The CPP legislation allows for a province to withdraw if it meets the conditions set out in the legislation, namely: 1) having given the required notice; 2) setting up an equivalent pension plan; 3) taking on the liabilities for all pensions earned by people who ever worked in that province from 1966 (the beginning of the CPP), for the pensions earned while they worked there; 4) that province’s cabinet having passed an Order in Council approving the withdrawal. No Act of the province’s legislature needs to be passed and there does not have to be a referendum, although Premier Smith has previously said there would be one but also said it would not be binding on her government.

The idea that one province with just 15% of the membership of the CPP could walk away with 53% of the plan’s total assets is a fantasy. It’s based on a very dubious reading of some old language in the Canada Pension Plan (the federal Act), and equally dubious actuarial assumptions in the LifeWorks analysis. To illustrate how shaky this proposal is: according to the approach adopted by LifeWorks, if Ontario decided to join Alberta in leaving the CPP, the two provinces would be entitled to a combined total of over 100% of the CPP’s assets, meaning the plan would be left with less than zero assets, and the rest of Canada would presumably owe Ontario and Alberta even more money. Given that all members of the CPP make contributions at the same rate, regardless of where they live or work, how does this make sense?

It is likely true that an Alberta Pension Plan could start off with lower contribution rates but not by as much as the Alberta government is claiming. First, let’s assume that the plan would get a fair share of the assets rather than a fanciful one. The plan would have responsibility for pensions that were earned while working in Alberta since 1966, regardless of where the person lives now – not just pensions to retirees living in Alberta. That’s a much larger number of pensioners than the government is claiming. Since the APP, like the CPP, would largely pay for current pensions from current contributions, this might work to lower contributions in the short to medium term while Alberta enjoys good times, but it carries big risks for Albertans. First, Alberta has a roller-coaster resource-dependent economy and a downturn could lower the work force and its overall wages, increase the number of pensioners as people are pushed out of the workforce, and lower the return on the fund’s investments if in addition the fund was too concentrated in Alberta investments (one of the goals of APP advocates is to invest more in Alberta). All those changes would result in less money coming into the plan and more going out in pensions. Those bad times have come to Alberta before, and they will come again. The advantage would become a disadvantage quickly – much more quickly than if we were in a plan like CPP with 10 times as many members and a national economy. A broad-based plan covering all regions has greater stability and less risk. Quebec is a case in point. Although it has twice Alberta’s population and a more diversified economy, it has not been able to provide the same benefits as CPP without raising contribution rates significantly higher than CPP’s.