Glossary

Clicking the term below will show the definition.

Active Member

A member who is making contribution or, if not making contribution, is on leave or in receipt of benefits under the employer's disability plan or at the point of maximum pensionable service (35 years).

Actuarial Reserve

The estimated cost to the pension plan of providing the increased benefits gained by a member who buys or transfers optional service. An actuarial reserve calculation takes into account a number of factors including salary scaling.

Actuarial Valuation

A mathematical analysis of the financial condition of a pension plan. An actuary prepares a plan valuation at least once every three years. The valuation shows if the contribution rates are higher or lower than what is needed to ensure the long-term funding of the Plan.

Actuary

A person authorized by their designation as a Fellow of the Canadian Institute of Actuaries to prepare and sign actuarial valuations.

Alberta Consumer Price Index (ACPI)

A weighted average of the cost of a basket of goods and services that are normally purchased by Alberta households. It includes such things as clothing, food, housing, gasoline, health, personal care services, recreation and education.

Allocation

The designation of your pension benefits to one or more beneficiaries.

Approved Long-Term Disability Income (LTDI) Plan

A specific type of disability income replacement plan that is offered by an employer for its employees and is approved by APS. Where the LTDI plan is approved by APS, the period of LTDI coverage is considered mandatory service for pension purposes.

The criteria used by APS to approve LTDI plans are:

  • all members employed by the employer in the group to whom the LTDI plan applies, except for those who are not eligible for coverage by reason of medical requirements, must be covered by the LTDI plan;
  • a member must not be required to apply for a pension as long as the member qualifies for benefits under the LTDI plan; and
  • the LTDI plan must be filed with APS.
APS

Alberta Pensions Services Corporation (APS) is responsible for administering seven statutory pension plans under the direction of four pension boards and the Government of Alberta, as well as two supplementary retirement plans.

Beneficiary

The person(s) you name to receive a benefit if you die before retirement or before the remainder of a guaranteed term if you die after retirement. A beneficiary can be a charitable organization. If you do not name a beneficiary and you do not have a pension partner, your estate is your beneficiary.

Canada Pension Plan

The federal pension plan administered by Human Resources Development Canada. It applies in all provinces and territories of Canada except Quebec where the equivalent Quebec Pension Plan applies.

Commuted Value

The amount of money paid as a one-time payment that is equal in value to your future pension payments.

Contributions

Money paid into a pension plan by you and your employer. Your contributions are tax deductible and are made through payroll deduction. All contributions go directly to the LAPP fund.

Coordination

Coordination is a feature offered to members who retire before age 65. With coordination, you can temporarily increase your monthly payments from the pension plan. At age 65, your payments from LAPP are reduced and remain reduced for as long as the pension is paid to you.

Cost-of-Living Adjustment (COLA)

An increase in a pension benefit to compensate for an increase in the cost-of-living. Your pension will increase each January by 60 per cent of the Alberta Consumer Price Index (CPI). The CPI is a weighted average of the cost of a basket of goods and services that are normally purchased by Alberta households. This includes things such as clothing, food, housing, gasoline, health and personal care, recreation, and education. COLA increases are calculated by taking the average of the CPI during the 12-month period ending each October and comparing it to the previous year's 12-month average.

Current Employment Status

Your current status of employment with your employer, for example, full time, part time or terminated (no longer contributing to the Plan).

Deferred Member

A member who is no longer employed by a plan employer, has left contributions in the Plan and has yet to choose a pension option.

Deferred Pension

A pension that starts at some future date.

Defined Benefit Plan

Defined Benefit Plans pay a monthly pension based on your salary and your length of service. The pension plan's obligation is to pay a stated benefit to each employee that depends on the employee's salary and length of service. Your benefit is guaranteed, regardless of how much money is in the pension fund. Your normal pension continues to improve daily because it is tied to your length of service. The pension estimator allows you to estimate your future monthly payments.

Diversified Portfolio

The pension plan fund is invested in common stocks (both Canadian and international), bonds, mortgages, and real estate and is managed by the Alberta Investment Management Corporation (AIMCo).

Early Retirement

Retirement before being eligible to receive an unreduced pension. See "Normal Retirement" and "Postponed Retirement".

Excess Contributions

The amount of contributions and interest returned to the member when the member's contributions and interest in the account exceeds 50 per cent of the benefit to be paid.

Guaranteed Term

You can choose a pension guaranteed for either 5, 10 or 15 years. Guaranteed term pensions are paid for your lifetime, but if you die before your guaranteed term has expired, your pension is paid to your beneficiary or estate for the remainder of the term. For example, if you choose a 10-year guaranteed term pension and die 4 years later, the pension will be paid to your beneficiary for the remaining 6 years.

 

Highest Average Salary

The average of your five highest consecutive years of salary used to calculate your pension benefits.

