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2011-02-18
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THE TASK FORCE ON THE TEACHERS' UNFUNDED PENSION LIABILITY
Ms. Elizabeth (Betty) Evans, Chair
Mr. Thomas Lukaszuk, MLA, Edmonton Castledowns
Mr. Allan Scott, President, Edmonton Economic Development Corporation
By the Calgary Retired Teachers' Association Pension Committee
Mr. R. Michael Allen
Mrs. Jean G. Crawford, Chair
Dr. Ralph M. Levinson
Dr. Charles P. Rose, President
Mr. James R. Weed
August 14, 2007
Good Morning Chair Betty, Thomas and Allan
We appreciate the opportunity to address the Task Force on this important matter. We have been working on the issues and problems of the Alberta Teachers' Pension Plan for eight years. Our work has resulted in the development of policy for retired teacher associations and an educational program that is being presented throughout the province.
You have before you a description of who we are and copies of what we will say today, along with copies of documents earlier sent to the Premier, the Minister of Education and the Minister of Seniors and Community Supports, so we will get right to the task at hand.
Whether or not the Alberta Government decides to pay all or any part of the teachers' share of the unfunded liability, the taxpayers of the province carry an enormous burden for the employers’ share of a problem that will only continue to grow the longer the matter is ignored. In fact, the longer we procrastinate, the more complicated and difficult will be the resolution and the greater the impact on taxpayers, school systems and teachers, who are also taxpayers.
As a result
of our study of the issues and problems of the Alberta Teachers' Pension Plan,
we can advise you with some certainty that even if the entire unfunded liability
were somehow removed, the taxpayers of the province would eventually be called
upon, to support many people who, by virtue of the failings of the plan, will
find themselves slipping below the poverty line and in need of some form of
social assistance in retirement. The unfunded liability is but one of several
plan problems and it is our opinion that it is unwise to deal with this issue
out of context of the others.
Regarding the UFL, we offer some of what we discovered from our research…..
1. From 1958 until 1992, the government of Alberta chose to withhold the employers' monthly contributions to the plan, opting to deal with the plan out of general revenues and only paying the employer part of the costs for retirees at the end of each year. That action pretty well ensured future plan difficulty as funds that would otherwise be invested for the future were simply retained by the government. In doing so, they deferred their financial obligation. By guaranteeing a defined benefit pension, the government of the day did not intend to walk away from their financial responsibility and yet did nothing to prevent the inevitable. That obligation is now due.
2. As for the argument that the UFL arose due to a lack of proper contributions by teachers, we can assure you that over the course of our careers, we paid fully what was required of us and we were never afforded input on contribution rates. Even today, before teachers receive salary payments, monies are deducted and funneled to a government appointed corporation that sets the rates and administers the fund based on its own actuarial accounting. As far as we can determine, their operations are not subject to supervision as are other pension plans.
There may have been pressure to keep contributions low in the early years of the plan and it may have been to the advantage of the ATA to do so. But it was equally to the advantage the employers of the time, school boards who, in addition to funding from the "Foundation Plan", had the powers of taxation. Employers were pressured to keep teacher costs in line, and employer pension contributions were a part of that.
Those possibilities notwithstanding and as already noted, the Teachers' Pension Plan of Alberta is administered by an independent corporation established by government and the process by which the two plan sponsors direct that body finds the government holding final say on all matters of policy and negotiation. Teachers simply do not have the rights accorded other plan holders and those for whom the plan exists, retired teachers, have absolutely no voice or representation at all. Clearly, it is inaccurate and unfair to attribute the unfunded liability to teachers, a fact that is not lost on those who can now be seen to make alternative career commitments.
3. In 1992, the ATA was bullied into accepting 1/3 of the responsibility for the unfunded liability and a plan that, in our opinion, no bank would approve and that, we argued, would eventually land us where we are at present. The plan called for amortizing the unfunded liability over 60 years. As plan participants, teachers were not afforded a vote. Retirees living on pensions were not even consulted. And with the advent of that plan, new legislation subtly shifted the nature of teacher pensions in Alberta.
At present, service after 1992 is not guaranteed. New liabilities are paid through increased contributions by teachers and employers, as are the costs of servicing the unfunded liability.
For teachers with service after 1992, the plan is more of a 'defined contribution' plan than the defined benefit plan for service before 1992.
