The LAPP Fund holds the Plan assets, which contains what we've committed to pay all LAPP members throughout any future retirement. Out of the fund, we also pay the monthly pensions guaranteed to all current retiree members. The fund is a combination of the contributions that have been paid by employers and employees (members like you) and the investment returns earned on the money in the fund.
The money we owe, often called our liabilities or pension obligation, is the estimated amount of money we need to pay pensions today and 70+ years into the future. The pension obligation is estimated because we have no way of knowing exactly when each member in the Plan will retire, or how long members (or their pension partners) will collect a pension after retiring. LAPP's pension obligation is calculated by using mathematical estimations called actuarial assumptions that predict life expectancies for members and pension partners.
We also have no way of knowing how much money the fund will earn in future investments or how much membership will grow. Moreover, we do not know what salary members will earn over the coming decades or what interest and inflation rates will be.
But what we do know, for sure, is that we have to put money aside today to pay for these pensions tomorrow. That means we need to estimate what all those factors will be so we can set a price today to cover the costs of tomorrow’s pensions.