LAPP News www.lapp.ca Lisa Vanden Dungen Counselor FCSS Coaldale In this Issue December 2018 Message from the Chair LAPP Facts Contribution rates for 2019 Governance changes moving forward for LAPP Did you know? For every dollar paid out in pensions this year, 90 cents came from investment revenues. Message from the President and CEO Always a LAPP Ahead
Message from the Chair It has been many years that Board chairs of the Local Authorities Pension Plan have been writing to you in these newsletters, keeping you up to date on the financial health of your pension plan and reporting on the work of the Board and ALAPP Corp. I have those Board chairs in mind today when I share Report and we were plea with you the very good news that LAPP in on the cusp of achieving its decades-long goal of independence from government. It is a goal that has been a focus of many LAPP Boards over many years and all LAPP trustees, current and former, deserve a special thanks for their part on the path to joint-governance. On December 11, 2018, Bill 27: the Joint Governance of Public Sector Pension Plans Act, received royal assent and became law. The new law signals a new chapter in LAPP s governance, set to take effect, March 1, 2019. In the few months between now and then, two new Boards will be established to represent you and ensure the security of your pension benefit for many decades to come. The LAPP Sponsor Board will be composed of an equal number of employer and employee representatives with authority over plan design (pension benefits and Plan rules). A new LAPP Corporation will act as the official administrator and trustee of LAPP, overseeing the management of our $43.7-billion pension fund and ensuring excellent pension services for our 263,000+ members and retirees. Its Board of Directors, also composed of equal representation, will oversee its operations and provide guidance to management. Under this governance model, roles and responsibilities are clear, risks are properly managed and decisions are made in the best interest of Plan members. What you are probably wondering is, Why does any of this matter to me? It matters because the new structure will improve pension security for LAPP members and retirees. It matters because you and your employer, who contribute to the Plan, will now have the final say on pension benefits. Gaining independence from government takes the politics out of pensions and removes a variety of risks that were once beyond our control to manage. As we move into this new chapter, I want to reassure you that the Plan will continue to be expertly managed throughout the transition and in the years ahead. LAPP will have the same top-notch management team, who skillfully worked with the Board to steer the Plan back to financial health after the global financial crisis in 2008. At the time, LAPP was only 74% funded. Today the Plan is fully funded, with a comfortable surplus, and the same great pension benefits are more affordable for our members. The new LAPP Corporation will continue to provide strategic oversight to LAPP, support the new Sponsor Board in its work and oversee the work of our proven investment manager, Alberta Investment Management Corporation (AIMCo) and our member-focused service provider, Alberta Pensions Services Corporation (APS). There will even be some current and former Board members returning to serve again. They are knowledgeable and committed individuals chosen by Plan sponsors to represent you and your interests in the important days to come. To those departing Board members, I express thanks on behalf of all members of the Plan. All Board members, current and past, deserve thanks for their role in the successful operation of LAPP over many years and for their part in the long fight for independence. We have provided a list of these members on the page following. Terry Agoto LAPP Board Chair Jaime McIntosh Tourism Marketing Specialist,City of Brooks Your Plan Has Value
Logan Grant Community Peace Officer, City of Brooks List of current and former Board members of LAPP Current Directors Terry Agoto, Chair Darren Sander, Vice-Chair Kenneth Balkwill Steve Bradshaw Barb Burton Kim Craig Tina Giesbrecht Peter Marsden Susan McGillivray Soren Odegard Shelly Pusch Heather Rogers Liz Thompson Richard West Former Directors Darren Aldous Jodi Edmunds Doug Fischer Dennis Gartner Chris Good Stephen Gould Kenneth Hoppins Grant Howell Margaret Johnson Neil Ketler Tony Krivoblocki Michael Mahar Richard Martin Rod Matheson Chris Mazurkewich Bruce McLeod Aaron Mireau Larry Murray Elaine Noel-Bentley Tony Olmstead John Ramsey Helen Rice Don Sieben John Vanderkaay George Walker John Whaley Les Young LAPP Facts 22,756 76,765 Average number of UNIQUE LAPP WEBSITE USERS /mth Average number of LAPP WEBSITE PAGE VIEWS /mth 2.51% INCREASE IN LAPP MEMBERSHIP over 2016 45.6 AVERAGE AGE OF ALL ACTIVE MEMBERS 9 AVERAGE YEARS OF PENSIONABLE SERVICE of all active members 71.6 AVERAGE AGE of all LAPP retirees $18,051 AVERAGE YEARLY LAPP PENSION PAID These statistics are updated each year as part of the actuarial valuation done by the Plan. The last valuation was done in 2018 for the year ending December 31, 2017.
