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There, in black and white
Bulletin NB, Vol.8 N. 2, November 2008
Municipal organizations sponsoring defined benefit pension plans will benefit from a new relief measure applicable for the preparation of 2009 budgets. The highlights of this measure are presented in this bulletin.
During the Table Québec-Municipalités held on October 31, 2008, the Union des municipalités du Québec (UMQ) urged the Ministère des Affaires municipales et des Régions (MAMR) to review accounting rules applicable to defined benefit pension plans for municipal organizations, given the current economic context that has lead to a significant increase of the pension expense.
On November 11, the Direction des finances municipales of the MAMR replied by announcing a tax relief measure designed to assist some 90 municipal organizations in their budget preparation for 2009.
This measure provides for a decline in the volatility of the pension expense, given that the current economic situation is exceptional and could be resolved in the coming years. The proposed measure is added to those already permitted by the accounting standards.
Proposed relief measure:
The use of this relief measure beyond 2009 must be clarified by the MAMR at a later time. For 2009, however, the combined use of "asset smoothing" and the proposed relief method will limit the volatility of the pension expense. Moreover, "asset smoothing - applied retroactively to December 31, 2007 would also reduce the pension expense for year 2008. Please note, however, that the corridor method, as proposed, can not be applied retroactively (for 2007 and 2008) and has no impact on the amount to be paid in the future for the initial deficit.
Below is a typical example of the impact of using the relief measures on the pension expense for 2009. The year 2008 is presented for comparison purposes.
* "Asset smoothing" is applied retroactively to December 31, 2007.
Please feel free to contact us for additional information.
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