Decision on Alberta’s Withdrawal from Canada Pension Plan Postponed for Federal Review

Alberta’s finance minister says the province’s decision on withdrawing from the Canada Pension Plan (CPP) is on hold pending more study by Ottawa.

Premier Danielle Smith last year instructed her Finance Minister Nate Horner to look into establishing an Alberta Pension Plan. The federal government responded by saying it wanted Canada’s chief actuary to study the issue.

Since then, however, the province has been advised that the chief actuary plans to set up a panel to study the issue.

“Recently, the federal government informed us that the chief actuary’s preferred approach is to strike a panel to interpret the asset transfer formula in the Canada Pension Plan Act,” said Mr. Horner’s statement.

Ottawa has indicated the panel’s assessment will be ready by spring and Alberta will have the chief actuary’s calculation in the fall, said Mr. Horner.

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According to one economist, taking time to do a thorough study is understandable given the complexity and importance of the issue.

“Consulting widely would also be a part of the process,” said Trevor Tombe, a professor of economics at the University of Calgary. “So, the fall strikes me as timing that I would have guessed. It could have easily been longer, quite frankly,” he told The Epoch Times.

The amount of money involved is massive, and the impact on Alberta and the rest of the country is also significant.

The advantage for Alberta workers is that they would end up paying less in a provincial plan—while workers in the rest of the country would likely have to pay more.

“Based on the assumptions made by the LifeWorks report [done for the Alberta government], Albertans would save about $2,800 annually under an Alberta pension plan compared to what they’re now paying in the CPP,” said Tegan Hill, associate director of Alberta policy for the Fraser Institute.

“The basic contribution rate for the rest of Canada was estimated to increase to 10.36 percent,” she told The Epoch Times. “So obviously it would be a big change for Albertans and for the rest of Canada.”

How much of the CPP Alberta could pull out is one of the points of debate, and not everyone agrees with the figure of 53 percent.

For example, Mr. Tombe did an analysis that found a more likely percentage of Alberta’s share of CPP would be around 20 percent, although he points out that even with that lower number, a provincial plan could still be a win for workers in Alberta.

“Even my paper, with only 20 percent provided to the province, does feature an Alberta pension plan with a lower [per worker] contribution rate than the Canada Pension Plan,” he said. “I think the nature of the disagreement here is on just the magnitude of what the contribution rate change would actually look like.”

Mr. Tombe added that the issues are complex and questions could remain after the chief actuary’s report comes out in the fall.

He pointed to the uncertainties of calculating the return on investment based on Alberta workers’ contributions over the years.

“The Act says that the investment earnings of the Canada Pension Plan that are derived from contributions made by Albertans would be a part of the payout. But it does not say how to do the derivation … and there are a number of conceivable ways of deriving investment returns from contributions. So, there’s some fundamental ambiguities there,” Mr. Tombe said.

The ambiguities in the Pension Plan Act mean Alberta’s potential withdrawal from CPP could end up in court.

“It may very well mean that after the chief actuary report, the Government of Alberta would need to consider having a reference case where we have judicial interpretations of some of those ambiguous sections of the act. So, there’s a lot left to do even after this report comes out,” he said. “It’s certainly a complex political landscape as well to navigate.”

The politics include the prevailing Alberta sentiment that the province contributes financially above its weight compared with the rest of the country, while at the same time getting punched as an energy-rich province.

“I think personally, that it’s about a much bigger discussion about Alberta’s role in the federation,” said Ms. Hill. The oil and gas emissions cap is notable for being “specifically, basically targeted at the province,” she said, adding such regulations “really have just been stacking upon themselves for the past several years.”

“So, to me, it’s really about starting those broader conversations about our role in the federation and renegotiating what that looks like,” said Ms. Hill.

For its part, the province is asking Albertans to continue submitting their opinions about a potential provincial plan until the end of February.

The finance minister’s statement adds that the province is committed to holding a referendum on the issue.

Regardless of politics, no province has ever pulled out of CPP since it began in 1965.

“It’s certainly an issue that will be difficult, politics aside, because of the sheer magnitude and complexity of it,” said Mr. Tombe. “And I think anyone would concede that … there’s a long road ahead.”