Alberta's Potential CPP Exit

I'll start with "bad idea" and "won't go as planned".

What makes the Alberta plan so enticing is also why it will fail. Basically, a study concluded that Alberta could be entitled to as much as 53% of the funds assets. And IF that were paid out, then Alberta would be able to start it's own pension fund and pay out more for less.

The problem is that they won't get that much, and they aren't realistically entitled to that much.

To frame the problem better, under the most loose and beneficial interpretation, the same company ended up at a number which was 118% of the funds assets. That's right, the wording of the act is so flawed that it can create interpretations of it such that Alberta could be construed as being owed more funds than the pool has.

Clearly. CLEARLY that is insane.

Alberta's relative share of the contributions is 18% and their population is about 16% of the people's involved. But, if they only take 16-18% it is NOT a better move for Alberta. Why? Well, a smaller fund is exposed to more risk. So, even if it is equal in proportion, it will likely perform less well over time. That is why CPP was created in the first place; more people = more funds = less risk.

But why won't Alberta be able to receive even 53% if some calculations peg it at over 100%?

Simple. Laws. While the law may be rather open and bat-shit crazy, it is pretty damn clear that unless it states how to calculate it, that no reasonable person (let alone Province) would enter into such an agreement if the exit of all parties would total more than the total of the fund.

And the law, when agreements do not state otherwise, tend to favor the most reasonable interpretation.

Put another way... the courts will likely determine that what is fair is not to simply perform a calculation for one Province and accept it. But rather, perform the same calculation for ALL Provinces and then assign Alberta their relative stake.

So, let's say using this calculation, Alberta ends up 53% of the pool. And the remaining Provinces combined only add another 47%. Then sure, Alberta walks away from the pool with their 53%. However, that won't happen. If the same calculation is applied, the total disgorgement for all Provinces will likely end up much higher. Let's say 300%. In that case, the total including Alberta would be 353% and their relative portion (53/353) would be 15%.

Why are the courts likely to rule this way? Well, first, this sort of calculation would ACTUALLY be fair. But, secondly, it almost doesn't matter. If the courts agree to Alberta's calculation, then every other Province in the plan simply need to to leave CPP at the exact same time or before Alberta. 

And this is the problem for Alberta. Their ask is so huge and ridiculous that it creates a path to mutually assured destruction. The 53% amount is so huge it would absolutely destroy every other Province staying in the plan. So, their logical move, if Alberta's is approved is to simply screw them over by also leaving. 

Furthermore, it is unlikely that Alberta's calculation will be accepted as the basis of any such calculation in the first place. The study which determined this faces 3 challenges; it was commissioned by the government of Alberta, their original calculation was much different and even they do not express a firm belief that Alberta is owed even the revised, much smaller amount.

So Alberta really needs to either arrive at a number which the remaining members of CPP would agree to, or this will go to court. And if it goes to court, one of the first matters will agreeing upon or enforcing a fair calculation. 

In the end though, I guess that really just highlights this for what it most likely is; a political wedge for Alberta to ram between Albertans and the Federal Government.