Since I invariably get this question from someone as soon as any MLA announces their retirement, I figured I'd might as well put the figures up on the blog.

MLAs in Alberta have the largest severance payments in Canadian politics.

It's equivalent to three months’ pay for every year served (although the calculation is slightly more complex).

If Premier Stelmach resigns his MLA seat on say, June 15, 2011 after the Spring Legislative Session is over-ish, that would also mark exactly 18 years as an MLA.  The CTF estimates Premier Stelmach would be eligible to collect a "Transition Allowance" of approximately $949,500.

If he stays on as MLA until the next election, which could be in March of 2012, the CTF estimates Premier Stelmach would be eligible to collect a "Transition Allowance" of approximately $987,400.

This is of course in addition to the $97,975 he has collected since 2001 in RSP payments (fully taxable unless put into an RRSP).

The obvious next question is how much would his transition allowance been if MLAs and cabinet not given themselves a 30% pay hike shortly after the 2008 election?

Well, assuming that MLA wages stayed the same in 2008, but increased each year thereafter by the change in average weekly earnings of Albertans in 2009 and 2010 (as was the policy for MLA pay between 1999 and 2008) the CTF estimates Premier Stelmach would have be eligible to receive approximately $776,900 if he resigns his MLA seat on June 15, 2011 and approximately $807,800 if he resigns his seat in March 2012.

Ok, let me be clear about the caveats.  All of these estimates are based on available information and assumptions as to the date of resignation and/or election.  Final figures will differ from these estimates once both final salary figures are provided and the resignation date and/or election date is determined.

Now that the figures are out of the way, let me address a couple of policy points.  Often these large transition allowances are justified by the fact that MLAs do not have a pension plan.  That’s only technically true.  It is true that they do not have a formal defined-benefit or even a defined-contribution pension plan, but they do get an RSP contribution equal to 50% of the maximum allowable RRSP contribution, which is clearly intended to help with their retirement.  This year the maximum you can contribute to an RRSP is $22,450, so MLAs get a cheque for $11,225.

If we want to get rid of the transition allowance and the RSP contribution and discuss creating a defined-contribution, dollar-for-dollar matching pension plan for MLAs, let’s talk about that.

Secondly, severance payments in the private sector are only mandatory to be paid if people are dismissed without cause.  So, if you are fired with cause, resign or retire in the private sector, you are not necessarily eligible for a severance payment.

Lastly, many politicians across Canada receive a transition allowance.  However, most are calculated at one-months’ pay per year served and many of them have a six-month or one-year cap in place.

All things, along with MLA pay worth reviewing by a citizens' assembly.

By: Scott Hennig
Posted: January 25, 2011
Topic: Alberta

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