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Lump Sum Payment
Who will receive the lump sum payment?
Any teacher covered by a collective agreement with one of the 62 public and separate school boards on a temporary, probationary, interim or continuous contract as of April 30, 2008, will receive up to $1,500 prorated based on his or her full-time equivalency (FTE).
Will teachers on leave receive the lump sum payment?
Yes. Teachers on leave are on contract. There may be some issues, however, for teachers receiving extended disability or long-term disability benefits from an insurer or receiving employment insurance or Canadian Pension Plan disability, as the lump sum payment may be subject to clawback from the insurer or the government. The Association is working on ways to mitigate the potential for clawback.
How will the lump sum payment be calculated for part-time teachers?
For part-time teachers who have been on contract continuously from the beginning of the school year and are working on April 30, 2008, the calculation will be made on their FTE for the period of September 1, 2007, to April 30, 2008.
What about teachers who have not been on contract continuously from the start of the year to April 30, but are on contract as of April 30?
For those teachers, FTE will be calculated by the amount of time the teacher has been on contract since the start of the school year. For example, there are approximately eight months from the beginning of the school year to the end of April. If a teacher worked four of those months, he or she would receive half of the lump sum payment ($750).
Will teachers who were under contract at some time during the 2007/08 school year, but not on contract on April 30, 2008, receive the lump sum payment?
No. To receive payment, teachers must be under contract with a school board on the day of April 30, 2008.
Will retired teachers receive the lump sum payment?
Teachers who retire prior to April 30, 2008, will no longer be on contract and will therefore not qualify for the payment.
Is the lump sum considered salary for the purpose of calculating best five-year average for pensions?
No. The lump sum is not pensionable salary.
Will substitute teachers receive any of the lump sum payment?
No. Substitute teacher work is defined as day to day. However, a substitute teacher who has worked for more than 20 days in the same position is entitled to a temporary contract and, therefore, is eligible for that period of employment.
Bargaining
Will bargaining units that have already settled have to reopen bargaining?
Yes. The eight bargaining units that have collective agreements in place for 2007/08 and beyond will need to reopen bargaining in order to negotiate collective agreements that expire on August 31, 2012.
Does the memorandum of agreement mean that no other improvements can be made to collective agreements?
The agreement stipulates that collective agreements have to cover the period of September 2007 to August 2012, and have to include salary, allowances and other rates of pay increases of 3 per cent September 1, 2007, and Alberta AWE each September thereafter. The agreement does not speak to leaves, benefits and professional development funding or other issues. Those issues will need to be bargained in the usual way between the school board and the bargaining unit.
How will this affect bargaining in school boards that are represented by the School Board Employer Bargaining Association (SBEBA)?
The memorandum of agreement stipulates 62 collective agreements between 62 school boards and their ATA bargaining units. School boards represented by SBEBA will need to complete bargaining by January 31, 2008, just like all other school boards.
Pension
What are the pre-1992 and post-1992 funds?
There are actually two funds operated by the Alberta Teachers’ Retirement Fund (ATRF) board. The pre-August 31, 1992, fund has been depleted since 2002. This is the fund for which the government is taking full responsibility. It will be closed because no teachers are entering the fund and it is no longer possible to earn pre-1992 service. The post-1992 fund is the ongoing fund and consists of the service of all teachers since September 1, 1992. The post-1992 fund is funded by the government and teachers.
Does the memorandum of agreement mean that teachers will stop contributing to the pension plan?
No. Teachers will no longer contribute 3.1 per cent of salary to the pre-1992 UFL, but they will continue to contribute an average of 8.93 per cent of salary to fund the costs of the pension plans in the post-1992 fund.
What happens if I’m still teaching and have pre-1992 service?
Essentially nothing—your pension will be calculated as it always has been. There is no change to the pension entitlement, only to the funding of the benefits.
Is the post-1992 fund fully funded?
No. There is a deficiency in the post-1992 fund that will be made up by teachers and the government over the next 13 years. Teachers pay 1.47 per cent of salary to the deficiency and the government matches that contribution. This amount is included in the 8.93 per cent of salary that teachers pay into the pension plan.
