Public sector unions plan to launch a legal challenge after Alberta’s finance minister quietly signed ministerial orders at the end of the year that they say give the government-owned investment manager more control over workers’ pensions.
One of four orders signed by Finance Minister Travis Toews on Dec. 23 changed the terms of the Alberta Teachers’ Retirement Fund (ATRF) to allow the Alberta Investment Management Corporation (AIMCo) to reject changes proposed by the pension manager in its investment policy.
The orders, which came into effect Jan. 1, follow the November 2019 implementation of Bill 22, an omnibus bill introduced and passed within four days which moved investment control of 82,000 practicing and retired teachers’ pensions to AIMCo from ATRF by December 2021.
Toews has said repeatedly that public sector pension boards, including the ATRF, would continue to control their own investment strategies and decisions.
But according to the ministerial order affecting the ATRF, the finance minister can intervene and dictate how investment management services are provided by AIMCo to ATRF until both parties come to a deal.
ATRF and AIMCo are without an agreement, despite an initial deadline of June 30, 2020 followed by an extension to Oct. 31, 2020.
Jerrica Goodwin, press secretary to Toews, said in a statement Wednesday the order was necessary as a temporary measure to ensure that the pension plan remains appropriately managed.
“We are confident that ATRF and AIMCo will be able to come to an agreement. Once the parties agree to a final investment management agreement, the ministerial order will no longer be in effect,” she said.
The ATRF said in a statement the order does not impact members’ pension benefits.
‘We call it theft’: unions
Along with the ATRF, the Local Authorities Pension Plan (LAPP), Special Forces Pension Plan (SFPP), and Public Service Pension Plan (PSPP), together representing more than 450,000 individual pensions, received ministerial orders reserving AIMCo’s right to reject amended investment policies from fund managers.
Speaking on behalf of the Alberta Union of Provincial Employees (AUPE), the United Nurses of Alberta (UNA), the Health Sciences Association of Alberta (HSAA), and the Alberta division of the Canadian Union of Public Employees (CUPE), Alberta Federation of Labour (AFL) president Gil McGowan said Thursday unions will be arguing in court that Bill 22 is unconstitutional.
“AIMCo and the finance minister will be the deciders, and the hundreds of employers, and the hundreds of thousands of workers who actually pay into the plan, have to shut up, take what they are given and trust that the government and AIMCo will do what’s best,” said McGowan.
McGowan added that the unions believe the government’s end game is to use the pension funds to prop up oil and gas ventures in the province that have seen difficulty raising money from international investors.
“The finance minister and premier might call this administrative reform. We call it theft,” said McGowan.
The order affecting its fund first became public when the ATRF published a statement Jan. 11.
Normally, the government publishes ministerial orders. Goodwin said in this case, the change applies to a specific group, so the order was given to the affected parties.
Teachers ‘across-the-board livid’
Greg Meeker, a school principal and former board member of the ATRF, said last week that while benefits are defined by law, costs are not, and an increased cost to members was his biggest concern given AIMCo’s performance.
During a debate in the legislature in November 2019, Toews promised that, with larger economies of scale, AIMCo could “deliver with lower costs.”
But the order states that AIMCo’s costs “should be lower” than market standard fees. That’s a red flag for Meeker, since it doesn’t force AIMCo to provide investment services at a lower cost.
By taking unilateral control of the pension fund’s management, Meeker said AIMCo is being given the right to refuse ATRF’s strategy.
“Imagine you have some money with a stock broker, and you picked up the phone and told the stockbroker to sell all the IBM shares that you have, and the stockbroker says ‘I decline to take that order’ — how’s that going to go over with you?” he said.
He said teachers were outraged by Bill 22, but he is hearing even more anger from them now.
“It’s across-the-board livid,” he said.
Alberta Teachers’ Association (ATA) president Jason Schilling is also incensed by the order.
“Now we have an investment agreement with loopholes big enough to fit a bad $2.1 billion volatility bet,” said Schilling in a Wednesday statement, referring to an investment strategy that led to billions in losses by AIMCo in early 2020.
‘Broken promise’: NDP
NDP Labour and Immigration critic Christina Gray called on Toews Wednesday to reverse the ATRF order, calling it a “broken promise.”
Gray said she had no faith the government would negotiate an agreement so that ATRF could direct its investments, noting Toews could have extended the deadline and brought in an arbitrator.
“They used the cover of the pandemic to sign the order, they waited until teachers were swamped with the return of students to online learning and back to school to even mention that they were giving coercive control of the pensions to AIMCo,” said Gray.
Oh boy, more drama in Alberta as teachers are 'livid' over a ministerial order that changes the terms of the Alberta Teachers’ Retirement Fund (ATRF) to allow the Alberta Investment Management Corporation (AIMCo) to reject changes proposed by the pension manager in its investment policy.
First, as the article states, the ATRF said in a statement the order does not impact members’ pension benefits:
Work continues on the transfer of ATRF's asset management function to the Alberta Investment Management Corporation (AIMCo) as required by legislation.
One of the legislated requirements is that ATRF's assets are managed in accordance with an Investment Management Agreement (IMA) between ATRF and AIMCo. The IMA is a foundational document that defines the investment management relationship between the two organizations. The legislation states that if an agreement is not put in place the Minister of Finance can impose the terms under which AIMCo manages ATRF's assets.
