ACER-CART Pension Committee Report – January 2020

Defined benefit pension plans continue to draw the attention of governments and that is probably not a good thing for pensioners.

1. The Alberta government’s Bill 22 includes a requirement that the Alberta Teachers Retirement Fund (ATRF) transfers management of their assets to the Alberta Investment Management Corporation (AIMCo). The explanation for this move is that a larger, pooled fund will create economies of scale. While the government has made assurances that the ARTA Board will still manage the investments, this legislation reduces the independence of the ATRF to choose their own investment managers. Without being paranoid, it’s hard to view this as anything but a step to increased control of pension governance by government and a reminder that no pension plan is safe from government legislation at any moment.See Appendix 1.

2. From the Federal Fiscal Update December 17, 2019: The Government’s obligations for pensions and other future benefits are determined on a present value basis, and dependent on year-end interest rates. The lower interest rate outlook relative to Budget 2019 results in larger estimated obligations, which translate into higher annual expenses for the Government.Over a five-year-period, Ottawa is expected to pay an extra $27.8 billion into federal employee pensions. See Appendix 2 - Globe and Mail December 17, 2019.

Again, without being paranoid, one must wonder what the government’s motivation is for this change. Perhaps it can be found in a quote from the President of the C.D. Howe Institute near the end of the newspaper article. “There’s a big transfer of wealth going on through these plans and we haven’t been seeing it. We never realized how generous we were compensating them, and now it’s coming to light….If we don’t want more of this sort of thing, what we need to do is not mess with the accounting, it’s change the pension plans.”

3. Quebec is introducing legislation to permit Target Benefit Plans.https://www.benefitscanada.com/news/quebec-to-introduce-bill-allowing-target-benefit-pension-plans-138756The provincial government has already given a mandate to Retraite Québec to develop a regulatory framework for the plans, said Minister of Finance Éric Girard at an event in Quebec City  last week. “This bill is intended to provide Quebecers with an additional savings option and responds to the demands of employers and unions in a context of declining defined benefit pension plans.” 

While the current Quebec legislation allows some very limited TB plans they are not permitted to reduce pensions in pay. The new legislation is expected to remove that limitation.

4. The Canadian Coalition for Retirement Security continues to meet but I didn’t attend the most recent meeting. They are proposing widening their mandate to cover more than the original opposition to Bill C-27.

5. I’m considering asking our Directors to complete a short pension survey for release at our AGM. I might focus on solvency ratios, cost-of-living adjustments and other threats such as changes to the pension promise (target benefits). Any thoughts?

Gerry Tiede, Pension Committee Chair.

Gordon Cumming, member

Appendix 1

Message from ATRF's CEO and Board Chair on Bill 22 We have heard from many of our members in the past few weeks with questions about Bill 22 the Reform of Agencies, Boards and Commissions and Government Enterprises Act. This legislation was passed recently in the Alberta Legislature and includes a wide range of provisions, including a requirement that ATRF transfers management of its assets to the Alberta Investment Management Corporation (AIMCo). We wanted to take this opportunity to address some of the concerns our members may have.

Let us say right up front: Your pension remains unchanged and secure.

This legislation did not make changes to the pension plan rules or benefits. ATRF has always been focused on ensuring sustainable pensions for Alberta teachers, and you can count on that to continue. We will keep working diligently to ensure the dependable pension plans Alberta teachers deserve and have relied on for generations will be there when you need them.

Our Board has a fiduciary duty to ensure the best interests of our members and that their pension plans are protected. That is a legal and moral obligation our Board takes very seriously, as do all the staff at ATRF. This legislation does not change that.

What's changingCurrently ATRF staff manage the investment of ATRF pension funds in accordance with the direction set by our Board. Bill 22 requires AIMCo to become "the exclusive provider of investment management services" for ATRF's pension funds.The legislation dictates that an Investment Management agreement must be in place no later than June 30, 2020, and the transfer of investment management services must be complete before December 31, 2021. The Board and ATRF management will therefore be working together in the coming weeks and months to determine the details of this transition, and to ensure this new arrangement meets our obligation to ensure your pension funds are managed in your best interests.

What's not changingATRF and its Board will continue to serve teachers and be responsible for the overall management of the plans. Bill 22 does not result in ATRF losing ownership of its assets. The ATRF Board remains responsible for determining investment strategy and establishing the policies and goals that will guide the investment of ATRF assets, and to ensure the pensions' funds are invested accordingly. We will hold the government and AIMCo to their word that our unique investment needs will be met and we will set up the accountability framework to ensure this.Our commitment to you, as our first priority in everything we do, has also not changed. We will continue to put in place agreements and expectations that represent your best interest.

We have been posting information to our website as it becomes available, and we will continue to do so. There is a page on our website with some additional information that we can provide at this point.

We would like to conclude by saying on behalf of every single ATRF employee, our Board, and from us personally, how very much the recent outpouring of support for our organization has meant to us. This organization is full of skilled and passionate people who have worked hard for teachers for decades. We believe that Alberta teachers have and continue to make a tremendous contribution to our communities, and we are truly honoured to be able to support such a remarkable group of teachers and teacher leaders. 

Sandra JohnstonBoard Chair

Rod MathesonC

Appendix 2