Posted under: DB, DC, Employee Benefits, MEPP, News
By Pat Johnston, FCIA, FSA – GBL
In March 2026, the Public Sector Accounting Board (PSAB) issued Section PS 3251, Employee Benefits, a new standard that replaces PS 3250 (Retirement Benefits) and PS 3255 (Post-employment Benefits, Compensated Absences and Termination Benefits). While PS 3251 does not change the actual cost or funding of employee benefit plans, it introduces significant changes to the measurement, presentation and disclosure of employee benefit obligations and expenses in public sector financial statements. Key changes include the elimination of deferral and smoothing mechanisms, linking the discount rate to a plan’s funding status, and enhanced disclosure requirements. The new standard is effective for fiscal years beginning on or after April 1, 2029, with early adoption permitted. This article will explain the PS 3251 employee benefits changes.
Section PS 3251, Employee Benefits, was issued by the Public Sector Accounting Board (PSAB) and added to the CPA Canada Public Sector Accounting (PSA) Handbook in March 2026. It amends and consolidates two existing standards: PS 3250 (Retirement Benefits) and PS 3255 (Post-employment Benefits, Compensated Absences and Termination Benefits) into a single standard covering the recognition, measurement, presentation, and disclosure of all employee benefits. PS 3251 is based on International Public Sector Accounting Standard (IPSAS) 39, Employee Benefits, adapted for the Canadian public sector context.
PS 3251 is effective for fiscal years beginning on or after April 1, 2029, and early adoption is permitted. For entities that report on a calendar-year basis, a fiscal year beginning January 1, which includes many municipalities, this means PS 3251 first applies to the fiscal year beginning January 1, 2030. Transitional provisions will not require an entity to present comparative information for the disclosures for the periods beginning prior to the entity’s adoption of PS 3251.
PS 3251 makes six notable changes to how public sector employee benefits are accounted for:
| Area | Current (PS 3250 / PS 3255) | New (PS 3251) |
| Actuarial Gains and Losses | Deferred and amortized over the expected average remaining service life; asset values permitted to be smoothed | Recognized immediately. No deferral, amortization, or asset smoothing is permitted |
| Discount Rate | Limited guidance; typically the expected asset return (funded) or the cost of borrowing (unfunded) | Method for setting discount rate is based on funding status – fully funded: expected market-based return on plan assets; underfunded: yield on an appropriate financial instrument, such as a government bond |
| Multi-Employer DB Plans | Commonly accounted for as defined contribution (expense = employer contributions) | Where sufficient information is available, entity to report on a defined benefit basis for a proportionate share of the overall plan |
| Short-Term Benefits | Gap in PS 3250 limited explicit guidance | Explicit recognition and measurement guidance |
| Attribution Period | Generally from the date of employment to the point the entitlement conditions are met | May start later, e.g.: in a post-retirement healthcare plan with an age 55 and 15 years requirement to qualify, attribution period might be from the later of hire date or age 40 to age 55 |
| Measurement Date | Practice varies | Year-end actuarial measurement |
| Disclosure | Baseline disclosure | Substantially expanded requirements: Risk, governance, assumption support, reconciliations, and sensitivity analysis |
The classic trade-off. Deferral and amortization of actuarial gains and losses, together with the smoothing of asset balances, give an improved longer-term expectation of a plan’s cost over many years, but by their very nature, they “fictionalize” the plan’s actual financial position at the reporting date. PS 3251 moves to disclose a much more accurate financial position at the reporting date, which results in greater fluctuation in a plan’s reported results from period to period. The change has no effect on the long-term actual cost of providing the program; it simply highlights the true financial volatility of the obligation from period to period.
Setting the discount rate on the plan’s funded position adds work and interpretation, particularly for funded plans, because it requires an annual assessment of the funded position at the reporting date. This is much more than an actuarial exercise comparing the value of assets to the value of liabilities. PS 3251 sets out primary considerations, such as the plan’s formal funding policy and its actuarial valuation for funding purposes. Where the primary considerations are not sufficient, secondary considerations apply, such as the entity’s past practices with the plan (for example, corrective action taken when the plan is underfunded). Professional judgement may also be needed to assess a plan’s unique circumstances and characteristics.
For fully funded plans, this may be a substantial change from what has been reported if the entity has been using the expected cost of borrowing as the discount rate. For less-than-fully-funded plans, it may be a substantial change if the entity has been using the expected asset return. The change will likely have little effect on unfunded plans, which typically already use an external index such as the yield on a government bond.
