The Alberta Teachers’ Association

ATRF retains control over pension investment policies; ATA drops lawsuit

The Alberta Teachers’ Association has dropped a lawsuit against the province since an agreement has been reached that will see control over the investment policies for teacher pensions remain with the Alberta Teachers’ Retirement Fund (ATRF).

Reached in early September, the investment management agreement negotiated between the ATRF and AIMCo is a victory for teachers and the ATA, said president Jason Schilling.

“Teachers mounted a strong, wide-reaching, relentless campaign in defence of their pensions, which provided the ATRF with the backing they needed to negotiate an effective agreement that protects the interests of teachers,” Schilling said.

The new investment management agreement replaces the previous one that was imposed by a ministerial order by Finance Minister Travis Toews in December 2020. The new agreement removes a controversial veto provided to AIMCo over investment directions made by the ATRF.

In a statement announcing the new agreement, the ATRF reported that the deal ensures that AIMCo must implement the investment policies established by the ATRF and provides for meaningful accountability measures and a commitment to collaboration and transparency regarding how pension assets are managed.

“Our team has kept the best interests of our plans paramount throughout these many months, and I’m very pleased with the terms we have formalized in the [agreement],” said ATRF CEO Rod Matheson.

ATRF Board chair Sandra Johnston said that the negotiated IMA respects the role of the ATRF and enshrines its fiduciary responsibilities to the plans. ATRF said that they appreciated the support of members and emphasized that addressing members’ concerns and the long-term health of their pensions was always a focus.

Drawn-out negotiations

The situation traces back to Bill 22, passed in the fall of 2019, which required the ATRF to use AIMCo as its sole investment manager, despite a longstanding history of strong returns by the ATRF. The bill required the negotiation of an investment management agreement between the ATRF and AIMCo to be concluded by June 30, 2020. The ATRF previously reported that AIMCo was not willing to agree to key terms that the ATRF felt protected the board’s role and the interests of the plans.

In the fall of 2020, AIMCo pulled out of negotiations with the ATRF, and shortly after that Minister Toews made his order imposing an agreement.

The imposed agreement prompted the Association to launch a lawsuit in March 2021, arguing that Toews’s ministerial order was unreasonable and should be declared invalid by the courts. Documents submitted with the court application said that the conditions imposed by the order were inconsistent with the Teachers’ Pension Plans Act and that a duty of procedural fairness owed to the Association had been breached.

That court challenge was heard before the Court of Queen’s Bench on Sept. 2 and 3.

The timing of the court case and the reaching of a replacement agreement were not coincidental, Schilling said. He believes that the court case was going very well for the Association, noting that the judge remarked at one point that she was not buying the Government of Alberta’s arguments related to certain sections of the agreement.

Schilling believes that the prospects of the government losing in court and the installation of a new AIMCo CEO with a fresh perspective on client relations have been instrumental in spurring this resolution.

“Our court challenge against the imposed IMA – backed up by significant pressure from teachers – changed the game,” said Schilling. “Under the new CEO, AIMCo appears to realize that they need to be responsive to clients and that they will be held accountable for their duty to teachers as the investment manager.”

New agreement offers vast improvements

The ministerial order provided AIMCo with the ability to reject parts of the ATRF’s investment policy, with little ability for recourse from the ATRF. The new agreement, which replaces the ministerial order, allows for a rejection of ATRF policy only if AIMCo finds it “impossible” to comply. Impossibility is the highest possible threshold that could be used for rejecting a policy.

The new agreement clearly establishes that the ATRF has fiduciary obligations, including the setting of investment policy, that are acknowledged and recognized by AIMCo. It also clarifies AIMCo’s role as a discretionary investment manager by clearly outlining the areas where AIMCo has discretion and the areas where AIMCo must consult with the ATRF.

The agreement also outlines a fair process for dispute resolution in which unresolved disputes are referred to an independent third-party arbitrator, appointed if necessary by the courts.

Schilling said that this agreement will reset the relationship with AIMCo and will allow the ATRF to engage effectively with AIMCo in a way that respects each group’s appropriate roles.

ATA executive secretary Dennis Theobald said that the conclusion of this agreement addresses all of the issues identified by the Association and, importantly, provides the ATRF with full control of its investment policy.

“With this agreement in place, the Association has achieved everything it hoped to achieve through the legal action,” he said. “The ministerial order is no longer in effect, and as a result the Association’s legal action challenging it is moot.”

The ATA has notified the Court that it is discontinuing its legal action.

“It is very important to understand that we would not have gotten here unless we had taken on the legal action,” Theobald said, “and, more importantly, we wouldn’t be here without the persistent advocacy of teachers.” ❚