Edmonton: President of Treasury Board and Finance Minister Doug Horner issued the following statement on reform of Alberta’s public sector pension plans, which face unfunded liabilities totaling $7.4 billion:
“Provinces across Canada are taking steps to make their pension plans more sustainable and to ensure they are able to meet the needs of future generations.
“The simple fact is this: while life expectancies have increased over the past several decades, the age of retirement has not. Today, some Albertans will spend more of their lives retired than they spend in the work force. This has a significant impact on pension plans, not just in Alberta, but across the country.
“Back in September I asked for feedback on proposed changes to the public pension plans. We listened and we are responding to that feedback.
“Today I met with board members from Alberta’s four public sector pension plans to provide details on changes I will bring forward in the Legislature to ensure long-term sustainability of these plans. These changes will ensure the sustainability of pension plans without over-burdening current or future plan members or taxpayers.
“I made two simple commitments: we’re going to protect the defined benefit nature of these pension plans, even though many other jurisdictions are making more dramatic changes. And we’re going to keep contribution rate increases as low as possible, so that we can leave more dollars in the pockets of employees.
“With that in mind, here are some of the changes we plan to move ahead with:
- Benefits to current retirees will not change and there will continue to be no changes to core benefits, with the same formula continuing based on age, service and salary. We will only make adjustments to ‘add-on’ benefits: early retirement subsidies and cost of living adjustments — with these changes only affecting benefits earned from January 1, 2016, onwards.
- The early retirement subsidy for the Local Authorities Pension Plan, Public Service Pension Plan and Management Employees Pension Plan will be modified to a ’60 and 90 factor’. To retire early with an unreduced pension, a member must be at least age 60 and age plus years of service must equal 90 instead of the previous 85 or 80, depending on the plan. Special Forces Pension Plan members will continue to have their current early retirement benefits.
- Cost of living adjustments for pension benefits earned after 2015 will remain at 60 per cent of the Alberta inflation rate, but this will be a target instead of a guarantee, which will allow for flexibility in managing the financial health of the pension plans. Cost of living adjustments for pension benefits earned up to 2016 will remain guaranteed at 60 per cent of Alberta inflation.
- As part of our pension reforms, we will also transition all the plans except the Management plan from government sponsorship to joint sponsorship by employers and employees, so that important decisions about the plan’s design and finances will be made by those bearing the costs and risks. At the same time, a new risk management system will be implemented.
“With these changes, public servants will still have excellent pension plans, with secure and predictable benefits at a reasonable price. Pension benefits already earned will not decrease, and those earned in future will continue to increase based on years of service and salary.
“For additional details about Alberta’s public pension system and these important reforms, please visit www.pensionsustainability.alberta.ca.”