The maximum pensionable service an employee may have is 35 years. If one of your employees reaches this milestone, stop remitting member and employer contributions on their behalf. If the member continues to work, the member's highest average salary used to calculate the pension when they retire will include the post-35 year salary even though contributions stopped. This usually has a positive effect on the member's highest average salary, subject to the salary cap.

If the new employer has a pension plan, the LAPP pension may be transferred to the new plan provided a reciprocal transfer agreement exists between the plans. There are reciprocal transfer agreements with most of the public sector pension plans in Canada. If there is no transfer agreement with the new plan, the member might be able to use the funds from LAPP to cover the cost of optional service with the new employer. Each pension plan has its own set of unique rules. Some plans do not allow service to be transferred or optional service. The member will need to check the rules under the new pension plan and contact our administrator, Alberta Pensions Services Corporation (APS) for information.

Read Important news for LAPP employers (January 10, 2008 Reciprocal Transfer Agreements).

There are two sources - contributions and investment returns. About 20 per cent of the Plan's income is from contributions and about 80 per cent comes from returns on investments. So, when the investments perform poorly on the market, this can affect contribution rates.

Curent contribution rates can be found on the Contribution Rates page.

The following graph shows employees' rates up to the YMPE for the past 16 years:

LAPP - Local Authorities Pension Plan
PSPP - Public Service Pension Plan (Alberta)
ATRF - Alberta Teachers Retirement Fund
OMERS - Ontario Municipal Employees Retirement System
OTPP - Ontario Teachers Pension Plan
BC Colleges - BC Colleges Pension Plan
BC Muni - BC Municipal Pension Plan
CAAT - Colleges of Applied Arts and Technologies (Ontario)
UAPP - Universities Academic Pension Plan (Alberta)

Pension fund contributions are not part of the Government's general revenues, so they go to a separate fund that is directed by the LAPP Board of Trustees. This fund is managed by Alberta Investment Management Corporation (AIMCo), as directed by the LAPP Board. The investments are balanced in asset classes and are well-diversified for security and long-term growth. The current policy has 35.5 per cent of the fund invested in fixed income investments (such as bonds and mortgages), 15 per cent in Canadian equities, 24.5 per cent in foreign equities, 10 per cent in real estate and 17 per cent in alternative investments (such as private equity, hedge funds, timberland, etc.).

For more information, view the Board's Long Term Funding Strategy.

Each year, the Plan conducts an actuarial valuation of its financial performance. The key findings of the most recent valuation are as follows:

1. LAPP is seeing a significant increase in the lifespan of plan members. As members are living longer than the plan anticipated, more money must be collected now to pay pension benefits over these additional years.
2. The Board's projections for future investment earnings have been reduced slightly, to a more conservative level, in light of recent investment market turmoil and our forecast for lower future returns from the market.
3. Some plan members are leaving the Plan before retirement and withdrawing their funds, to invest them independently. Pensions that were to have been paid out over a period of many years are now being paid all at once.

With the advice of the plan's actuary, the Board uses information from the Plan valuation to decide if a contribution rate increase will be necessary to give the Plan additional financial security.

Pension plans like LAPP are long-term investors. The contribution dollars of members joining the Plan today will be invested and reinvested for many years into the future. The investments compound and grow over time before being used to pay out to members as pensions during their retirement years.

In order to secure our pension promise, LAPP's Board of Trustees sets funding and investment policies which are regularly monitored. The Board, with the advice of an actuary, sets a funding policy to ensure that employer and employee contribution levels are sufficient. The contributions, together with expected investment returns, will pay all future pension liabilities.

We have designed LAPP's investment policy to generate the required rate of return after inflation, which in turn will grow to a large pool of assets that will provide the pension benefits to our members over the long term.

Given the long investment timeframe for pension plans, we know there will be periods of investment market weakness, resulting in investment under-performance. However, history shows us that over the long run, invested money grows in value.

To avoid major losses in any one area, LAPP's investment policy requires prudent diversification. As a result, LAPP invests in a broad set of assets including money market instruments, bonds, mortgages, real return bonds, real estate and stocks from companies based in Canada, the U.S., Europe, and the rest of the world.

We set limits on how much money can be invested in the different asset classes and in any one company or security, so that a loss in a single investment will not have a material financial impact on the Plan. LAPP also assures appropriate diversification is achieved between geographic locations, industrial sectors, investment managers and styles.

Moreover, LAPP is a defined benefit plan where pension benefits are based on a formula and not actual investment performance. Therefore, if the Plan suffered investment losses, retirees are protected by the financial resources of the Plan's sponsors and contributions from active members.

LAPP uses risk modeling tools to assess the long-term risk and return relationships in selecting the most appropriate combination of assets. LAPP structures its asset mix primarily in bonds, real estate and equities, to capture the historically higher real rates of return from stocks. While this may result in greater fluctuations in investment returns, it has generated the highest return and lowest funding costs (contributions) for pension plans over the long term. We expect the diversified portfolio to earn the level of inflation-adjusted returns LAPP needs to pay all future pension benefits.

Each year, the Alberta Auditor General does a complete audit and presents an audited statement to the Alberta Government and to the Board.

LAPP's financial statements are available in LAPP's Annual Report. The Annual Report is sent to all LAPP employers, unions and associations. In addition to the annual Report, LAPP also produces an annual Highlights Report, which gives an overall summary of the Plan's financial health. LAPP's Highlights Report is sent to all of LAPP's members and retirees.

For more information, see LAPP's Annual Report and LAPP's Highlights.
The investment section also provides more detailed financial information.

A mathematical analysis of the financial condition of a pension plan. An actuary prepares a plan valuation at least once every three years. Following a valuation, the Board, acting on the advice of its actuary, may adjust contribution rates so the rates meet the funding requirements of the Plan.

When filling out a remittance form in EOS (Form 113) complete the Form 7 section, which appears at the bottom of the page.  Fill in the negative amount for the member or employer contribution. 

For further questions, contact your Employer Services representative.

See detailed information in the Leaves Spanning Years section of Pension e-guide.

Members' balances are shown on the Optional Service Alert (1310) Report found in the Reports inbox section of EOS.

For further questions, contact your Employer Services representative.

E-mail your Employer Services Representative requesting to close the application.

Use the reset password function found on the EOS login page.

Or e-mail Employer Services at employerservices@apsc.ca.

The salary cap is the maximum salary upon which a defined benefit can be based as set by the federal Income Tax Act.

The current salary cap can be found on the Contribution Rates page.