Contribution rates for 2019 Contributions are collected from members and employers, with employers paying 1% more. **Annualized Salary: If you work part time, contributions are determined based on your annualized salary. The contribution rate percentages are applied to your annualized salary, and the annualized contributions are then adjusted based on your full-time equivalency (FTE) to determine the required contributions. The annualized salary is the amount you would have earned if you worked full-time over the same period. It can be calculated by dividing your annual part-time earnings by your FTE. 8.39 % 12.84 % Member rate on Member rate on up to $57,400 9.39 % Employer rate on up to $57,400 over $57,400 13.84 % Employer rate on over $57,400 Governance changes moving forward for LAPP In December, government unanimously passed legislation that establishes the Local Authorities Pension Plan as a jointly-sponsored pension plan that will be governed in partnership by the employers and employees (represented by their unions and associations ) in a new governance structure. There will be no changes to pensions, pension benefits or the way the Plan is funded as a result of this legislation. The changes apply to the governance structure only and LAPP will continue to be a defined benefit plan. What has changed? In the past, government had a final say in how benefits were set and how Plan rules might apply to members. Under the new system, government will no longer have control. LAPP will be governed by a Sponsor Board and a corporation. The Board will be appointed by sponsors of the groups and organizations that represent the members and the employers of the Plan. The Board of Directors, also composed of equal representation, will oversee the administration of pension benefits and the investments of the LAPP Fund. Highlights of the new structure: LAPP will have a Sponsor Board to make decisions on plan design and how the Plan is funded. Separation of sponsor and trustee functions makes for clearly articulated roles and responsibilities. Transitioning to joint governance will mean that employee and employer stakeholders will have direct say in how their pension plans are managed and will have more control over the future of the Plan. What are the benefits of joint governance? Clear roles and responsibilities Sponsors responsible for pension benefits Shared trusteeship of Plan assets Equal representation of employee and employer groups No political interference Improved accountability Service provider choice Your Pension is Secure
Message from the President and CEO Looking back on 2018, it seems the year passed by so quickly, it is hard to believe it is over. However, even as we transition into setting goals and making plans for 2019, it is worth reflecting on what a successful and productive year we had. LAPP began 2018 with a $4.8-billion surplus, achieving fully-funded status for the first time in about 20 years. The significant improvement to our financial position allowed the Board to shore up benefit security while at the same time reducing the cost of pensions for members and employers for the second year in a row. For a LAPP member earning about $60,000 a year, this will mean a $600 reduction in payroll contributions in 2019, on top of the $600 savings gained in 2018. Employers will also benefit from the same reduction, which for both members and employers is equivalent to a 1% reduction in contributions each year. LAPP then ended the year achieving another significant milestone. The Alberta government passed legislation establishing LAPP as a jointly-sponsored pension plan that will operate independent from government, with a vastly improved governance structure. The legislation transforming LAPP is called the Joint Governance of Public Sector Pension Plans Act. It received royal assent December 11, 2018 and is scheduled to take effect March 1, 2019. The legislation establishes a Sponsor Board with authority over the pension deal and a separate administrator trustee corporation. It clarifies roles and responsibilities and reduces political risks to the Plan. This was a long, sought-after development that came to fruition thanks to the hard work of LAPP s Board members and key stakeholders, who have lobbied government 25 years for these changes. These developments of 2018 have put LAPP in a very strong position to meet the challenges of 2019 and beyond. We are looking forward to our continued strong partnerships with our investment manager, Alberta Investment Management Corporation (AIMCo) and our benefit administration services provider, Alberta Pensions Services Corporation (APS) as we start down this new path. LAPP is a strong and healthy pension plan that is strategically managed and prudently funded. It will continue to serve the needs of its members for many generations to come. No one can predict what the economy will be like in the future, but at LAPP we plan for a number of different scenarios and are always working to ensure the Plan can weather any unexpected storm on the horizon. Our goal is retirement security for our members, at a price that is as affordable and sustainable over time. We strive to be industry leaders in risk management and we hope our example serves as an excellent model for strong, successful defined benefit pensions plans everywhere. I would like to pass on my thanks and appreciation to the trustees on the LAPP Board, who through the years have always put the members first in their decision-making. Soon new Boards will be appointed to take on the governance of LAPP and those members will benefit from the legacy former trustees have left behind. On behalf of the staff at ALAPP Corp., I wish you and your family the very best this holiday season. Chris Brown President & CEO ALAPP Corp.
Contact Us It s all on our website Whether you want to read more about Plan funding or learn more about your own personal pension and what you can expect at retirement, all the information you need is on LAPP s website at www.lapp.ca. Visit our new website soon. LAPP is one of the most valuable assets you are investing in and you owe it to yourself to learn more about how your plan is doing. For information about your personal pension, please contact our Plan benefit administrator, Alberta Pensions Services at: 1-877-649-5277 5103-Windermere Boulevard SW Edmonton, AB, T6W 0S9 Looking for more information? The LAPP Board of Trustees is committed to providing members with easy-to-understand pension information on a regular basis. If you have thoughts on how this newsletter or other communications can be improved, please send an email to news@lapp.ca. Local Authorities Pension Plan Executive Offices P.O. Box 1315 Edmonton, AB T5J 2M8 www.lapp.ca