PSAB Review of Employment Benefits - Implications for Municipal Employers
The Public Sector Accounting Board (PSAB) is currently considering changes to employment benefits that could negatively impact municipal employers. The proposed accounting standard may require public entities to record a proportionate share of their interest in pension plans like OMERS on their financial statements. These changes could result in increased volatility in public sector financial statements, increase administrative costs and add complexity, and do not take into consideration Ontario’s unique governance and funding rules are set out in provincial pension legislation.
MFOA is partnering with OMERS to coordinate advocacy initiatives around this issue to help stakeholders voice their concerns to PSAB. Per PSAB’s Employment Benefits project plan, an exposure draft will be issued in summer 2021 for stakeholders’ comments. While we are outside of the formal consultation process, we believe it is important for PSAB to be aware of views of Ontario municipalities before they share their draft standard later this year. As such, the template letter below has been provided to support you in voicing your concerns to PSAB directly. Click here to view MEPCO's joint submission with other OMERS employers and employee associations on the potential PSAB changes.
How these changes could impact your municipality:
- They could increase administrative costs and add unnecessary complexity
These changes under consideration are administratively complex, impractical and result in additional costs to public pension plan administrators, sponsors and members as well as governments themselves. Public sector employers do not have the information or resources to produce and disclose their proportionate share of liabilities and assets. If the proposed standards are adopted, employers would be required to report their share of OMERS accrued benefit obligation on their financial statements resulting in increased costs.
- They are inconsistent with the statutory regime of Jointly Sponsored Pension Plans
Ontario’s jointly sponsored pension plans (JSPPs) are unique and built on the foundation of shared-risk pooling whereby assets and liabilities are not attributed to individual employer groups. No employer, acting unilaterally, has meaningful influence over the assets of a multi-employer pension plan and as such, these changes do not account for – and are not appropriate to apply to – the unique rules for JSPPs.
- They could result in increased volatility in public sector financial statements
Using discount rates related to the yield on high quality government or corporate bonds and moving away from deferral provisions increases volatility in public sector financial statements. Moving to the market yield of high-quality government or corporate bonds will also result in a higher valuation of pension obligations than the true cost under the funding model.
How you can help:
Review the material provided and determine the potential impact these proposals could have on your organization.
Share your concerns with PSAB via the template letter provided.
Sign up to be kept up to date regarding development of PSAB’s review and future advocacy initiatives.
For further information and to keep receiving updates on this issue, please contact christine@mfoa.on.ca or StakeholderRelations@omers.com