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December 2020

Municipalities’ financial statements – Decision on Bill 15

This publication is of particular interest to people taking part in the preparation of municipalities’ financial statements.

On November 30, 2020, the Ministère des Affaires municipales et de l’Habitation (MAMH) published details on the presentation of information contained in municipalities’ financial statements. These details are the result of the appeal regarding the challenge to the Act to foster the financial health and sustainability of municipal defined benefit pension plans (Bill 15).


As a reminder, in July 2020, the Superior Court of Quebec ruled that Bill 15’s provisions aimed at suspending the automatic indexation of retirees’ pensions were unconstitutional. According to MAMH, 16 municipal organizations (37 plans) have suspended retirees’ indexation for a total amount of $400 million. The Superior Court also dismissed applications to declare provisions related to active members unconstitutional.

This decision has been appealed.


Until now, only additional note in the financial statement informed the reader of the challenge to Bill 15. This note, proposed by the Ordre des comptables professionnels agréés du Québec (CPA), did not quantify the potential effect of a ruling and did not have any repercussions on the results.

For the time being, the recent judgment does not make any changes to the accounting treatment for municipalities that did not suspend the indexation of retirees’ pensions under Bill 15. However, according to the details issued by MAMH, it must be taken into consideration by municipalities that suspended this indexation.

There are two possible approaches these municipalities can use for their December 31, 2020, financial report:

  • Update the note regarding the challenge to Bill 15 in their financial statements
    • No effect on accounting results
    • Makes readers aware of recent developments
    • Changes will be proposed by the Ordre des CPA
  • Account for the restoration of the indexation of retirees under Bill 15
    • Effect on accounting results
    • Recognition of a past service cost or revision of accounting estimates
    • A tax relief measure is planned so any effect can be differed until a decision is rendered.

The municipalities in question will have to make this decision with the help of their consultants. Although the judgment does not provide any redress, actuaries may, if necessary, estimate the repercussions that the restoration of the indexation of retirees could have. Municipalities can also progressively build a financial reserve dedicated to pension plans.

These additional details issued by MAMH are in addition to all the reflections already underway regarding the production of December 31, 2020, financial results. This reflection deals with, among other things, the relief measure and the revision of the discount rates in the context of the pandemic, as well as the integration of per-component investment policies for several retirement plans.

For more information, contact your Normandin Beaudry consultant or email us.