 

Joint Life

A pension option paid as long as either you or your nominee continues to live. If you choose a joint-life not-reduced pension, on your death your nominee will be paid the same amount you were paid for as long as your nominee lives. If you choose a joint-life reduced-by-one-third pension, the pension to the survivor will be reduced by one-third after your death or the death of your nominee.

 

LAPP Membership

The period of time in calendar days between the commencement of contributions with an employer under LAPP, and termination of LAPP contributions.

 

Leave With Partial Salary

A period of service during which a member is, with the approval of the employer, on leave from all or a portion of their regular duties of employment and is receiving pensionable salary that is less than regular pensionable salary from the employer. During periods of leave with partial salary, member and employer contributions to the pension plan are required.

 

Liability

The LAPP liability is the total value of all benefits earned by LAPP members and other costs for which the LAPP Fund is responsible.

 

Locked-In Retirement Account (LIRA)

A type of RRSP that is locked-in and can be withdrawn for a pension as early as age 50. It must then be used to provide a regular pension income. Most financial Institutions offer LIRAs from which you can choose the one that best suits your needs.

 

Marital Status

Marital status can be single, married, common-law, separated, widowed or divorced. See "Pension Partner" for further information.

 

Matrimonial Property Order

If a marriage ends, the Court is likely to treat the pension asset as one of the items to be considered when property is divided. A Matrimonial Property Order (MPO) is a legal and binding Court Order.

 

Member ID

The unique number assigned to you by APS' pension administration system. The Member ID is printed on publications sent after January 2004, including your annual statement, enrolment package or benefit estimate package.

 

Member Plan Status

Your status under the Plan. See "Active Member" and "Deferred Member".

 

 

Morgan Stanley World Index

An index maintained by Morgan Stanley, the index is compiled and reported monthly in local and common currencies. Measures the total return attributable to the largest capitalized companies on the world's major stock exchanges.

 

mypensionplan

mypensionplan is a secure website that provides active members and deferred members of the Local Authorities Pension Plan with access to personalized pension information.

Nominee

The person you name to receive your joint-life pension if you die first. If you have a pension partner on the effective date of your pension, the nominee must be your pension partner unless they sign a waiver before pension commencement. The nominee can be an ex-spouse or dependent child, but must qualify as a dependent under the income tax rules at pension commencement.

 

Normal Form

The normal form of pension uses the prescribed retirement formula to come up with the basic pension amount. At present, the normal form of pension is a single life pension guaranteed for five years. All other optional forms of pension are the actuarial equivalent of the current normal form.

 

Normal Retirement

Retirement at exactly age 65. See "Early Retirement" and "Postponed Retirement".

 

Old Age Security (OAS)

The basic federal income security program for seniors who are age 65 and older.

 

Optional Service (Prior or Past Service)

This is previous employment with a public service organization within Canada during which you did or didn't belong to a pension plan. You may be able to buy back this period of service if you're not receiving a current or future pension from your former employer. (Only some types of public service organizations are eligible.)

Buying back optional service increases your length of pensionable service, thereby increasing your future benefits.

 

Payment Due Date
The last date payments can be accepted towards the purchase of service. The date is shown in the notice of cost information mailed to you if you are buying past service or a leave of absence. If you terminate while you are already buying service, the payment due date is 90 days from the date of your day of paid employment. If you have not ended your employment but have moved to a position for which you don't make pension contributions, the due date would be 90 days from the last day of plan membership. Your employer will be able to tell you this date.
Pension Partner

A "pension partner" means:

(i) a person who, at the relevant time, was married to a participant or former participant and had not been living separate and apart from him or her for 3 or more consecutive years, or

(ii) if there is no person to whom subclause (i) applies, a person who, as at and up to the relevant time, had lived with the participant or former participant in a conjugal relationship

(A) for a continuous period of at least 3 years, or

(B) of some permanence, if there is a child of the relationship by birth or adoption.

For the purposes of this definition, persons are living separate and apart
(a) if they are living apart and either of them has the intention to live separate and apart from the other, or

(b) if, before the relevant time,
(i) they had been living separate and apart for any period, and

(ii) that period was interrupted or terminated by reason only that either of them became incapable of continuing to live separate and apart or of forming or having the intention to continue to live separate and apart of that person's own volition, and the separation would probably have continued if that person had not become so incapable.

Pension Plan Assumptions

Plan assumptions are used in preparing actuarial valuation reports and are set by the pension plan Boards. They are long-term estimates of the economic and demographic assumptions for the Plan. These assumptions include factors such as interest rates, inflation rates, mortality rates and retirement ages for:

  • members who are retiring, these assumptions are used to determine the optional forms of pension a member may select.
  • members who are transferring into or out of the Plan, these assumptions are used to determine the value of the member's pension.
  • members who are purchasing optional service, these assumptions impact the cost of optional service.

 

 

Pensionable Salary

Basic pay, for the performance of regular duties, that counts towards your pension. Overtime salary and bonuses are not pensionable salary.

 

Pensionable Service

Your years of service during which you contribute to the pension plan, plus service recognized from a transfer or purchase of optional service. The maximum is 35 years.

 

 

Period on Loan to a Bargaining Unit

A period of service during which a member is, with the approval of the employer, on leave from his or her regular duties in order to be employed by a certified bargaining agent that is serving persons employed by a plan employer.

 

Plan Valuation

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 may adjust contribution rates so the rates meet the funding requirements of the Plan.

 

Portable Document Format (PDF)

Portable Document Format (PDF) is a format used to deliver documents over the Internet. Adobe® Reader® (TM) is the standard software used to access PDF documents and can be downloaded, for free, from the Adobe® Website.

 

Postponed Retirement

Retirement after age 65 or after the age of entitlement to an unreduced pension. See "Early Retirement" and "Normal Retirement".

 

Pre-retirement Death Waiver

The pension partner may waive their right to a lifetime pension by completing the Pension Partner Waiver of Pre-Pension Commencement of Death Benefit form. This allows the pension to be paid to the beneficiary or beneficiaries on file with APS instead of the pension partner. This waiver can be completed by the pension partner any time before pension commencement but it may only be rescinded by the pension partner prior to the member's death.

 

Reciprocal Transfer Agreement

An agreement negotiated with another pension plan that allows members to transfer their pension when they move between plans.

 

Reduced Pension

If you retire between 55 and 65 and your age plus service totals less than 85 points, your pension is subject to a reduction. This is because, based on average life expectancy statistics, we will be paying out money over a longer period of time than if you retired at age 65. Currently, this reduction is three percent for each year you retire early. This reduction is based on your years short of age 65, or your years short of 85 points, whichever you would reach first.

 

Registered Retirement Savings Plan (RRSP)

A type of tax-deferred investment that is set up to hold and invest your savings until you retire. Most can be withdrawn at any time, but you will be taxed on the amount withdrawn.

 

Russell Canadian Property Index

An index maintained by Frank Russell. Measures the total return attributable to Canadian commercial real estate.

 

Salary

See "Pensionable Salary".

 

Salary Cap

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

 

 

SCM 91-Day T-Bill Index

An index maintained by Scotia Capital Markets. The index measures the return attributable to 91-day Treasury Bills.

 

SCM Bond Universe Index

An index maintained by Scotia Capital Markets. Measures the total return attributable to bonds and includes representative bond issues by issuer (Federal, Provincial, Municipal and Corporate), quality (AAA, AA, AA, A, and BBB) and term (short-, mid-, and long-).

 

Service

See "Pensionable Service".

 

 

 

Service Year

The year specified by the employer as the employer's annual payroll pay period cycle. This is the year for which member's pensionable service is reported by the employer and which will have specific From and To dates. The service year may not coincide exactly with the calendar year.

 

Social Insurance Number (SIN)

A nine-digit number used in the administration of various Canadian government programs. You require a SIN to work in Canada or to receive government benefits.

 

Spouse

See "Pension Partner".

 

Surplus

A surplus exists when the actuarial valuation determines the Fund's accrued benefit payments are less than the net assets available for the payment of those benefits.

 

T-Bill

Short-term government security.

 

Termination

The point at which a member ceases to participate in the Plan, e.g. retires or moves into a non-participating position.

 

Unreduced Pension

A pension that will not be reduced for early retirement. See "Reduced Pension" and "Early Retirement".

 

Variable Pay

Variable pay:

  • is lump sum pay, whether variable or constant in amount from year to year, that is paid on or after December 3, 2003;
  • must form part of a variable pay program, where the terms of the program are contained in a written policy or agreement;
  • must form an ongoing part of the employee's compensation package and is payable to all employees in the program; and
  • cannot exceed 20 per cent of the employee's gross basic pay.

Variable pay is not considered pensionable salary for a member who commences in the variable pay program within the last 12 months of employment before termination.

 

 

Vested

You become vested when you have 2 years of LAPP membership. Vesting means you are eligible to receive a pension at retirement, or if you leave the Plan before age 55, you are eligible to receive the commuted value of the pension you have earned.

 

Weighted Average

Weighted average means that some items are given more importance because a larger proportion of household income is typically spent on those items.

 

Withholding Date

The date on which the employer issues a member's pay for a particular pay period. Pension contributions for a particular pay period must be remitted to APS within 15 days of the withholding date.

 

Withholding Year

The year in which the employer withheld contributions that were remitted to the pension plan.

 

Year’s Maximum Pensionable Earnings (YMPE)

The Canada Pension Plan (CPP) sets a maximum amount of earnings on which you can contribute to that plan. This maximum is called the Year's Maximum Pensionable Earnings.