Newsrelease

December 17, 1997
Edmonton, Alberta

Government responds to Albertans' request for second look at CPP options

The Alberta government has struck a Canada Pension Plan (CPP) committee to evaluate options and provide advice on issues currently being raised by Albertans. Dr. John Cowell, past President of the Workers Compensation Board, will Chair this committee. Other members include: John Hokanson, President and CEO, H&R Drilling Inc., Edmonton, and Dennis Erker, Partner, Fairley, Erker Estate Planning & Associates Ltd.

The federal Bill C-2 - An Act to Establish the Canadian Pension Plan Investment Board and to Amend the Canadian Pension Plan and the Old Age Security Act - is expected to become law in the new year.

"Alberta fought for a timely review of CPP," said Provincial Treasurer Stockwell Day. "We want to have good information to bring to the table for the next review round - which starts immediately in 1998."

Alberta’s CPP committee will collect ideas before making suggestions on what is best for Albertans. "This panel is going to take a hard look at all the different proposals that are surfacing, from a variety of groups," said Day.

Alberta’s Canada Pension Plan Committee will use these Terms of Reference:

1. identify options to adapt the CPP to the changing demographics of Alberta and Canada, including the viability of replacing the CPP retirement component with RRSP style accounts,
2. review the merits of Alberta withdrawing from the CPP and establishing an "Alberta Pension Plan",
3. examine options to spread the burden of paying for the CPP unfunded liability more fairly across generations, and
4. look for new incentives, if any, Alberta can provide for its residents to save towards retirement.

Alberta passed the required Order in Council today relating to the CPP amendments agreed on by the federal government and seven other provinces last February. The February agreement was a necessary first step toward making the CPP sustainable for Albertans and all Canadians.

Approximately 280,000 Albertans now draw some benefits from the CPP. The Alberta CPP committee will make recommendations to the Provincial Treasurer early in the new year.

For more information, please contact:

Trish Filevich
Director of Communications
Alberta Treasury
Telephone (780) 427-5364
e-mail address: webmaster@treas.gov.ab.ca

Backgrounder

Canadian Pension Plan Reform: A Chronology

Track One:

• CPP reform began in response to the Chief Actuary’s 15th Report concluding that the CPP account would be exhausted by 2015.
• In 1996, the provincial and federal governments agreed to a public consultation process. A chief finding of the process was that Canadians, including Albertans, wanted the CPP to remain a public pension program.
• During federal/provincial negotiations, Alberta took a leadership role, calling for real change that would help to fix the CPP permanently. This new legislation, Bill C-2, is a step in that direction.

Bill C-2, An Act to Establish the Canadian Pension Plan Investment Board and to Amend the Canadian Pension Plan and the Old Age Security Act:

• Bill C-2 is expected to take effect January 1, 1998. It amends CPP legislation and creates an independent investment board for CPP funds. This legislation is based on a February 1997 federal-provincial agreement.
• The highlights of this legislation are:
  1. contribution rate increases are limited to 9.9 per cent of pensionable earnings, instead of ultimately rising to 14.2 per cent as forecast by the CPP’s actuary,
  2. an arms-length, non-government investment board, appointed with input from the provinces,
  3. a new default mechanism that will automatically trigger benefit reductions if CPP costs overtake maximum contribution rates,
  4. a small reduction in benefits,
  5. a new investment policy aimed at getting higher returns for the CPP fund,
  6. reviews every three years instead of five,
  7. strengthened accountability and more public disclosure.
• By accepting the deal, the participants will:
  1. lower the growth of the CPP unfunded liability,
  2. show that benefits can be reduced,
  3. institute a new governance structure for CPP investments,
  4. take immediate action towards making the CPP viable.

Track Two:

• The federal and provincial governments will begin the next review of CPP in 1998.
• Alberta is preparing for this review by establishing a CPP committee.
• During Track Two discussions, Alberta wants all other governments to consider options that focus on:
  1. further reducing CPP costs,
  2. redistributing the burden of CPP reforms more fairly across generations,
  3. assessing the merits of turning the retirement component of the CPP into mandatory, individual RRSP style accounts,
  4. mechanisms to reduce intergenerational inequities, and
  5. other options which may be introduced by groups consulted.

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