Are retired teachers who currently receive pensions affected by this agreement?
No. Pensioners will continue to receive their pensions as they always have.
Will contributions increase because of the changes to the plan?
It’s possible. The contribution rates are based on many factors, including interest rate returns, projected salary increases and teacher demographics. The memorandum of agreement does not alter potential changes in contribution rates due to regular valuations. Changes to the structure of the plan as a result of the agreement may also trigger a contribution increase. That potential contribution increase is mitigated by the phasing in of plan changes as agreed to in the memorandum of agreement. Teacher contributions due to structural changes to the plan may increase up to 1.5 per cent, most likely in 2011 or 2012.
Does the memorandum of agreement change the way I purchase service from pre-1992?
No. The purchase of service is based on the actuarial value of the service. The contribution rate and the UFL have no effect on the cost of the purchased service.
| | Contribution Rate | Teacher Contributions | Government Contributions |
| | M of A 2007 | 1992 Agreement | M of A 2007 | 1992 Agreement | M of A 2007 | 1992 Agreement |
| Normal cost (60% COLA) | 50/50 | 50/50 | 6.92% | 6.92% | 6.92% | 6.92% |
| Additional 10% COLA | 100% teacher | 100% teacher | 0.45% | 0.45% | | |
| Pre-September 1992 UFL | 0% teacher 100% gov’t | 33.33% teacher 67.67% gov’t | 0% | 3.10% | 9.48% | 6.38% |
| Post-UFL (60% COLA) | 50/50 | 50/50 | 1.47% | 1.47% | 1.47% | 1.47% |
| Post-UFL additional 10% COLA | 100% | 100% | 0.09% | 0.09% | | |
| Total | | | 8.93% | 12.03% | 17.87% | 14.77% |
Teachers’ pension contribution rates are set by the Alberta Teachers’ Pension Plan legislation (last amended in 1992). The Teachers’ Pension Plan is integrated with the Canada Pension Plan (CPP). Therefore, the contributions are broken down into two rates based on the yearly maximum pensionable earnings (YMPE) from CPP: a lower rate applies to salary up to the YMPE, and a higher rate to salary earned above the YMPE (in 2007, the YMPE is $43,700). For example, the average contribution of 8.93 per cent from September to December breaks down to 7.21 per cent up to $43,700, and 11.63 per cent above $43,7000.
What was the 3.1 per cent reduction in pension contributions in September? Will teachers receive another reduction?
In the 2007/08 Alberta budget, the government allocated $25 million dollars to pre-1992 UFL payment relief for teachers. This money is 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 is assuming responsibility for those payments forever. Teachers will no longer pay into the pre-1992 UFL. Teachers’ contribution rates will not change, however, since the reduction was already in place since September.
What is surplus clawback and what does it mean?
Surplus clawback refers to the requirement in the current pension legislation that any surplus earned in the post-1992 fund automatically revert to the pre-1992 fund. Since 1992, more than $400 million has been clawed back in this fashion. This provision will be removed as of January 1, 2008, under the agreement, which will enable the
post-1992 fund to go forward on a more stable basis.
What is the loan from the post-1992 fund to the pre-1992 fund?
Because the pre-1992 fund is depleted, it borrows money to pay pensions from the post-1992 fund, at a current interest rate of 7.25 per cent. In effect, the post-1992 fund loans money to the pre-1992 fund. This loan will end with the separation of the fund in 2009, but the government will not pay back any portion of the loan until 2010. The post-1992 fund can continue to use the loan as a stable investment until that time, thus reducing the need for a contribution increase.
Alberta Average Weekly Earnings
How will the Alberta average weekly earnings be calculated?
A critical component of the proposed framework agreement between the Alberta Teachers’ Association and the government of Alberta is the linking of teacher salary increases to changes in Alberta average weekly earnings (AWE).
