Danielle Smith wants 53 per cent of the CPP, but to get it she’s in for a fight with other premiers

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Danielle Smith has always been on the side of Alberta going it alone with a provincial pension. What we didn’t know until this week is what a stunningly big chunk of the pie the Premier would seek in that separation from the Canada Pension Plan.

The Alberta claim is so huge – Ms. Smith’s United Conservative Party government says the province is entitled to more than 50 per cent of the CPP’s assets – that it’s likely to usher in a new era of Canadian political chaos if seriously pursued. The province is embarking on a new fight not only with Ottawa, but potentially with all the other provinces and territories, except for Quebec.

The Alberta argument is based on this scenario: What if the province had never joined the CPP when the plan was formed by Lester B. Pearson’s government all those years ago? How much money would Alberta have if it had created its own fund in 1966?

A long-awaited government-commissioned report concludes Alberta is entitled to withdraw $334-billion from the CPP – about 53 per cent of the entire pension fund’s projected assets in 2027.

The report, from LifeWorks, a consultancy now owned by Telus Health, describes the multibillion-dollar figure as one calculated by a “reasonable interpretation” of the Canada Pension Plan Act. Under the act, provinces are all entitled to establish their own pension systems. But only Quebec – which has never been part of the CPP – has ever done so. The act also says that, when a province withdraws from the CPP, that province is entitled to a share of the plan’s assets.

The UCP government says the asset share it could claim in such a scenario should reflect the contributions the province has paid, less the benefits received (and share of costs), plus investment income on that net amount, as if a provincial pension plan had always existed since 1966.

“There’s always been an exit formula,” Alberta Finance Minister Nate Horner told reporters on Thursday. “We stand by the validity of their interpretation and methodology.”

With so much more money on hand, Alberta employees and employers could pay less in premiums and receive better benefits, the report says. The government is floating the tantalizing prospect of extras – perhaps, it said, Alberta retirees will get $5,000 or $10,000 bonus payments.

But this nest egg has to come from somewhere. Given the detrimental effect such an asset withdrawal would have on pension provisions for the rest of the country, Ottawa and other provinces are likely to fight Alberta’s version tooth and nail. And despite Ms. Smith calling the LifeWorks document “a very factual report,” the question of Alberta’s share is far murkier than the government says.

In his own paper this week, University of Calgary economist Trevor Tombe said that if other provinces used Alberta’s calculations, and if Alberta, British Columbia and Ontario all tried to withdraw from the CPP, this would represent a 128-per-cent claim on CPP assets.

It doesn’t appear the Alberta-commissioned report examined what such a large asset withdrawal would mean to other provinces. (The Premier has said her government believes the annual effect would be somewhere around an extra $175 a worker in annual premiums, plus an extra $175 per employer, in provinces outside of Alberta and Quebec.)

Dr. Tombe said in his report that while the LifeWorks calculation is based on one interpretation of the CPP Act, he doesn’t believe it’s reasonable given changes to the act over the years. His calculation is that Alberta would be due $120-billion to $150-billion. “There is no obvious way to determine the share of CPP assets that a hypothetical Alberta pension plan would be endowed with, because the Canada Pension Plan Act is imprecise,” he wrote.

In all the calculations the government released, I didn’t see any estimates of the cost of lawyers as this turns into one of the most protracted legal battles in Canadian history. The federal government could, with the support of other provinces, change the CPP Act to stymie Alberta’s plans.

There is a big caveat in all of this: As much as the idea of an Alberta pension plan has long been supported by the Premier, and the UCP, it’s not clear the government will follow through. Albertans waited three years for the report. How long will the actual process take?

If newly appointed Alberta pension panel chair Jim Dinning finds little support for the plan in his public consultations, a pension question might not even make it to the referendum stage. There’s no polling that suggests a majority of Albertans want the government messing with their current pension arrangements.

Even beyond the $334-billion figure, there are thorny parts of this provincial pension push. Mr. Dinning has called his public engagement “independent.” But that will be near impossible with the government cheerleading. Dr. Tombe has also noted other risks: It’s still unclear what Alberta’s demographics will be in the decades ahead – whether the province will stay young, employed and fortunate – or what investment returns will be.

Ms. Smith said Thursday there would be many options for the management of an Alberta plan, including having the Canada Pension Plan Investment Board run it. But the Premier also told the Calgary Sun’s Rick Bell, “If we can reduce premiums for workers, increase benefits for seniors and also have a say in how the money is invested, that checks off a lot of boxes for me.” Her description of control over how money is invested opens the door to concerns about political interference.

Ultimately, the province needs to think hard about threatening to leave a national pension fund it has been a part of for six decades – one that is well funded, and that is among the few unifying institutions in our decentralized and sometimes fragmented country. This sentence from Michel Leduc of the Canada Pension Plan Investment Board earlier this week sticks: “A province that accounts for only 16 per cent of total contributions can’t legally, realistically or morally be allowed to claim more than half the assets,” he told The Globe and Mail.

As Mr. Dinning begins his meetings with Albertans, he and the Smith government need first to be honest and let them know that the premise that the provincial pension plan will begin with $334-billion in the bank is far from a sure thing.