Canadian Public Sector Accounting Standards: Publication of Section PS 3251 Employee Benefits

The CPA Canada Public Sector Accounting Handbook was updated in March 2026 to incorporate the new Section PS 3251 Employee Benefits, the new standard on employee benefits applicable to Canadian public sector entities. This standard will replace Sections PS 3250 (Retirement Benefits) and PS 3255 (Post‑employment Benefits, Compensated Absences and Termination Benefits). It introduces significant changes, and public sector entities that account for employee benefits will need to take action to reflect these modifications in their financial statements. Section PS 3251 applies to fiscal years beginning on or after April 1, 2029 (therefore starting in 2030 for fiscal years beginning January 1), and early adoption is permitted.

This publication is particularly relevant for individuals involved in the preparation of financial statements in the public sector.

This standard introduces significant differences from the current requirements, including:

• No deferred recognition of gains and losses on plan assets and benefit obligation
  • Elimination of the use of the deferral and amortization method.
  • Immediate recognition of remeasurements of the net defined benefit asset (liability) in accumulated remeasurement gains and losses, separately from other remeasurements.¹  These remeasurements include gains and losses on plan assets and benefit obligation, as well as any changes in the effect of the asset ceiling, and exclude any amounts considered in the calculation of net interest on the net defined benefit asset (liability). They are not reclassified to surplus or deficit in a subsequent period (no recognition in the expense recognized in the statement of operations).
  • Plan assets must be measured at market value (no asset smoothing).
• Discount rate varies based on the assessment of the plan’s funded status
  • The assessment of the plan’s funded status is based on the preponderance of available evidence, using professional judgment.
    • Based on our understanding, registered plans whose deficits must be fully funded through special payments should generally be considered fully funded, unless there is a demonstrated historical trend of underfunding in actuarial valuations.
  • Fully funded plans: Discount rate based on the expected market-based return of plan assets, consistent with the current standard.
  • Underfunded plans: Discount rate based on the market yield of government bonds, high‑quality corporate bonds, or another financial instrument that best reflects the time value of money for the plan. The discount rate must take into account the estimated timing of benefit payments.
• Other significant changes
  • Net interest recognized in expense is determined considering the impact of the asset ceiling, when applicable.
  • Certain additional disclosures are required, including:
    • A sensitivity analysis of the obligation for each significant actuarial assumption.
      • Note that the requirement included in the second exposure draft for fully funded plans to disclose the impact of using the discount rate applicable to underfunded plans has been removed.
    • Entities participating in a multi‑employer plan that they account for as a defined contribution plan must provide additional disclosures, including why they do not have sufficient information to account for it as a defined benefit plan.
  • Differences in the actuarial valuation methodology may affect (increase or decrease) the service cost and defined benefit obligation, depending on the features of the plan, particularly for life insurance and health care plans.

It should be noted that the transitional provisions allow entities to reflect the cumulative effect of retroactive application of the new standard to prior periods in the opening balance of accumulated remeasurement gains and losses for the first period presented.

This new standard is the first component of the Public Sector Accounting Board (PSAB) project announced in 2020, which aims, among other objectives, to harmonize practices with the International Public Sector Accounting Standard (IPSAS 39, Employee Benefits). The remaining components, to be published at a later date, will address shared‑risk plans and other non‑traditional types of plans.

The amendments to the current standard are significant, and the effect of changes in the financial position of employee benefit plans on financial statements will require in-depth analysis, particularly for several public organizations whose taxation is directly linked to the expected charges.

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¹ Note: For other long-term benefits, such as accumulating sick leave, remeasurements are instead recognized immediately in the surplus or deficit.

For any questions or to better understand the effects of this new standard on the accounting of your plans, contact your Normandin Beaudry consultant or email us.