Question Period Note: Exiting from the Canada Pension Plan – General

DOES A PROVINCE HAVE THE LEGAL RIGHT TO OPT OUT OF CPP?

• The Canada Pension Plan is portable across jobs and provinces, including Quebec where the Quebec Pension Plan offers similar benefits.
• If a province were to set up its own pension plan, it would have to follow conditions as per legislation.
• The portability of the Canada Pension Plan encourages labour mobility across the country to help fulfill the needs of workers and employers.
• If Alberta were to set up its own pension plan, the provincial government would need to assume the existing liability for benefits previously earned in Alberta, including those for contributors who no longer reside in the province.

An article “Protect pensions”, published on February 20, 2020, in the Edmonton Sun indicates that Premier Jason Kenney has said he would hold a referendum on the issue. "Yes, Albertans are frustrated, but no one wants politicians meddling in their pensions and risking pensions and risking their retirement."

The Canada Pension Plan (CPP) is a national contributory public pension plan for all workers in Canada. In Quebec, workers are covered by the Quebec Pension Plan. The CPP is portable across jobs and provinces, including Quebec where the Quebec Pension Plan offers comparable benefits. This encourages labour mobility across the country to help fulfill the needs of workers and employers. Benefits paid are based on the contributory history of an individual. Maintaining one plan allows administrative costs to be kept to a minimum.

The CPP legislation provides a framework for provinces to establish their own comprehensive pension plan as long as a series of conditions are met, including three years written notice from the province, passage of comparable pension legislation by the province, and the assumption of all of the obligations and liabilities with CPP benefits due to employment or self-employment in that province (even for individuals who no longer reside in that province).

Under the CPP legislation, any province may withdraw from the CPP as long as:

1. advanced notice is given of the intention to offer old age pensions and supplementary benefits in lieu of the CPP, commencing with the third year after the year in which notice was given, and to assume all accrued obligations and liabilities;
2. provincial legislation is enacted and in force within a year after the year in which notice was given; and
3. the Governor in Council makes a federal regulation, effective on the first day of the third year after the year in which provincial notice was given, recognizing the provincial pension plan as being comparable to the CPP.

Section 94A of the Constitution Act, 1867 specifies that the federal Parliament may make laws in respect of old age pensions and supplementary benefits, but such laws cannot affect the operation of any provincial law (present or future) on the same matter.

• When the CPP legislation was introduced, it provided two mechanisms allowing a province to opt out of the CPP and provide a comparable plan in its place. The first mechanism applied to provinces that expressed a desire to operate such a Plan before 1965 and was used by Quebec.
• The second mechanism consists of several conditions per legislation, which apply to provinces that express a desire to leave after 1965, and has not been used to date.