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Jan 15, 2014

Alberta unions say proposed changes to pensions will gut benefits

Critics say changes would slash pensions of 300,000 workers
By Dean Bennett/The Canadian Press
    
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EDMONTON (CP) — Alberta union leaders say proposed changes to public-service pension plans are an extreme response to a manufactured crisis that risks gutting retirement nest eggs of 300,000 workers.

“The best course of action in the case of Alberta's pension plans is simply to do nothing,” Gil McGowan, president of the Alberta Federation of Labour said Tuesday.

“What they propose for pensions will harm thousands of Albertans and their families and will harm them for no good reason.”

McGowan and other union leaders made the comments as they released their own actuarial studies to proposed changes announced in September by Finance Minister Doug Horner.

Horner is planning to introduce legislation to deal with $7.4 billion in unfunded liability.

The changes would take effect on Jan. 1, 2016, but would not be retroactive.

Horner has said that with more workers retiring and living longer, action must be taken to ensure retirees have decent benefits and taxpayers are not left to pay extraordinary costs.

But union leaders said Horner wants to solve a problem that is already being solved.

They note that after the global economic meltdown in 2008, the ratio of assets to liabilities of the largest plan, the Local Authorities Pension Plan, fell to 75 per cent, but has been steadily improving ever since and is well on its way to getting back in the black by 2026.

They also note that both employers and employees have stepped up, with each side paying an extra 3.7 per cent of payroll to get the unfunded liability erased.

“There is no crisis. It's a manufactured crisis,” said Heather Smith of the United Nurses of Alberta. “Certainly nurses and other health-care workers are not willing to accept what Mr. Horner is trying to suggest is an appropriate treatment for an illness that doesn't exist.”

Guy Smith of the Alberta Union of Provincial Employees said Horner's pretend crisis could become a real one by creating a pension plan so mediocre, existing employees would flee elsewhere.

Horner, however, said the unions are relying on pie-in-the-sky projections of investment income and on the number of people who will be in the labour pool.

“We can put our heads in the sand and try to imagine that we're going to make six per cent a year (in investment returns) for the next 20 to 30 years and everything will be fine,” said Horner. “I think it's irresponsible.”

Alberta's public-sector pension, spread over four plans, has 200,000 active members and 120,000 retirees.

Most of the resources and members are concentrated in the Local Authorities Pension Plan, or LAPP, which has 150,000 active members and $23 billion in assets.

The union leaders estimate employees pay about eight per cent of the payroll costs while employers pay nine per cent for a total 17 per cent payroll contribution for pensions.

They say the changes to cost-of-living payouts and contributions will knock that 17 per cent figure down by as much as a third, eroding the benefits at retirement.

The key change, they said, is that Horner plans to implement a maximum contribution rate on the plan for both the government and employees.

They noted that despite a proposed new governance structure, the final decision on such a contribution cap would still be determined behind closed doors by cabinet.

As a result, if a pension plan's investment returns hit a rocky stretch or there is some other unforeseen crisis, a hard cap means the pension plans would have no choice but to cut benefits, even core benefits, they said.

Horner said he is open to suggestions on changes in how the plans are governed.

    
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