The Alberta Teachers’ Association is launching a legal challenge of a government ministerial order that reduces teacher control of their pension plan’s investments.
The Association is acting on legal advice that identified new avenues for a legal challenge as a result of a ministerial order signed by Finance Minister Travis Toews on Dec. 23. The order imposed an investment management agreement on the Alberta Teachers’ Retirement Fund (ATRF) and the Alberta Investment Management Corporation (AIMCo).
“This offensive and over-reaching ministerial order, which negates promises made by government officials when passing Bill 22, needs to be stopped, and we will turn to the courts to do so,” said ATA president Jason Schilling.
The ATRF was informed of the imposed agreement on Jan. 4 and the ATA’s Provincial Executive Council voted unanimously on Jan. 21 to initiate legal action. The Association’s law firm is now working on the court application.
Control of their pension plan has been an issue for teachers ever since the government introduced Bill 22 in November 2019. The bill requires that the ATRF use the government-owned AIMCo as its exclusive investment manager. The bill specified that the ATRF would still retain control of the plan’s investment strategy, according to an agreement that the ATRF and AIMCo were to negotiate by June, 30, 2020. To date, the sides have not been able to agree on terms.
According to the ATRF, the agreement imposed by Toews includes a recognition that the ATRF board will establish the investment policy to direct how plan assets are managed, but the full discretion of the board in establishing and executing the investment policy is restricted.
“Specifically, AIMCo is not required to implement ATRF’s investment policy if, in the sole opinion of AIMCo, it would threaten to compromise AIMCo’s economies of scale or operational efficiencies,” says the ATRF release. “Such decisions by AIMCo are not subject to appeal or arbitration.”
The imposed terms contradict statements made by Toews in the legislature at the time Bill 22 was being passed.
“The ATRF board will remain in control of determining how the pension funds are invested at a strategic level as well as retaining ownership of the plan’s assets,” said Toews on Nov. 7, 2019. “That is, AIMCo will invest according to the policies set by the ATRF board.”
The Association has launched a new email tool and social media campaign for teachers to express their frustrations directly to MLAs.
“Teachers were betrayed by their MLAs, the minister and the premier when this imposed agreement failed to live up to the promises made to respect the ATRF’s ability to direct the investment of teacher pension dollars,” Schilling said. “We will fight the order in court, but there still needs to be political accountability for the broken promises.”
The court action will be filed when it is ready. The foundations and basis of the Association’s challenge will be revealed in due course before the courts. ❚
Is my pension safe?
The ATRF says that teacher pensions remain secure and that benefit entitlements are not impacted by the change in investment management.
These recent developments remain deeply concerning for teachers, as lower than expected returns on investment could result in future contribution rate increases or underfunded liabilities for the plan.
Some teachers talk about taking their money out of the plan, but this is generally not a good idea. You receive the best value by staying in the plan. On average, retired teachers receive eight dollars in benefit for every dollar that they contribute into the plan. If you are thinking about pulling your contributions out of the plan, contact the ATRF or Teacher Employment Services for advice before making a final decision.
The AIMCo pension takeover – a timeline
Oct. 24, 2019 – Provincial budget
Government of Alberta tables 2019 budget with line buried on page 120 that reads the ATRF “will be expected to transfer funds to AIMCo for management, reducing redundant administration.”
Nov. 1, 2019 – HandsOffMyPension.ca launched
ATA launches a website where members and supporters can email MLAs to express opposition to the pension takeover. Fifteen thousand emails are sent over the first weekend, and a total of 30,000 are sent by the time Bill 22 passes.
Nov. 6, 2019 – ATRF data
The ATRF sends a letter to Minister Travis Toews showing that the ATRF outperformed AIMCo over the past six years. ATRF annualized returns averaged 9.5 per cent, while AIMCo’s comparable assets averaged 8.7 per cent. The data is disputed by government spokespeople.
Nov. 18, 2019 – Bill 22 introduced
Finance Minister Toews introduces omnibus Bill 22, Reform of Agencies, Boards and Commissions and Government Enterprises Act, 2019 in the legislature. Bill 22 amends the Teacher Pension Plans Act, requiring the ATRF board to use AIMCo as its exclusive investment manager. The bill requires the ATRF and AIMCo to negotiate an investment management agreement (IMA) to take effect by June 30, 2020, and to establish a plan by December 31, 2020, for the transfer of investment management to AIMCo. The bill allows the finance minister to extend deadlines and to impose an IMA, if needed.
Nov. 18, 2019 – AG urged to weigh in
The ATRF files a formal request for the auditor general (AG) to assess the proposed transfer and provide independent analysis. The ATA also reiterates the call for AG involvement. By Jan. 2020 the AG responds to say such a review is not within their mandate.
Nov. 21, 2019 – Bill 22 passes
Despite the overwhelming and well-documented objections of teachers, retired teachers and others, the government pushes Bill 22 through the legislature at breakneck speed. Using closure three times in just 16 hours, the bill passes through all stages of debate in just over a day and a half.
Jan. / Feb. 2020 – Process of transfer begins
The ATRF and AIMCo establish working groups to discuss and oversee all of the elements of the transfer.
Apr. 2020 – AIMCo’s $2.1 billion volatility loss
News that AIMCo lost at least $2 billion when an investment bet against market volatility is lost as a result of COVID-related market fluctuations renews uproar among teachers and teacher pensioners about the AIMCo takeover. The ATRF is unaffected as no assets had been transferred yet. News stories state that AIMCo executives were not fully aware of the risks, and a subsequent independent review finds that AIMCo has an inappropriate risk culture.
May 14, 2020 – AIMCo management would mean $1.3 billion less for teacher pensions
Based on an analysis of annual report data, the ATRF concludes, in a letter sent to the ATA, that AIMCo management would have resulted in the ATRF assets being worth $1.3 billion less if AIMCo had managed them since 2013.
June 8, 2020 – Bill 203 introduced
NDP MLA Christina Gray introduces Bill 203, the Pension Protection Act to reverse the changes made by Bill 22. It is referred to the UCP-dominated private bills committee, which recommends the bill not proceed.
June 2020 – IMA deadline extended
The ATRF and AIMCo jointly request and receive a deadline extension from Minister Toews for reaching an IMA. The new deadline is Oct. 31, 2020.
Oct. 31, 2020 – IMA deadline passes
Despite significant progress being made, the IMA is not finalized by the time the revised deadline passes. The parties inform government that the agreement is not in place but continue negotiations.
Dec. 2020 – ATRF control over investment policy remains outstanding
According to the ATRF, negotiations continued through November and into December, and the ATRF urges AIMCo to continue participating in negotiations. The ATRF believes they are close to an agreement, but notes they are unable to reach agreement on ATRF’s control over investment policy .
Dec. 23, 2020 – Minister Toews imposes IMA
Minister Toews signs a ministerial order imposing an IMA on the ATRF and AIMCo that will remain in place unless the ATRF and AIMCo are able to agree on an IMA at some future date. The IMA provides AIMCo with a veto over ATRF investment policy that it can use at its sole discretion without process for appeal from the ATRF is not informed of the ministerial order until Jan. 4, 2021. ❚