The memorandum of agreement provides that, beginning in 2008, teacher salaries would be increased each September by the same amount received by MLAs the previous April. Further adjustments would be made on an annual basis for the duration of the agreement. The last such adjustment would be made on September 1, 2011, for the 2011/12 school year. (Basing September salary adjustments on the previous calendar year actually reduces teachers’ exposure to risk, particularly in years two and three of the agreement.)
The notion of linking teacher salaries to AWE was originally explored in 2004 during an attempt to arrive at a framework agreement to resolve the unfunded pension liability. This approach is familiar to government and has been the method used to determine increases in the salaries of members of the Legislative Assembly (MLAs) since 1999. On April 1 each year, MLA salaries are increased (or potentially decreased) in accordance with the percentage change in the AWE over the previous calendar year (January 1 to December 31). Having set the precedent, the government could hardly object to having teacher salaries determined in much the same way.
But what exactly is AWE and what are the implications of an AWE-linked salary formula for teachers?
AWE data is collected by Statistics Canada, an independent agency of the government of Canada, and reflects the average amount of money earned each week from all sources by workers in both the private and public sectors across the country. The statistic is based on data collected in the agency’s Business Payroll Survey and on payroll deductions data received from Canada Customs and Revenue Agency. The only workers excluded from the calculation of AWE are those primarily employed in agriculture, fishing and trapping, private household services, religious organizations and military personnel. Changes in AWE reflect changes in rates of pay across all income levels but also changes in income resulting from changes in the hours worked in the week (for example, overtime). As a result, AWE is directly affected by the labour market and by the general level of activity in the economy.
Linking changes in salaries to changes in Alberta AWE is a good way of ensuring that these changes are in line with general trends in the economy and with changes in the incomes being earned by people living in the community.
Because AWE reflects data from both the private and public sectors, it tends to be stable and insulated from direct political influence. For example, in 1992 and 1993, when teachers, along with other public servants, were forced to take salary cuts of 5 per cent over two years, Alberta AWE still increased by 2.98 per cent in the first year and 1.70 per cent in the second. It is possible for AWE to decrease; however, this is rare and would occur only during periods of significant economic decline. In any event, the memorandum of agreement specifies that teacher salaries increases will never fall below zero.
AWE also tends to be less volatile than the Consumer Price Index (CPI), the statistic typically used to measure changes in the cost of living. In nine of the last fifteen years, the annual increase in Alberta AWE has exceeded the increase in the cost of living as measured by the consumer price index (CPI). Over time, earnings have consistently increased at a slightly higher rate than the CPI, reflecting the gradual growth in real income associated with increased productivity growth across the entire economy.
Finally, in only 6 of the last 15 years, have increases in Alberta teacher salary rates exceeded increases in the Alberta AWE. Significantly, when teachers did achieve salary increases above those in the provincial AWE, it was after long periods of salary erosion. While teacher salaries may have caught up from time to time, the long-term cumulative trend is unmistakable: teachers’ salary increases have trailed increases in AWE.
In recent years, growth in Alberta AWE has been exceptionally strong. In the five- year period 2002 to 2006 inclusive, AWE rose at an annual average rate of 3.39 per cent, compared to 3.03 per cent for CPI and 2.67 per cent for average teacher salaries. (On a technical note, these statistics are calculated using the geometric mean.)
In the first nine months of 2007, average weekly earnings have increased by 4.5 per cent, following strong growth of 4.9 per cent in 2006 and 5.2 per cent in 2005. This is well above the national AWE growth of 3.1 per cent over the same period. While AWE is increasing at a relatively high rate, so is the cost of living. Inflation in Alberta from January through September was 5.0 per cent, compared to only 2.0 percent nationally. Inflation is expected to moderate somewhat in October, November and December, while AWE stabilizes or even increases slightly and so it is reasonable to predict that the annual increase in AWE will match that of the CPI.
Based upon results for the first three quarters of 2007, if the memorandum of agreement with the government is implemented, teachers could expect to receive an annual increase and allowances in salary for the school year beginning September 2008 around the 4.5 per cent level. Any uncertainty will be removed when AWE data for the 2007 calendar year is made available in February or March 2008.
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