The province of Alberta remains poised to make a series of reforms to its public sector pension plans this spring, despite the improving outlook for many pension plans across Canada.
“They’re looking healthier, but I bet you in 2007 they were looking good too,” Alberta Finance Minister Doug Horner said in an interview.
But while pushing ahead with his plan, which is designed to sharply reduce pension costs over the long term, the Alberta minister insists he has listened to union concerns and will consider small changes before introducing the controversial legislation in the months ahead.
Alberta’s pension problems are the same ones that many governments and large corporations face. Increased life expectancies, low interest rates and uncertain investment returns make it hard to keep up with the rising costs of defined benefit plans.
And those dark clouds are still on the horizon, no matter the current positive indicators after a strong stock market year, according to Mr. Horner.
The minister said unfunded liabilities – now sitting at about $7.4-billion for four separate provincial public pension plans – cannot be borne by taxpayers, and the problem won’t be solved with increased contributions or periods of higher investment returns alone.
On the table are changes such as an end to early retirement benefits paid at age 55 and the end of guaranteed cost-of-living increases. There will be contribution rate caps – that can be “changed from time-to-time” – and a moratorium on benefit improvements until 2021. Those already receiving pensions by the end of 2015 will not be affected by the proposed changes to cost-of-living adjustments (COLA).
“I’ve got to tell you, there’s very few defined benefit programs in the private sector that even have a COLA,” said Mr. Horner.
The minister said the government asked for union and member feedback in the fall and got some ideas. The province is talking about getting rid of subsidized early retirement, he said.
“Maybe instead of getting rid of it, you could moderate that somehow,” Mr. Horner said, adding that nothing has been decided yet.
Despite the signs of movement from Mr. Horner, the unions maintain the government’s plan is impossibly flawed. A consultant’s report commissioned by labour groups and released earlier this year shows Alberta’s largest public-sector pension plans are healthy and on the road to returning to fully funded status.
Alberta Union of Provincial Employees president Guy Smith said he’s hearing from members who plan to leave the public service before the changes are implemented – putting a drain on both pension plans and a government that needs to hold onto workers in the province’s labour market.
“Actually, what Horner is doing is creating a crisis,” Mr. Smith said, noting Alberta’s public sector pension plans are far from lavish.
Unions are also buoyed by a report from Alberta’s Auditor-General last week that stated it is “unclear whether the proposed reforms significantly increase the likelihood of the plans’ sustainability.”