EDMONTON — Alberta politicians, debating three options for their new pension plan Thursday, agreed there needs to be safeguards so taxpayers aren’t on the hook for shortfalls.
“We’ve got to look at something that protects taxpayers down the road so taxpayers will never be asked to bail the plan out,” Rob Anderson of the Wildrose party said after a meeting of the all-party member services committee.
“If the benefits don’t turn out to be as high as what’s being promised in the benefit plan, it’s naive to think the government won’t just swoop in and fund it — and that means putting future taxpayers on the hook.”
The committee heard a report on the merits of three pension plans. It will make a recommendation in three weeks to the legislature, in time for the fall sitting.
The three options are a straight-up RRSP plan, a direct contribution option, and a targeted benefit plan.
Under the RRSP plan, members would get a contribution from the government equal to nine per cent of wages.
The plan would not cost taxpayers anything to implement and run. It would deliver an annual pension of close to $22,000 to the average MLA.
Under the direct contribution plan, members would pick their investment options from a menu selected by the legislature assembly.
Both the MLA and taxpayers would kick in nine per cent of earnings. The fund would cost $65,000 to set up and $60,000 a year to run, delivering an estimated return of $23,580 per year at retirement.
The targeted benefit plan would also see both taxpayers and politicians pony up the nine per cent.
The plan carries more risk and reward on investment, costs twice as much to set up and run but is expected to deliver a conservative $18,400 per year on retirement.
Of the four parties in the legislature only the Wildrose said where it stands: the RRSP option.
Anderson said it’s the least expensive to operate and the best way to reverse the trend of public sector pensions bleeding into the red.
The other three parties will be discussing the proposals in caucus.
NDP Leader Brian Mason agreed that safeguards are needed for the targeted plan option, but said on the whole, Alberta is working in taxpayers’ interests on the pension issue, particularly when compared with the federal government.
“The taxpayer contribution to those (federal) pensions is 44.4 per cent,” said Mason.
“We’re talking about a nine-per-cent-taxpayer contribution, and so I think we need to put this discussion we’re having here in Alberta in perspective.”
Gene Zwozdesky, chair of the committee and a member of the Progressive Conservative caucus, agreed.
“You have to look at what the predictability is for taxpayers in making sure they aren’t on the hook for things they shouldn’t be on the hook for,” said Zwozdesky.
“But by the same token you want to bring in something we haven’t had for a long time, and that’s a pension that can be fair for all concerned.”
Tory MLA and committee member Dave Dorward said he’d push for safeguard rules.
“We need to meet that cornerstone of having cost certainty,” said Dorward.
Derek Fildebrandt of the Canadian Taxpayers Federation urged the politicians to avoid the targeted benefit plan.
“We simply cannot trust a legislative outline to protect taxpayers in the future should there be a funding shortfall in a targeted pension plan,” said Fildebrandt.
Raj Sherman, leader of the Alberta Liberals and a committee member, has declined to vote on the issue, saying the system itself is broken.
“This is the only profession that sets its own pay,” said Sherman, adding he will continue to advocate for an independent process to set the stipend.