Question: So now the Alberta Teachers’ Association is planning to sue the government over the pension. Why wasn’t this done sooner and what are our chances for success?
Answer: Provincial Executive Council’s decision to authorize a legal challenge of changes to the administration of the Alberta Teachers Retirement Fund (ATRF) and its shotgun marriage to the Alberta Investment Management Corporation (AIMCo) was informed by advice from our legal council that the ministerial order, set out on Dec. 23, and other actions being contemplated by unions representing similarly affected employees, opened new paths forward to the courts that did not exist previously.
As to the second question, we believe we have a credible case to advance, but the outcome of legal action is never certain, for either side. More to the point, it would be a mistake to regard this as being primarily a legal matter; it is, in fact, fundamentally political. And that is potentially a good thing because it admits of a political solution.
What teachers need the government of Alberta to do is simply to keep its promise. Travis Toews, finance minister and Treasury Board president, said in the legislature during debate on Bill 22 that “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 … That is, AIMCo will invest according to the policies set by the ATRF board.” His ministerial order belies that promise.
The minister has said that his order is merely temporary and will be in place only until AIMCo and the ATRF can negotiate an investment management agreement to replace it. But that same order backstops the position that AIMCo took when it walked away from negotiations last November and removes any incentive that the provincial crown corporation and its lame duck CEO Kevin Uebelein might have to arrive at a reasonable solution. Having been handed by Toews a veto on a silver platter, why would AIMCo give it up?
The resulting problem is eminently solvable and at no cost to taxpayers or teachers. First, the government needs to direct AIMCo to return to the table and arrive at an agreement with the ATRF that will preserve a role for AIMCo in managing investments at the direction of the ATRF, but also allow the ATRF to manage by itself, or through other independent investment managers, investment strategies and approaches that are beyond AIMCo’s competence or capacity. The additional costs associated with implementing these specialized strategies could be borne by the ATRF alone and, based on past history, would be more than covered by enhanced returns to the plan.
The second element of a solution is to put the ATRF on the same footing as AIMCo with respect to compensation for its staff. The UCP government changed the application of the Reform of Agencies Boards and Commissions Compensation Act (RABCCA) to place the ATRF at an unfair competitive disadvantage by capping the compensation of ATRF staff at well below market rates, while continuing to exempt AIMCo from the same legislation. When the impact of this is fully felt, the ATRF will have difficulty attracting and retaining the specialized investment and risk management expertise that teachers need to ensure that their pension funds are secure now and into the future. It is difficult to see the government’s decision to make the ATRF subject to RABCCA as anything other than a deliberate effort to hamstring the ATRF and to compromise the fund’s ability to meaningfully provide even the level of strategic oversite contemplated in Bill 22. Again, any additional resulting compensation costs would be covered by the ATRF, which has consistently outperformed AIMCo.
Finally, the premier and Toews have said that the teachers’ pension is guaranteed by the provincial government and so teachers should stop worrying. Well this isn’t true — since the pension agreement of 2007 dealt with the unfunded liability of the pension plan, risk was transferred to and internalized in the plan. But if the government really wants to put taxpayers back on the hook, then we can discuss the legislation and/or regulationas that need to be passed to make that happen. Or government could just let the ATRF do its job.
At the end of the day, these solutions can be implemented and this entire problem can be made to go away. The best way of achieving this is not through a lengthy court process but through concerted political action. You can help by phoning the Honourable Mr. Toews at 780-415-4855 and saying politely to him or his staff that it is time for the minister to keep his promise and to let the ATRF do its work for teachers and taxpayers. ❚
Questions for consideration in this column are welcome. Please address them to Dennis Theobald at Barnett House (firstname.lastname@example.org).