Question Period Note: ALBERTA PENSION PLAN

• The Canada Pension Plan (CPP) is a national contributory pension plan and is portable across jobs and provinces.
• The CPP encourages labour mobility across the country to help fulfil the needs of workers and employers while keeping administrative costs to a minimum.

In 2020, the Alberta Government commissioned this report from Lifeworks (formerly Morneau Shepell) to explore the feasibility for Alberta to withdraw from the Canada Pension Plan (CPP) and create a standalone provincial public pension plan.

Reflecting the constitutional division of powers between governments, the CPP legislation states that any province may withdraw from the CPP as long as they offer a “comparable” plan. What would be considered a comparable plan is not defined under the legislation but is generally understood as providing the same class of benefits (i.e., covered risks, range of protected earnings, replacement rate and normal age of retirement). No province or territory has ever withdrawn from the CPP. Québec created its own plan from the beginning and was never part of the CPP.

The creation of an Alberta Pension Plan would be a complex process for the CPP, requiring the identification of existing pension liabilities based on contributions made in Alberta since 1966, and a determination of the amount of assets to be transferred to Alberta relating to those liabilities.

The Lifeworks report estimates that Alberta would be entitled to more than half of CPP’s accumulated financial assets, which is significantly higher than Alberta’s 15% share of the population in the CPP. The methodology used to estimate this amount is based on Lifeworks’ adopting an alternative interpretation of transfer formula found in the CPP legislation.

This methodology and interpretation of the legislation has been called into question by a number of groups and experts. CPP Investments indicated that this methodology is “impossible” and employs “a formula that does not seem to connect with any reality.” University of Calgary economist Trevor Tombe has also argued that Lifeworks’ interpretation is inappropriate and problematic. Alberta’s Official Opposition, formed by the New Democratic Party, questioned the validity of the study, characterizing the report as “complete make-believe” and an “entirely torqued, misleading, fantasy case for leaving the CPP and creating an Alberta Pension Plan.”

All of the estimated potential contribution rates and savings for workers in Alberta are based on the projected transfer from the CPP Fund. A smaller transfer would have a large impact on the potential Alberta Plan’s financial state and would alter its potential contribution rate.

Following the release of the report, the Alberta Government has mandated an engagement panel to conduct public consultations from the fall of 2023 until the spring of 2024. The Alberta Government will decide whether to conduct a referendum on the creation of a provincial plan based the results of the consultations. The NDP Finance Critic, Shannon Phillips, has announced that they will undertake an independent survey with Albertans. They have proposed that this will counterbalance the engagement panel of the government, that they have described as a “sham” designed to promote the implementation of an Alberta pension plan.

If Alberta decides to withdraw from the CPP, it must provide an advance formal notice of their intention to opt out. . The earliest Alberta could withdraw is in the third year after notice is given, with provincial legislation to create the pension plan having passed at least 12 months before the date of withdrawal.

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