Association Policy and Directives
6.A.1 A teacher’s pension is an earned right to be exercised after specified conditions of length of service and age are met.
6.B.3 BE IT RESOLVED, that the Annual Representative Assembly affirm that resolving the Teachers’ Pension Plan unfunded liability is a high priority.
6.B.5 BE IT RESOLVED, that the Alberta Teachers’ Association urge the Government of Alberta to allocate funds in order to eliminate the entire unfunded liability of the Alberta Teachers’ Retirement Fund.
Questions being asked about the Alberta Teachers’ Pension Plan
Do Alberta teachers have the worst pension plan in Canada?Top of page
No! Here’s how lifetime pension returns for Canadian teachers stack up, based on the following:
the teacher retires in August 2002 after 27 years of service
age at retirement is 56
grid placement is four-year maximum or provincial equivalent
anticipated lifetime following retirement is 29 years
New Brunswick $613,482
Nova Scotia $606,983
Prince Edward Island $561,209
Did the Alberta government trick teachers out of a fair pension deal in 1966? Top of page
No! In 1966 the Canada Pension Plan (CPP) came into effect. Neither teachers nor the government wanted to pay contributions into both the teachers’ plan and CPP. The minutes of the 1965 Annual Representative Assembly (ARA) show that a great deal of time was devoted to debating the issue of integration and that a resolution was passed approving the integration of the two plans by using a formula method. This method, endorsed by ARA in 1965, is exactly the same method used to calculate pensions today.
Should a teacher at age 55 receive the same retirement income as a teacher at age 65 who also receives CPP?Top of page
No! Pension is based partially on years of service. A teacher with 35 year of service will receive a higher retirement income than a teacher with 30 years of service. Integration with CPP reduced teachers’ contributions to the plan. Since 1977 teachers have been able to retire at age 55. Since 1966, however, teachers have contributed to an integrated pension plan. Teachers are receiving the pensions they paid for.
Is the pension plan paying less now than before?Top of page
No! Pensions are calculated using portions of salary below and above the maximum salary on which CPP is earned. This salary level is known as the Yearly Maximum Pensionable Earnings (YMPE). Teachers are earning more salary above the YMPE level than they were 10 years ago. The end result is that teacher pensions are increasing.
Is court action the way to solve the unfunded liability?Top of page
No! The major changes that occurred to the teachers’ plan in 1956, 1966 and 1992 were negotiated with the government and approved by teachers at the respective Representative Assemblies. The changes were transparent, openly debated and well publicized in ATA publications. Pension improvements have been the subject of ongoing discussions with government at every opportunity. The government understands the liability it faces, the Association understands the need for pension reform, and our members have adopted policies that will lead to improvements. Litigation would be counterproductive and may undermine the Association’s efforts to eliminate the entire unfunded liability.
Is the Teachers’ Pension Plan a good deal?Top of page
Yes! The average teacher lives 30 years after retirement. Most teachers will continue to receive more from the pension plan than they ever put into it. The pension is guaranteed for life and is protected against inflation.
Yes! The teachers’ pension plan is not in debt. Each year, the plan collects more money in contributions than required to meet obligations to current pensioners. Pension benefits earned since September 1992 are funded as they are earned. The assets of the pension fund continue to grow.
Is the government contributing to the plan?Top of page
Yes! Teachers and government signed a memorandum of understanding which took effect September 1, 1992. Both parties agreed to fund pensions as they are earned, each paying half of the required amount. It was further agreed that the unfunded liability would be amortized over 68 years with government contributing two-thirds and teachers contributing one-third of this amount.
On average, teacher contributions to the teachers’ plan in 2004 amounted to 10.7 per cent of salary. Of this, 7.8 per cent went to fund pensions currently earned with the remaining 2.9 per cent being directed toward the pre-1992 unfunded liability. The provincial government contributes an amount equal to 13.31 per cent of each teacher’s salary.
Will I receive a reasonable pension upon retirement?Top of page
Yes! Pension payments are based on the number of years of service and the five highest consecutive years of salary. More years of service equate to higher pension returns. Cost-of-living adjustments will be included in pension payments each year until the teacher’s death. Combined with CPP payments, a teacher at age 65 with 35 years of service can expect a pension equivalent to 70 per cent of pre-retirement income.
What is an unfunded liability?Top of page
The total liability of a pension plan is the amount of money that the plan will eventually need to pay for all pension benefits that all plan members have earned. An unfunded liability is the amount by which the plan’s total liability exceeds its assets. As of August 31, 2004, Alberta Teachers’ Retirement Fund had an unfunded liability of $6.03 billion.
What caused the unfunded liability?Top of page
From 1956 to 1992 the provincial government did not make contributions to the plan for the pensionable service being earned by teachers. Instead, the government paid half of all pensions paid out during that time. During those years, however, many improvements, such as a cost of living adjustment and the introduction of an age plus service index, were made to the plan with no increase in contributions from either the government or teachers.
Is the Association working to resolve the unfunded liability?Top of page
Yes! Acting according to directions established by the membership at Representative Assemblies, the Association has worked earnestly to advance the members’ interest in pension matters and to arrive at a solution to the unfunded liability. Table officers and senior Association personnel have kept the issue in front of a succession of government ministers during turbulent times in the Association’s recent past.
Unfunded liabilities in government pension plans constitute government debt. In a province such as Alberta, which claims no debt owed by government, the unfunded liability of the teachers’ pension plan is a sore reminder to government of an uncomfortable reality. While teachers want to see this debt retired at the earliest opportunity in order to ensure the long-term viability of the pension plan, the government would also like to see this liability resolved for its own reasons.
Teachers and government have worked together in the past to stabilize and improve the pension plan. Negotiating with government is the best approach to resolving the unfunded liability.