On September 16, the Alberta Finance Minister Doug Horner announced plans for a series of major changes to Alberta’s public service pensions, specifically including the Local Authorities Pension Plan (LAPP), which is the main retirement savings plan for a majority of United Nurses of Alberta members.
UNA members and members of other Alberta public sector unions were gravely concerned and began a campaign of letter writing, calls and visits to MLAs to express their concerns and urge the government to change course.
On February 24, the government announced several changes to its plan to change Alberta’s public service pension plans, including the LAPP.
Since then, the government has been running radio ads suggesting that it has made significant concessions.
This has left many UNA members and members of other unions with the impression the government has blinked, and the unions have won their fight. Unfortunately, this is not so.
While the government has indeed blinked, there continues to be a serious risk that the pension promise to you and your co-workers will be violated in the future.
The government and some media reports have characterized the revised government position as a reversal of previous cuts. However, a careful look makes it clear that the government’s position hasn’t changed very much.
In other words, the government still intends to gut our pension plan, and we need to continue to oppose the government’s plans.
Here is a summary of the proposed changes as they currently stand:
Early retirement: The Redford Government is now proposing to change pension benefits so that early retirement without penalty is available to workers who are at least 60 years old and have a combination of age and years of service that totals 90.
This is a slight improvement over the government’s last proposal, as a few people may be able to retire early. It still means UNA members will have to work longer to receive an unreduced pension.
The revised government plan will also make it harder to retire early if you choose, by increasing the penalty to do so.
Currently, if you retire before reaching the “85 Factor” (age plus years of service equal 85), there is a penalty of 3 per cent for every year you retire early. Under the latest Redford Government’s changes, that penalty is increased to 5 per cent for every year of early retirement without the “90 Factor.”
Indexing: Under current pension rules, retirees are guaranteed to have their pensions indexed to 60 per cent of inflation. The government refuses to continue that guarantee and now characterizes cost of living increases as a “target” that will not always be implemented. This means pensioners will see the value of their pension rapidly decrease as they get older.
Cap on contributions: The Redford Government is still pushing for a cap on pension contributions. This could be very harmful to the health of our pension plan. The danger is particularly acute if there is another market crash, and market crashes have happened periodically throughout history. As long as this is on the table, no one’s pension is safe from future cuts.
In his report, the Auditor General of Alberta had this to say about contribution caps: “This is an example of a threshold that could be used to achieve clarity. However, the department also needs to ensure the plans determine how these contribution rate caps will align with other plan attributes. For example, the plans will need to determine how these caps align with the objective of benefit security and investment policy.” (Emphasis added.)
“When a plan deficit occurs,” the AG’s report went on, “only current and future employees can fund the employee share over an extended period of time (e.g., 15 years). This can create inequities between past, current and future employees. Practically speaking, current and future employees will not likely pay for benefits accruing to past employees if current employees’ contribution rates are significantly more than the value of their own expected pension benefits. If current and future employees will not support the plan, then the options are limited to: the employer is left to assume more of the past liability; retired employees will receive benefits that are less than promised; or the plan risks insolvency. This means changing the pension promise for current or future employees is difficult while they bear the cost and risks of benefits given to past employees.”
Three tiers of pensions: The government is proposing three different tiers of pension plans. One for pre-2016 benefits, one for post-2016 benefits, and one for firefighters, paramedics, and corrections officers, which the government now defines as “public safety occupations.”
It is not fair that one group of workers gets to keep the “85 Factor” and get a better pension plan than another for the same kind of public service. We all serve our communities, we all pay into our pensions, and we should all have pensions that operate under the same rules. This is an attempt by the Redford Government to “divide and conquer” public sector workers.
As members of a profession dominated by women, UNA members should be particularly concerned by this division. Professions dominated by men have been singled out by the Redford Government for more favourable treatment. A vital front-line health care profession has been relegated to second-class status. The Redford Government’s war on pensions is a war on women!
Joint trusteeship: All unions in the Labour Coalition on Pensions, including UNA, have long supported a pension plan where workers have an equal say with employers over the management of the fund. Alberta is far behind other jurisdictions in not managing public sector pensions this way.
The Redford Government is now offering joint trusteeship, which is a good thing. But it insists the changes mentioned above be implemented first, and that afterward the trustees cannot make changes to them.
This gives employees a say over the management of their pensions after the government has taken steps to starve the plan of funds, and after it has put pensioners into poverty.
If Alison Redford and Doug Horner are serious about joint trusteeship, they should implement it now. Employees and their employers can then negotiate changes to the plan as equal partners.
The changes announced this week are not meaningful changes, and they do not come about from discussions with employees and their representatives.
However, the changes announced this week do mean one thing – we are making the Redford Government nervous.
Conservative MLAs do not like getting angry calls and emails from public sector workers, and they are trying to appease us into silence. We need to keep up the pressure.