services (PA) 301, 305, 308, 310, 501, 502, 503, 504, 505
Operational Services (SV) 602, 652, 603, 653, 604, 654, 605, 655, 606, 656, 607, 657, 612, 662, 659
EB 209, 215, 414
Executive Group (EX) and other senior employees, including:
102, 104
Deputy Ministers and Governor in Councils appointed after
701, 710
DS-07 and DS-08
Excluded Medical Officers and Medical Specialists
NR table 2 note 1 203, 210
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