Their timing is impeccable – just as federal MPs are buckling under the pressure and are preparing to scale back their own over-the-top pensions, some Alberta MLAs are rubbing their hands together at the prospect of getting in on the action.
While not at the level of the ridiculous MP pension plan, the proposed “targeted-benefit” pension plan for Alberta MLAs could be little more than a coat of lipstick on the pig of a gold-plated pension plan.
Almost universally in Canada, the biggest problem with government pension plans (not just those for politicians) is that they often make promises of payouts to retirees that are much higher than how much money has been socked away in the pension fund.
If you had that same problem in your RRSP (not having as much money in it as you’d like) you’d have to adjust your budget to meet your reality. Unfortunately, with the “defined-benefit” pension plans in the government, the payouts to retirees are not adjusted when the funds invariably fall short; taxpayers are simply sent the bill for the shortfall.
Alberta MLAs on the all-party Members’ Services Committee appear to be giving serious consideration to a “targeted-benefit” pension plan. The only difference between a “defined-benefit” pension plan and a “targeted-benefit” pension plan is that with the former, taxpayers are automatically dinged for shortfalls, and with the latter, they have the option of either handing taxpayers a bill for the shortfall or reducing their payouts.
Now, if you were an employee whose business had a seemingly bottomless pit of money, and you yourself got to decide if your employer would pony-up more dough for your pension, or if you would cut back your own pension, which would you pick?
Exactly.
Moreover, if MLAs follow the formula recommended by Justice Major in his report on MLA pay, Alberta’s MLAs could be looking at a pension plan that offers pension pay outs that would be very generous.
For example, for serving just two terms in the legislature, a backbench MLA with no extra responsibilities would be entitled to an annual, indexed pension of $32,000 a year for life. A three-term MLA would be entitled to $53,000 annually. That three-term MLA would need to contribute $203,000 towards his pension fund, while you would need to save at least $822,000 in your RRSP to buy the same pension.
A three-term member of the cabinet, the opposition leader, or the speaker would all be entitled to an annual, indexed pension of $79,000 for life under the proposed pension plan. While those MLAs would need to contribute $305,000 towards their pensions, you by contrast would have to save at least $1.2 million for the same retirement.
Try as they might to change the technical name of the pension scheme, it is still similar to the old pension plan Ralph Klein killed in 1993. That year, the CTF’s then-representative, Jason Kenney took the new premier to task for the gold-plated pension plan. The very next day, the premier announced that the pension pig had been taken behind the barn and its bacon cooked. The pension plan was scrapped – full stop.
The Canadian Taxpayers Federation has been salt in the eyes of federal MPs since that time for
their pensions, and we may just finally be about to break through with reforms on their way.
Albertans are watching their representatives in Ottawa and Edmonton right now. Will our MPs in Ottawa right wrong, while our MLAs in Edmonton wrong their right?
Derek Fildebrandt, Alberta Director
