Hands Off Pension Surplus, Canadian Labour Orgs Tell Federal Government

By: Neil Hrab

A week before Christmas, some contributors to Canada’s defined benefit Public Service Pension (PSP) received what they considered to be the equivalent of a pre-winter holiday lump of coal. 

Such was their reaction to an announcement by Canada’s federal government that it planned to transfer about C$900 million (US$720 million) in surplus from the pension to the government’s own Consolidated Revenue Fund (that is, the government’s primary bank account).

PSP currently has about C$300 billion (US$215 billion) in net assets. With the Government of Canada as its employer-sponsor, PSP invests on behalf of the pension plans serving Canada’s federal civil service, federal police, and regular and reserve members of Canada’s armed forces.

For further context, PSP is about 125% funded, based on anticipated liabilities. A funding level beyond 125% is considered under the law that governs PSP to represent a “non-permitted surplus,” meaning the government can move that portion of the pension surplus into its Consolidated Revenue Fund.

The fireworks over the surplus comes as the government is trying to shrink the overall size of Canada’s federal civil service by offering early retirement incentives.

The Public Service Alliance of Canada (PSAC) denounced the action on the surplus, saying in a statement that “[o]ur position has always been that any public service pension surplus should be invested back into the workers who've contributed to the plan their entire careers.” 

Another labour voice, the Professional Institute of the Public Service of Canada, protested “the government’s continued treatment of [the pension] surplus as a piggy bank it can access at will."

In 2024, the government previously withdrew C$1.9 billion (US$1.4 billion) from PSP as “unpermitted” surplus. That brings the total amount in surplus transferred from the pension to C$2.8 billion (US$2 billion) in two years.

Surplus dollars in Canadian pension plans have occasionally been the source of sharp public controversy. The OMERS pension plan, for example, ran such large surpluses just prior to the start of this century that it entered into a “contribution holiday” lasting for several years. Some OMERS members at the time complained that they would have preferred to see benefit enhancements enacted, in place of the holiday. 

Another well-known Canadian pension flashpoint concerns a dispute over a company pension plan surplus in the mid-1980s between the owners of Dominion Stores, a grocery chain, and the labour groups representing store staff. That disagreement led to years of litigation over the surplus.