A Brief History of the Teacher’s Pension Plan and Government Agreements

  • The Teachers’ Retirement Fund was established in 1939, with a contribution rate of 6% (paid ½ by teachers, ½ by government). The first pensions were paid in 1940 (a flat rate $25 per month) and the Fund started accruing an Unfunded Liability (UFL).
  • In the 1950’s the Association attempted to shame the government into increasing its contributions in 1951 by proposing that teachers increase their contributions from 4 per cent to 5.5 per cent if the government would match the increase. The government refused to do so but amended the legislation to allow teachers to increase their contributions. In 1952, teachers voluntarily began contributing at 5 per cent while the government continued to contribute at 4 per cent. This inequity continued until 1956.
  • In 1956, after two years of negotiations between the government and the Alberta Teachers’ Association, the government agreed to amend the Teachers’ Retirement Fund Act again. Under the terms of the amendments, the government agreed to guarantee all pensions under the Act. At the same time the government stopped setting aside money to pre-fund benefits and, instead, began using the equity already in the fund to pay one half of the pension payments being made to pensioners. 
  • No new government money was added until ten years later, when from 1966 to 1992

  • The argument at the time was there was no need for a pension funding body such as the Alberta government to take taxpayer money from general revenues and place it in a fund used the pay pensions 40 to 50 years in the future. Those funds would be better used to build the Alberta economy.

  • In addition to the 1956 agreement by which the government stopped pre-funding benefits, the unfunded liability was caused by the introduction of several major improvements to the Plan—improvements that were not accompanied by a corresponding increase in the contributions necessary to fund them.

    • The first of these major improvements occurred in 1970 when the rules were changed to allow teachers, for the first time, to begin earning pensionable service before the age of 30.
    • A second major improvement was the introduction in 1970 of an age-plus-service index, which was initially set at 100. By 1977, when the index was reduced to 85, teachers who had acquired enough service could retire with an unreduced pension as early as age 55.
    • A third major improvement occurred in 1975 when, for the first time, the Plan granted a cost-of-living adjustment (COLA) to pensioners. Although ad hoc adjustments continued until 1992.

  • During the late 1980’s, only 14 percent of the liabilities of the Plan were funded. At the same time, the provincial treasurer began talking about “de-indexing” the Plan (removing the COLA) and decreasing the pension benefits in all public-sector pension plans. Teachers believed that unless action was taken to secure both the present pension benefits and the contributions necessary to fund those benefits, teacher’s pensions would be reduced.

  • A 1992 agreement was based on future assumptions of teacher population growth and teacher salary growth. Both those assumptions were drastically altered in 1994 when teachers experienced a five percent rollback and over 1,000 teachers were laid off. These two changes alone resulted in a 5% increase in contribution rates.
  • In the 2007/08 Alberta budget, the government allocated $25 million dollars to pre-1992 UFL payment relief for teachers. This money was being used to pay teachers’ pre-1992 UFL contributions from September to December 2007. Had an agreement not been reached, those contributions would have been picked up by teachers in January 2008. Under the memorandum of agreement, the government assumed responsibility for those payments forever. Teachers no longer pay into the pre-1992 UFL. Teachers’ contribution rates did not change, however, since the reduction was already in place since September.
  • The 1992 pension legislation required any surplus earned in the post-1992 fund automatically revert to the pre-1992 fund. Since 1992, more than $400 million was been clawed back in this fashion. This provision was removed as of January 1, 2008, under the agreement, which enabled the post-1992 fund to go forward on a more stable basis.