This article originally appeared in the Financial Post. Below is an excerpt from the article.
By Jack Mintz, October 10, 2023
I wasn’t going to write again on the Alberta Pension Plan and what has become the controversial LifeWorks report saying Alberta should get half the Canada Pension Plan’s assets if it sets up its own APP. It’s so obvious that since 1966 Alberta has carried the load for the rest of the CPP provinces (i.e., not Quebec, which has its own plan) that I didn’t think I’d have to. Besides, even LifeWorks acknowledges the numbers need refining. Its model essentially tracks the CPP’s actuarial report, but a more careful treatment of Alberta-only actuarial assumptions and interprovincial migration requires access to confidential CPP data. No one has done that exercise yet.
Yes, to the horror of Central Canadian and some Alberta pundits, LifeWorks’ estimated asset transfer equals roughly half of CPP’s assets. Section 113.2 of the Canada Pension Plan Act makes quite clear that if a province withdraws from the CPP it is entitled to an asset transfer equal to: its contributions, plus associated investment returns, minus administrative costs and pension benefits paid — all since 1966.
As LifeWorks and other experts acknowledge, how exactly to calculate Alberta’s share of administrative costs and investment income is not entirely clear. (Though administrative costs are miniscule, at just 0.5 per cent of contributions, accumulated investment income is big: it now exceeds accumulated contributions). A literal reading of the law suggests investment income owing might be based solely on past contributions multiplied by the rate of return on investments. That would result in an asset transfer of $637 billion in 2021 or 117 per cent of CPP net assets. But that calculation in effect indexes contributions though not benefits or administrative costs, which makes little sense.