Regular Albertans will have to have over $822,000 in savings to match the pension of a three-term backbench MLA
EDMONTON, AB: The Canadian Taxpayers Federation is calling on Alberta’s 87 MLAs to reject Justice Major’s proposed gold-plated, defined-benefit pension plan, in favour of formalizing the current, dollar-for-dollar, matching MLA pension plan.
“Ralph Klein rightfully killed the gold-plated MLA pension plan back in 1993 and under no circumstances should MLAs today agree to resurrect its toxic corpse,” said CTF-Alberta Director Scott Hennig.
The CTF has calculated that under the MLA pension plan proposed by Justice Major, a three-term backbench MLA would stand to collect an indexed pension starting at $52,740 a year, for life. Using the Standard Annuity Calculatorat, the CTF has also determined a regular Albertan would have to have $822,205 in savings to purchase a pension (joint life annuity) that would pay the same.
“Considering Canadians are currently limited to putting no more than $22,970 into their RRSPs each year, it’s going to be mighty tough for any Albertan to sock away over $822,000 over the next 12 years to match their local MLA’s pension,” continued Hennig.
The CTF is calling on Albertans to sign a new petition opposing the gold-plated plan and formalizing the current RRSP payment into a defined-contribution pension plan. The CTF is also asking Albertans to contact their MLA and the new members of the powerful Members’ Services Committee to oppose the gold-plated MLA pension plan.
The MLA pension plan proposed by Justice Major includes a 2.5 per cent annual accrual rate, which is 25 per cent higher than the maximum 2 per cent accrual rate legally allowed in Canadian's pension plans according to the Income Tax Act.
“In addition to this proposal requiring special amendments to provincial law to over-ride the legal limits in the Income Tax Act, it’s an unsustainable defined-benefit pension plan,” continued Hennig. “This is the same type of pension plan that has nearly bankrupted GM, Chrysler, Air Canada and soon, taxpayers.”
The CTF notes that the Alberta government currently has over an $11 billion debt in the form of pension liabilities, with the teachers’ pension plan eating up the bulk of that at over $9 billion. The MLA pension plan that was stopped in 1993 (retroactive to 1989) still has an unfunded liability (debt) of $42 million. Further, every single Government of Alberta employee pension plan has an unfunded liability.
“Nineteen years after Klein killed the MLA pension plan and taxpayers are still on the hook for a $42 million debt,” said Hennig. “Considering it was a $49 million debt in 1999, it’s going to take the better part of this century until that debt is fully paid.”
Due to their unsustainability, defined-benefit pension plans have been falling out of favour in the private sector for the past two decades. According to a 2010 study by the Certified General Accountants of Canada (CGA-Canada), prior to the financial meltdown in 2008, 71 per cent of all private-sector defined-benefit pension plans were in a “solvency deficit.” That number spiked to 92 per cent by the end of 2008.
“By their very nature, defined-benefit pension plans run massive unfunded liabilities or debts that leave the employer, in this case taxpayers, holding the bag,” said Hennig. “When Justice Major said during his press conference that his proposed plan protected and benefited MLAs, he wasn’t joking.”
In the CTF’s submission to Justice Major it was recommended the current plan which provides MLAs with 50 per cent of the maximum RRSP contribution limit ($11,485 in 2012), should be formalized, with government matching, dollar-for-dollar, MLA contributions into a group RRSP plan or the a new Pooled Registered Pension Plan (PRPP).
The CTF calculates that under the CTF’s proposed defined-contribution MLA pension plan, a 12-year backbench MLA could purchase a pension at age 65 that would pay them an indexed $34,560 annually, for life.
CTF calculations on various scenarios for the proposed MLA pension plan can be found HERE
The CTF’s new petition opposing the gold-plated MLA pension plan can be found HERE
The CTF’s submission to Justice Major, entitled “Reversing the Kowalski Legacy” can be found HERE
