Alberta Pension Plan (APP)     


 

 

An Alberta Pension Plan


The Alberta Government and the Frasier Institute have published some of these studies. An excellent summary of their research can be found on the Website of the Citizens Centre for Freedom and Democracy: Click here to access this information.

Section 94(a) of the Canadian constitution gives Albertans the right to opt out of the CPP. Quebec chose the option to operate its own separate plan at the outset (in 1965), and any other province may do the same upon three years’ notice to Ottawa.

Administrative Costs: APP versus CPP

Whenever the discussion comes up of creating an Alberta Pension Plan the status-quo argument parrots the same old line. "It would be too costly." Those who voice this opinion are not being truthful as there never has been a proper study on what those costs would be.

On the other hand a Paper written by William Robson Director of Research, C.D. Howe Institute and published by The Fraser Institute as Public Policy Sources Number 73/November 2003 contains a possible solution to prohibitive costs.

He pointed out that Alberta already has some infrastructure in place to collect work-related premiums for workers' compensation, Healthcare premiums, corporate taxation and distribute Alberta benefits to seniors.

He also points out that it would help to reduce costs by using the timing to take advantage of upgrading the antiquated systems now used to collect premiums and distribute benefits. Also, the collection of our personal provincial income tax could be incorporated into the system right from the start. Another positive is with the upgrading to new technology systems it is highly unlikely that any new personnel would be required to operate the entire modernized system.

It is estimated that Alberta workers now pay some $4 billion per year into the CPP. As mentioned elsewhere that is 34% more than is needed for the needs of an APP. Meaning an extra approximately $1.36 billion would remain in Alberta. That's a lot money to pay for any and all adminstrative costs of managing an APP.

Alberta Pension Plan (APP) Unfunded Liability

The December 31, 2003 Actuarial Valuation Report on the Canada Pension Plan (CPP), showed an Unfunded Liability of $516 Billion. This was made up of Actuarial Liabilities of $584 Billion less Assets of $68 Billion.

Public pension plans of this type are generally either unfunded, as is the case of Old Age Security (OAS) or partially funded, as is the case of the CPP. The Quebec Pension Plan (QPP) is also a partially funded Plan.

Due to substantial increases in CPP contributions in recent years, the CPP assets have been growing at an increased rate. The December 31, 2003 assets of $68 Billion are now in excess of $100 Billion. A new Actuarial Valuation Report as at December 31, 2006 is imminent and this Report will update the financial situation of the Plan.

As the CPP does not cover residents of the Province of Quebec, who are covered by the QPP, Alberta’s population as a percentage of the CPP population is approximately 13.5%. As participants in the CPP, Albertans and their employers are therefore liable for approximately $70 Billion of the CPP Unfunded Liability of $516 Billion. In addition, they are entitled to approximately $13.5 Billion of the $100 Billion of CPP assets.

On exiting the CPP, Albertans, when they establish the APP, will inherit through negotiation both their fair share of the CPP Assets and Unfunded Liability. The Province is then in a position, unlike the present, where it is able to deal on its own unique terms with the APP Unfunded Liability. The choices available range from gradually increasing Plan Assets and limiting the growth of the Unfunded Liabilities to stepping up Employer/Employee Contributions and/or payments from the Provincial Government in order to reduce and perhaps eliminate the APP Unfunded Liability. These choices as they relate to the APP will be made solely by Albertans. Continued membership in the CPP does not offer any alternatives but the status quo.


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