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Alberta to explore leaving CPP as report lays claim to more than half of fund

Alberta to explore leaving CPP as report lays claim to more than half of fund

CBC
Thursday, September 21, 2023 7:05 PM GMT

The Alberta government released a long-awaited report Thursday on the possibility of establishing an Alberta-only pension plan on Thursday, claiming the province is entitled to a staggering $334-billion asset transfer from the Canada Pension Plan in 2027.

That's more than half of the fund's estimated total net assets. The report attributes the figure to Alberta's high employment rates, young population, and higher pensionable earnings, which it claims has meant the province has sent billions more into the CPP compared to what it has received.

Withdrawing from the CPP could potentially mean the rest of the country would end up paying more for their pension contributions (though Trevor Tombe, an associate professor of economics at the University of Calgary, said it's not mechanically guaranteed). Quebec would not be affected, as it has operated its own pension plan for decades. 

To withdraw from the CPP, Alberta would need to provide written notice that it planned to do so and draft legislation to establish an Alberta pension plan. It would need to accept contributions beginning in the third year following the year in which it gives notice, and then provide comparable benefits to the CPP.

The government is quick to note that such a plan to withdraw from the CPP is still in the early, hypothetical stages. Now that it's been released, the next few months will see former Progressive Conservative finance minister Jim Dinning head up a panel that will consult with Albertans on the idea over the fall and into spring 2024. If those go well, the government says it could then hold a referendum.

Over the coming days and weeks, expect questions about the report's assumptions around how much Alberta would be entitled to, which it states are based on how much Alberta has contributed to the CPP, minus what they've received in benefits since the start of the CPP in 1966, plus investment earnings on that amount.

"What the government has released in its report today is, I think, a very problematic interpretation of the act that basically puts Alberta into the position that it would have been in had it never joined in the first place. But that's not a reasonable read," said Tombe at the University of Calgary.

"What we need to do is divide the existing assets, not construct a hypothetical amount of assets that we could have had if the world had been different from the 1960s onwards. So that's hugely important."

Tombe said a more reasonable interpretation lands not at over half of CPP assets, but somewhere potentially around 20 per cent of CPP assets, or at the highest, 25 per cent.

Also expect questions around how the report interprets portions of the Canada Pension Plan Act related to withdrawal. The government expects those questions, along with others, will be hotly debated over the coming weeks and months.

This report emerged out of the "Fair Deal" panel report, a series of proposed measures that former premier Jason Kenney said would help the province carve out a stronger position for itself within Confederation, the pension part of that equation being the clear crown jewel.  After being shelved for a time, Alberta Premier Danielle Smith tasked President of Treasury Board and Minister of Finance Nate Horner with releasing it as a part of his mandate letter in July.

Dinning himself noted in a news release Thursday that he expects that conversations around the plan could get "fiery" at times. Polling has suggested that the majority of Albertans aren't on board with the idea. 

Tombe, the U of C professor, said the single most important variable determining the future of a separate Alberta plan are the assets that they would get from the CPP.

"This is not something that's just arbitrarily negotiated between Alberta and the rest of the country. It's something that has a formula defined in the Canada Pension Plan," Tombe said, who added there is some ambiguity in some of the critical language in the act.

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