Abstract
Governments are major employers, and usually provide defined-benefit (DB) pension plans with full inflation indexing and generous early retirement provisions. Hence, changes in thinking about, and accounting for, the costs of DB pension plans have major implications for government finances. Both past tallies on government balance sheets and current accruals on government income statements may understate the true cost of public-sector employment in Canada, and gradual recognition of changes in the financial status of government plans may understate the risks they create. Fair-value approaches are exposing higher costs, risks and funding deficits in DB plans, raising concerns about the security of their promises for participants and the exposure they create for taxpayers.
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