In September, the Government of Alberta announced its intention to reform the province’s four public-sector pension plans, including the Local Authorities Pension Plan (LAPP), to address how changing demographics and unpredictable markets are affecting Public Sector pensions in their current form. The three other pension plans affected are the Public Service Pension Plan (PSPP), Management Employees Pension Plan (MEPP), and Special Forces Pension Plan (SFPP). Only LAPP affects municipal employees.
Some of the key proposed Public Sector Pension reforms include:
- Removal of early retirement provisions, specifically the “85 factor” (age plus pensionable service).
- Cost of living allowance for pensionable service earned after January 1, 2016 being reduced to 50% from 60% and no longer guaranteed.
- Pension contributions being split 50/50 between employees and employers.
- Benefits will vest immediately (currently there is a two-year waiting period).
- Removal of the 35-year service cap.
- No new benefits can be authorized before 2021.
- A cap being put on costs and rates.
- The Governance Board being changed from representative (employers and employees) to skills-based.
The Government of Alberta is engaging in consultation in these changes until December 31, 2013.
Members are encouraged to review Charting a New Course: A Vision for Public Sector Pension Reform and an abbreviated information sheet regarding LAPP that the Government of Alberta has developed to gain an understanding of the proposed changes. The AAMDC is encouraging members to participate in this consultation by submitting your municipality’s concerns directly to email@example.com by December 31, 2013.
In a parallel effort, members are also encouraged to submit comments and concerns directly to the AAMDC online by clicking here by Monday, December 16, 2013.
The AAMDC Board of Directors will review information gathered to determine if a formal advocacy position(s) can be adopted regarding the pension reform proposal as they affect LAPP. The AAMDC asks that members consider the impact of the proposed reforms from both the employer and employee perspective when submitting comments.
Mixed messaging exists as to whether or not the LAPP specifically is unsustainable in its current form with the revisions and rate adjustments it has been making. To clarify, the four pension plans affected by the provincial pension reform proposal all have different levels of liability and contribution rates and different plans for sustainability based on required actuarial studies.
Recently, LAPP released its 2012 Actuarial Valuation on its current pension system. Additionally, LAPP released its own information regarding the plan’s sustainability. The province has not released actuarial reports on the projected performance of its proposed reforms as it affects each pension plan. The lack of actuarial data on how the reforms will make each specific pension plan sustainable, will make it especially important that members closely consider the proposal. The AAMDC currently has representation on the LAPP’s Board of Directors and Board of Trustees; however, a proposed change in governance structure may affect this involvement.
In an effort to better understand the implications of the proposed pension reform, AAMDC is involving the Alberta Rural Municipal Administrators Association (ARMAA) and encouraged them to participate with us in the review. In 2007, the AAMDC in conjunction with ARMAA and Municipal Affairs developed Workable Solutions: A Labour Force Strategy for Rural Municipalities to address labour shortages in recruiting and retaining rural municipal staff. A significant change to employee benefits could be detrimental to municipal efforts to retain and recruit skilled and valuable staff. To that end we ask that employees be given the pension reform proposal and concerns be gathered from them as well to be submitted.
As this is an overarching municipal staffing issue, the AAMDC has requested a legal opinion. As associations’ who share responsibility for municipal sector staffing in Alberta, this information will be discussed with the Alberta Urban Municipalities Association (AUMA) in addition to being considered in the Boards’ formation of positions on this issue.
More information on the proposed reforms can be found at the Treasury Board and Finance Ministry website.
Enquiries may be directed to: