Reality Test Reveals Higher Costs and Greater Risks in Ottawa's Pension
Plans: C.D. Howe Institute

TORONTO , Dec. 17 /CNW/ - Fair-value accounting reveals Ottawa's pension obligations to be larger and more volatile than they appear, creating risks for plan participants and underappreciated exposure for taxpayers, according to a study released today by the C.D. Howe Institute.

In "Supersized Superannuation: The Startling Fair-Value Cost of Federal Government Pensions," authors Alexandre Laurin and William B.P. Robson evaluate the defined-benefit pension plans for federal employees using fair-value accounting principles, which value assets and liabilities using current market prices and interest rates. Both past tallies on government balance sheets and current accruals on government income statements, they find, may understate the true cost of public-sector employment in Canada and understate the risks that exist. Restating recent federal government financial statements, the authors calculate an accumulated deficit, or federal debt, of $522 billion at the end of fiscal year 2008/09 using fair-value pension accounting. That total is $58 billion higher than the $464 billion reported at the end of fiscal year 2008/09. As well, they point out, many of the budget surpluses Ottawa has shown since the beginning of the decade would have been deficits, and the latest deficit would have been $7 billion larger.

Reducing or offsetting these costs and reducing these risks, say the authors, should be key elements of a program to restore federal finances to a sustainable position.

For the study go to http://www.cdhowe.org/pdf/backgrounder_122.pdf

For further information: William B.P Robson, President and CEO; Alexandre Laurin, Senior Policy Analyst, C.D. Howe Institute, [phone], email: [email protected]