City Manager of Financial Planning replies to “Accrued Benefit Obligation” post

Mr Schulstad:

This is in response to your comments that you sent to Council regarding the City’s Accrued Benefit Obligation in the Financial Report.

Under PSAB sections 3250 and 3255, the City is required to account for retirement benefits and other post-employment benefits, compensated absences and termination benefits in its financial statements. The amount accrued and expensed each year is based on an actuarial calculation done by an independent actuary. Up until 2007 the calculation only included retirement benefits so the accrual included on the financial statements only included an actuarial estimate of the amount that would be paid out in the future for the up to 60 day payout of sick leave benefits employees, who meet the criteria, are eligible for upon retirement. In 2007 the calculation was changed to include compensated absences for accumulated sick days. That is why there was such a huge jump in 2007.

There have been no changes in employee contracts, other than wage increases, that have had an impact. The increases are a result of the City’s aging workforce (getting closer to retirement) and the fact that the majority of employees are long-term and have been using less than the 18 days annual sick leave. Employees can accrue up to 120 days of accumulated sick days. Therefore as they save more days, the actuarial calculation increases.

The City has also used a professional negotiator for collective bargaining for the last several negotiations.

Shannon Graham
Manager of Financial Planning
City of Nanaimo
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Follow-up question May 18:

Ms.Graham
Thank you for your response.Could you please explain in more detail what is meant by the term “compensated absences for accumulated sick days.”

Wayne Schulstad

Response by Ms.Graham May 19:

“Generally permanent employees are entitled to 18 days of sick leave per year and are allowed to accumulate unused sick leave up to a maximum of 120 days.Therefore when an employee who has accumulated time in their sick leave ‘bank’ and is paid for a sick day they are being compensated for an accumulated sick day.”

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