Extensive negotiation between ATRF and AIMCo to establish a mutually agreeable IMA occurred throughout much of 2020. ATRF's single focus during the negotiations was on ensuring terms were established in the IMA that protected the best interests of our plans over the long-term, and that carefully considered and addressed the variety of issues that could arise in managing the assets of our plans.
Through the course of the intensive discussions, we reached agreement with AIMCo on many important matters. However, AIMCo was not willing to agree to certain key terms that we felt appropriately protected ATRF's role and responsibility and the interests of our plans.
On January 4, 2021, ATRF was informed that in accordance with the legislation, the Minister of Finance had issued a Ministerial Order (MO) establishing the terms and conditions of the relationship between ATRF and AIMCo. The MO will remain in force until replaced by an IMA that is the product of mutual negotiations.
This Ministerial Order does not impact member's pension benefits. Your pension remains secure and ATRF is still managing your pension plan.
The MO includes some terms that had been sought by ATRF during the IMA negotiations. This includes general recognition that the ATRF Board continues to be responsible for establishing the Investment Policy to inform and direct how our plans' assets are managed. However, it also includes terms that restrict the full discretion the ATRF Board currently exercises in establishing and executing on its Investment Policy. Specifically, AIMCo is not required to implement ATRF's Investment Policy if, in the sole opinion of AIMCo, it would threaten to compromise AIMCo's economies of scale or operational efficiencies. Such decisions by AIMCo are not subject to appeal or arbitration.
While we were not able to agree to terms of an IMA, the MO allows us to move forward with the significant work that will go into the next steps of the transition process. The ATRF Board is proud of the work done by ATRF staff with AIMCo to ensure everything is planned and in place for a successful transition of asset management. As planned, we will begin the staged transfer of asset management to AIMCo in accordance with our legislated requirements in the coming months, and we will also keep members informed as that transition progresses.
Our primary focus in the course of this work has always been the best interests of our pension plans, and that will continue as we progress within the constraints that have been set out in the Ministerial Order.
The MO contemplates that an investment management agreement between ATRF and AIMCo will be finalized in due course and in that event the MO will no longer be in effect. In addition to ensuring the asset transition is successfully completed, we expect to resume negotiations with AIMCo in the near future and we will continue to be singularly focused on outcomes that are in the best interests of the plans in those negotiations.
Now, I don't know the details, but reading this statement tells me a lot of work has already been done to amalgamate ATRF into AIMCo but there are still some issues that need to be resolved.
When I read "...however, AIMCo was not willing to agree to certain key terms that we felt appropriately protected ATRF's role and responsibility and the interests of our plans," it tells me AIMCo isn't willing to compromise on some issues and maybe rightfully so.
None of this, however, jeopardizes Alberta teachers' pensions in any significant way and with all due respect to Gil McGowan and Greg Meeker, they are just stirring up a hornet's nest over nothing.
AIMCo lost $2.1 billion in their VOLTS strategy last year. We all know this, I've covered extensively on my blog and openly stated they screwed up. Heads rolled and AIMCo's CEO is resigning in June.
But the losses in VOLTS don't define AIMCo and they don't change my opinion that this amalgamation, once it goes through, will be positive for all parties involved, including ATRF employees, AIMCo, and Alberta's taxpayers.
If Alberta's teachers are livid, it's again due to the UPC Government and their disastrously poor communication skills.
You don't need to ram ministerial orders through, you need to to first consult with all stakeholders, answer their questions and then proceed.
Sometimes when I look at the way provincial and federal government leaders conduct policy, it's as if I'm watching a bunch of amateurs who don't know how to do things right based on transparency, accountability and results.
What else? I'll tell you what I'm livid about, the cancellation of Keystone XL pipeline.
President Joe Biden just revoked the permit for Calgary-based TC Energy's Keystone XL pipeline via executive action after being sworn in as the 46th U.S. president on Wednesday.
On his first day, the new president issued a sweeping order tackling climate change, which included revoking pipeline permit.
Of course, environmental zealots are relieved, Tom Steyer is relieved, AOC and Bernie Sanders are relieved, the Saudis funding the Clinton and Obama foundations are relieved, but along with many Canadians and Americans, I'm pissed because that pipeline would have sustained many great jobs on both sides of the border and secured oil to the United States for decades.
So cheer up Alberta teachers, your pensions are safe and there are much more important issues to worry about in your province.
Below, the Alberta Teachers’ Association is angry with recent changes the UCP government has made that it says take control away from teachers when it comes to their pensions. Sarah Komadina reports.
You have to watch this clip here as I can't embed it but one thing I can't stand is some teachers who don't know what they're taking about stating "ATRF outperformed AIMCo" over the years.
AIMCo has addressed these concerns and I would ignore them.
Also, Canada's Prime Minister Justin Trudeau says his government is trying to persuade US President Joe Biden not to cancel the Keystone XL pipeline. Good luck with that, it's a done deal.
Lastly, if you missed it earlier, watch President Joe Biden’s inauguration speech that he delivered after he was sworn-in on Capitol Hill. It was actually an excellent speech, let's hope he unites Canada and the US with policies which benefit both nations.