Ken Boessenkool is a founding partner of Meredith Boessenkool Policy Advisors.
I was a co-author, with former prime minister Stephen Harper and others, of the 2001 Alberta Agenda letter. That letter urged the Alberta government to withdraw from the Canada Pension Plan and establish an Alberta Pension Plan (APP), as part of a broader set of policies that would create a “firewall” between the federal government and Alberta.
A proposal for Alberta to withdraw from the CPP has been put forward again, this time by the provincial government itself. The argument for an APP was, and is, straightforward. Alberta had a younger population, higher incomes and higher labour force participation than other provinces in the CPP, and still does today. Together, these things mean Alberta can deliver the benefits provided for in the CPP, but at a lower cost.
The latest APP proposal has given Prime Minister Justin Trudeau a political opportunity to stand not only with the Albertans who currently oppose the idea – and indeed, polling is not currently favourable – but also with Canadians outside Alberta and Quebec (who have their own provincial pension plan), who will see higher premiums if Alberta withdraws.
The coming APP debate will be divisive and has a high probability of inflaming regional tensions, perhaps even boosting separatist sentiments in Alberta. Nobody wants that. Which is why it is necessary to clarify the ground rules by which Alberta might withdraw from the CPP.
There are four ways in which that might happen.
First, the entire debate could be left to political negotiation. Alberta is embarking on a consultation process by the eminent former Progressive Conservative MLA Jim Dinning, which will be a place to direct resentment within Alberta. Outside the province, the Prime Minister has weighed in, and Ontario Finance Minister Peter Bethlenfalvy has called for a meeting of finance ministers to discuss the issue. Regardless of who leads the debate, the number of serious unanswered questions and the growing political gap will make a political negotiation difficult.
Second, both sides could hire experts, with negotiations driven by those expert opinions. The Alberta government has cited an actuarial report by Lifeworks that argues that the province is due over half of the CPP’s assets – a claim that has been met with incredulity in most quarters. In response, the Canada Pension Plan Investment Board said that “the amount the report says could be extracted from the CPP is impossible and based on an invented formula.” Provincial finance ministers have asked Canada’s chief actuary to weigh in. Again, regardless of who weighs in, the experts are clearly far apart.
Third, Ottawa could change the CPP legislation to clarify the withdrawal rules, and count on the majority of provincial governments outside Alberta (and perhaps Saskatchewan) to pass those changes into law. The current legislation, for example, gives the federal finance minister the authority to determine whether any pension plan Alberta wishes to establish is “comparable” to the existing Canada Pension Plan. But what does “comparable” mean in this circumstance? And should Ottawa unilaterally decide these matters? Again, this approach appears more rancorous than necessary.
But there is a fourth approach. Whatever the politicians say, whatever current or future legislation says, and whatever the experts say, the Supreme Court of Canada will ultimately have to weigh in. We could wait for the political, legislative and expert debate to play out and then litigate the matter at the Supreme Court, but that could take years.
There is a faster way. A number of provinces recently asked a series of questions as part of a reference case to the Supreme Court on the Impact Assessment Act. The court came back with an opinion, saying that it saw federal overreach in the act. Importantly, Alberta cheered its findings; Ottawa is now making changes based on the court’s non-binding ruling.
The federal and Alberta governments should do the same here. An APP/CPP Supreme Court reference case should ask these two questions: What are the rules governing the division of assets when a province withdraws from the Canada Pension Plan to establish its own? And what scope does the federal finance minister have when it comes to deciding whether a withdrawing province has established a “comparable” plan?
By going today where we know this issue is going tomorrow, we can establish ground rules and remove a significant amount of uncertainty and rancour that other approaches will elicit. Whether Alberta withdraws or not, all Canadians would be better served if the Supreme Court was asked sooner rather than later, and certainly not years from now, to clarify these rules.
Alberta and Ottawa should follow this course. And other provinces will, I suspect, be pleased to support that as well.