January 13, 2021

Finance Minister Imposes Pension Management Agreement

Teachers and pensioners received a late, unwelcome Christmas gift from Finance Minister Travis Toews in the form of an imposed agreement on pension investment management.

On December 23, 2020, Toews signed a ministerial order imposing an investment management agreement (IMA) between the Alberta Teachers’ Retirement Fund (ATRF) and the Alberta Investment Management Corporation (AIMCo). ATRF was informed of the imposed agreement on January 4, 2021.

According to a release posted yesterday on the ATRF website, the IMA includes a recognition that the ATRF board will establish the investment policy to direct how plan assets are managed, but the full discretion of the board in establishing and executing the investment policy is restricted. Effectively, the government has given AIMCO a veto.

“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,” says the ATRF release. “Such decisions by AIMCo are not subject to appeal or arbitration.”

The imposed terms contradict statements made by Toews in the legislature at the time Bill 22 was being passed.

“The ATRF board will remain in control of determining how the pension funds are invested at a strategic level as well as retaining ownership of the plan’s assets,” said Toews on November 7, 2019. “That is, AIMCo will invest according to the policies set by the ATRF board.”

Bill 22, the Reform of Agencies, Boards and Commissions and Government Enterprises Act, required ATRF to use AIMCo as its sole investment manager, despite a long-standing strong-returns history of investment management by ATRF. The bill required the negotiation of an IMA between ATRF and AIMCo to be concluded by June 30, 2020. Yesterday’s ATRF release says negotiations occurred throughout much of 2020 but that AIMCo was not willing to agree to key terms that ATRF felt protected the board’s role and the interests of the plans.

Alberta Teachers’ Association president Jason Schilling is incensed by the ministerial order.

“Throughout debate on Bills 22 and 203, the government was adamant that ATRF would retain control over investment decisions. Officials and MLAs told teachers they were overreacting and that they were being lied to. Now we have an investment agreement with loopholes big enough to fit a bad $2.1 billion volatility bet.”

Schilling is puzzled that AIMCo and the government would not accept reasonable terms suggested by the ATRF board.

“You would think that AIMCo, which independent reviewers described as demonstrating unsatisfactory investment decisions, risk controls, collaboration and risk culture and as being desperately in need of a culture change would have approached its negotiations with ATRF with a little less arrogance and more flexibility. You would think the government would think twice before backing AIMCo’s position.”

Schilling is calling on teachers and retirees to contact their MLAs to order a stop to the IMA until AIMCo can come to terms with ATRF and the promises made by government officials.

The agreement would allow the transfer of management to now begin, with a deadline established by Bill 22 and the IMA for the management of all assets to be completely transferred by December 31, 2021.

While these recent developments are deeply concerning for teachers, ATRF says that teacher pensions remain secure and that benefit entitlements are not impacted by the change in investment management.