Complicating things even more, all pre-1992 funds have been depleted and monies to pay the pensions of retirees (all of whom have service prior to 1992) are being borrowed monthly from the post-92 funds which are supposed to be invested to ensure adequate pensions for those currently in service. Our children, the new generation of teachers and taxpayers, are paying for our pensions, for problems not of their making.
It is difficult for us to visualize any benefit arising from this issue. We believe that the cost to Alberta taxpayers will be far greater if we fail to address the problems of the plan overall. In our opinion it is not a labor issue. Why make it one? The massive costs of servicing this kind of ‘mortgage’ should be of concern to everyone in the province. Less visible implications of failing to address the unfunded liability and the other issues with the plan are already being felt with talented young people leaving the profession and others deciding not to even start, given the economic and social realities of being a teacher in this province. There is already a "new deficiency" accruing in the funds for post-1992 pensionable service.
What do we suggest?
1. It is incumbent upon the Government of Alberta to acknowledge their obligation and to respond with integrity by making good on the guarantee given to teachers from 1958 to 1992.
2. The unfunded liability needs to be addressed in the context of the other plan issues and problems.
v Since the advent of the Canada Pension Plan, the CPP benefit is deducted from a teacher's pension. While few will argue against that once they receive the benefit, it is hardly fair to make those deductions to teachers who retire with full pension but before they are 65 and eligible to receive CPP. To deduct $800 per month ($9,600.00 per year) for up to ten years before the retiree even receives CPP, is absurd and unjust. Can you afford to lose between $80,000.00 and $96,000.00 from your pension? That is the reality for many teachers in Alberta.
v A Cost Of Living Adjustment at 0.6 to 0.7 of the Alberta CPI and a year after the fact simply ensures that any teacher attempting to live on a pension will cross the line into poverty somewhere around age 80 and the government will have need for more social assistance programs.
v While teachers currently in service have recovered from the effects of the salary and wage rollbacks imposed in 1994-95, many retired teachers have been affected for life. The rollback altered the average of their highest five consecutive years of salary, the base for calculating pensions. We believe there is a moral responsibility to correct that injustice.
v Retired teachers require equal voice and representation in all matters pertaining to pensions.
The recruitment and retention of quality entrants into the teaching profession in Alberta is dependent upon the resolution of these issues.
3.
The Teachers’ Pension Plan should be brought into the new century by:
Allowing plan participants the rights afforded
participants in other plans.
Affording those with service after 1992... or a date
negotiated as workable... the option to self-manage.
Ensuring that the plan is supervised as is done with
other pension plans.
In summary, what we have is a very large debt that has been deferred so long it has become problematic. The attempt to amortize the matter over 60 years has proven to be flawed and equally so, the effort to shift the burden to a new generation of teachers and taxpayers.
Teachers question the unfairness of it all but, by law, can only speak through their professional association. Thus, the matter becomes a labor issue instead of a financial one. The consequences of what appears to the public as an age-old labor/management feud are beginning to surface. As new teachers experience the drain on their incomes and 'how they are treated in Alberta', more are opting to leave the profession. Others choose not to begin a career in education for the same reasons.
Growing increasingly frustrated with their lack of voice on pensions, teachers approach the matter in the only way possible…through their union. Already taxed heavily and bereft of detail and the history, taxpayers (including teachers, for every teacher is also a taxpayer) have not yet awakened to the scope of the problem. Many of them simply conclude that teachers are greedy. A standoff of this nature does little to contribute to the future of our province.
As greater numbers of teachers retire and discover the flaws in the plan, the government may expect more submissions like ours and even petitions, political or legal actions.
The most cost effective and ethical course of action for the government of Alberta, in the long run, is to address the issues we have identified, to honor its long standing guarantee to the previous generation of teachers and to work out a new arrangement with the next generation of teachers that affords those in service and retired equal status and investor rights and that returns taxpayers to a reasonable level of commitment to those who serve their children.
Regarding the plan in general, it should be noted that in the mainstream of society, the days of patriarchal control are gone. The notion of government and union sponsoring a plan in which the ultimate control rests with government no longer fits. At a time in history when women’s issues are front and center in society, along with issues of race and ethnicity, why should seniors be treated less favorably? Retired teachers have the right to equal and full partnership in any pension plan to which they have contributed. The plan of the future will need to recognize those realities, will need to have a clear and fair process for periodic reform and like other plans will require external regulation and supervision.