Entities that participate in multi-employer pension plans commonly report the obligation on a defined contribution basis, recording each year’s cost simply as the employer contributions made on behalf of employees. Under PS 3251, and where sufficient information is available from the plan, the entity must instead report its proportionate share of the overall plan on a defined benefit accounting basis. This can mean substantial additional reporting and greater financial statement volatility relative to the prior defined contribution approach.
The clarified rules for short-term employee benefits will likely have little effect for entities already reporting such liabilities. The effect could be more substantial for entities that had not been reporting such liabilities due to the gap within PS 3250.
PS 3251 might change the attribution period over which an employee accrues entitlements for some post-retirement programs. This may be more material where entitlement to post-employment benefits depends on a combination of age and service, for example, a plan under which an employee is entitled to benefits only if they terminate after age 55 with 15 years of service. Currently, the attribution period would typically run from the employee’s date of employment to the later of age 55 or 15 years of service. Under PS 3251 for this example situation, attribution would run only from the later of the date of employment or age 40, to the later of age 55 or 15 years of service. This change is unlikely to apply to defined benefit pension plans.
PS 3251 substantially increases the reporting required in the financial statements. For defined benefit pension plans, this includes a description of:
Entities must also provide a reconciliation of gains and losses in the period, and a sensitivity analysis for each key assumption, including the methods and assumptions used to determine that sensitivity and any limitations of those methods.
No. PS 3251 changes how employee benefit obligations are measured, presented, and disclosed, not the underlying benefit promises, plan design, or funding requirements. The long-term cost of providing the benefits is unchanged. What changes is visibility: the plan’s true financial position, and its volatility, become far more apparent in the entity’s financial statements.
The specifics will depend on your plan and require professional judgement, but most entities should:
The application of PS 3251 will have several effects:
What is PS 3251?
PS 3251, Employee Benefits, is a Canadian public sector accounting standard issued by the Public Sector Accounting Board (PSAB) in March 2026. It replaces PS 3250 (Retirement Benefits) and PS 3255 (Post-employment Benefits, Compensated Absences and Termination Benefits), consolidating them into a single standard for the recognition, measurement, presentation, and disclosure of employee benefits.
When does PS 3251 take effect?
PS 3251 is effective for fiscal years beginning on or after April 1, 2029, with early adoption permitted. For entities with a calendar-year (January 1) fiscal year, which includes many municipalities, the standard first applies to the fiscal year beginning January 1, 2030.
What standards does PS 3251 replace?
It replaces PS 3250 (Retirement Benefits) and PS 3255 (Post-employment Benefits, Compensated Absences and Termination Benefits).
Does PS 3251 change how much an employee benefit plan costs?
No. PS 3251 changes how obligations are measured, presented, and disclosed, not the benefit promises, plan design, or funding. The long-term cost of the benefits is unchanged; the standard makes the plan’s true financial position, and its volatility, more visible.
What is the biggest change under PS 3251?
The elimination of deferral, amortization, and asset smoothing. Actuarial gains and losses are recognized immediately, so a plan’s reported position more closely reflects its actual position at the reporting date, at the cost of greater period-to-period volatility.
How does PS 3251 change the discount rate?
The discount rate now depends on the plan’s funding status. Fully funded plans use the expected market-based return on plan assets; underfunded plans use the yield on an appropriate financial instrument, such as a government bond. Determining funding status relies on primary indicators, and, where needed, secondary indicators, together with professional judgement.
GBL is a national Actuarial Consulting firm headquartered in Calgary. Since 1995, we have serviced plan sponsors and administrators and total rewards teams in navigating the complexities of employee retirement and health benefits. We are experts in pension plan consulting and administration, executive compensation strategies, and actuarial valuations.
GBL positions itself as a boutique alternative to large multinational firms, delivering senior-led actuarial expertise with personalized service and competitive pricing.
If you have questions about PS 3251 and the changes it will bring, reach out to us for a consultation by visiting www.gblinc.ca or calling 403.249.1820.
Pat Johnston is a Senior Vice President with GBL and has over 40 years of actuarial and pension experience. In 2003, he founded Pension Strategies Inc which joined GBL in 2023. Pat continues to provide services for corporate and public sector pension plans, IPPs, RCAs, family law pension-related services, and other expert evidence work.
