Thank you, Mr. Chair.
Thank you for this opportunity to meet with your committee today to discuss the chapter on public sector pension plans from our 2014 Spring Report. Joining me at the table is Richard Domingue, Principal, who was responsible for this audit.
Public sector pension plans have a large impact on the government's financial position. The net liability relating to these plans exceeds $150 billion. Pension plans are now operating in an environment where interest rates are low, and plan members are living longer. It is therefore important that the plans be designed and managed in a way that not only considers present circumstances, but that also protects the interests of current and future employees and taxpayers.
The audit focused on the three main public sector pension plans, those of the public service, the Canadian Forces, and the RCMP. The audit objective was to determine whether the Treasury Board of Canada Secretariat, the RCMP, National Defence, and the Department of Finance Canada carried out selected key aspects of their governance and management responsibilities with regard to the public sector pension plans.
Although we found that the entities we audited had carried out their responsibilities under the law, no one is responsible for the regular, systematic assessment of whether these pension plans are sustainable over the long term. It would be reasonable to expect that the plans be designed to be sustainable and affordable. We recommended that the secretariat, in collaboration with the RCMP and National Defence, periodically assess the pension plans' sustainability. If deemed appropriate they should recommend changes to plan designs so that they are up to date, affordable, and fair to current and future generations.
We also found that the legislative framework that governs the pension plans disperses responsibilities among a number of entities and does not include a funding policy. So far the Public Sector Pension Investment Board has assumed that the funding risks required to meet the rate of return on assets set by the actuary are acceptable to the government. Funding decisions related to the plans could have an impact on the government's budgetary framework. We recommended that the secretariat, in collaboration with the other supporting entities, finalize a funding policy for all three plans on a timely basis.
Clear and complete information on the pension plans and good reporting on the budgetary impact of government liabilities are essential to allow for better transparency and accountability.
We found that information in public sector pension plans and liabilities is not user-friendly. We recommended that the Treasury Board of Canada Secretariat, with the collaboration of the RCMP and National Defence, prepare a proposal for a consolidated report with clear and understandable information on the public sector pension plans for consideration by the President of the Treasury Board.
The Treasury Board Secretariat is in agreement with all three recommendations. In particular, it has committed to work with the RCMP, National Defence, and Finance Canada to implement a funding policy and propose a consolidated report for the three pension plans.
We found that the Department of Finance Canada monitors the budgetary impact of the pension plans. However, it has not concluded on the merit of funding the pre-2000 pension liabilities. The government needs to assess the benefits and risks, and determine if it would fund the liabilities. The Department of Finance has agreed with our recommendation and has committed to assess this issue in the 2014-2015 fiscal year.
Mr. Chair, that concludes my opening remarks. We would be pleased to answer any questions the committee may have.