Taxpayers Federation calls for the Alberta government to scale back golden employee benefits
CALGARY, AB: The Canadian Taxpayers Federation is calling on all political parties to reform government employee pensions to offer matching RRSP-style plans rather than costly defined benefit pensions for new hires.
“Government benefits in Alberta are unfair and very risky for taxpayers,” said Franco Terrazzano, Alberta Director for the CTF. “It’s time to bring government employee benefits back in line with the realities facing the rest of Albertans and that means moving new hires to matching RRSP-style plans instead of defined benefit plans that stick taxpayers with all the risk.”
Alberta’s defined benefit plans are costly for taxpayers. Under these plans, the government guarantees pension payments decades later and taxpayers are forced to cover shortfalls.
According to the Fraser Institute, Alberta taxpayers were required to make a “one-time” payment in 2002 of $60 million towards the pre-1992 Teachers’ Pension Plan short fall. In 2009 another $1.2 billion taxpayer payment was required. Taxpayers have also made additional contributions to the Universities Academic Pension Plan, the Special Forces plan, the Management Employees plan, the Public Service Pension Plan and the Local Authorities Pension Plan.
A matching RRSP-style plan allows employees to build up their own retirement savings without any risk to taxpayers. In the 1970s, the Saskatchewan New Democrat government enacted legislation to move much of the province’s government employees from defined benefit plans to defined contribution plans.
Government employees in Alberta (all levels) earn a 10 per cent wage premium compared to those outside government, according to the Fraser Institute. Furthermore, about 72 per cent of government workers are covered by a registered pension plan, compared to 24 per cent of workers outside of government. Of those covered by a registered pension plan, 95 per cent of government workers enjoy a defined benefit pension compared to less than 30 per cent of private-sector workers.
“Many Albertans are forced to pay for government-employee benefits that we don’t receive as workers and can’t afford as employers,” said Terrazzano. “There’s no reason the next Alberta government can’t make its benefits more fair for taxpayers by following the model laid out by the NDP in Saskatchewan.”