C.D. Howe pension policy council co-chair suggests a change in legislation
Albertans are to be asked whether the province should withdraw from the Canada Pension Plan in a vote by 2025, but what are the implications for the national plan if they vote to leave?
A new memo by Bob Baldwin, a co-chair of C.D. Howe Institute’s pension policy council, highlights the huge amounts that could be involved, and how the matter might be resolved.
According to a report commissioned by the government from actuaries at LifeWorks (now Telus Health), current legislation could in theory mean Alberta would be entitled to claim $747 billion from CPP in compensation for paying benefits earned up to the date of withdrawal.
The colossal sum is 118% of CPP assets and clearly unworkable, but even the $334 billion that the report concludes could be the appropriate sum would leave a significant hole in CPP assets (53%) and would be far higher than the 16% share of contributions Albertans have made.
“Any settlement has to be fair for all provinces in the CPP, not just the one leaving,” Baldwin writes in his memo. “The payment to any departing province should be no more (or less) than what would be paid to it if all nine participating provinces left simultaneously.”
Baldwin says that there are two routes that could follow a decision to leave the CPP: negotiation and legislation. He notes that an open-ended negotiation would not be in the best interests of stakeholders, and therefore favours a change to the CPP act to make it less opaque, although this would require agreement between Ottawa and two-thirds of the provinces with two-thirds of the country’s population.
“No doubt agreeing on and legislating new language will also involve difficult negotiations,” he acknowledges. “But this approach would have the advantage of lending clarity to how any transfer of assets is to be determined, either in the immediate case of Alberta or off in the future if other provinces exit.”
Baldwin concludes that any legislation andment is unlikely to bare much resemblance to the under the current wording of the legislation, and clarifying the law would give some context to whatever the settlement would be.
