Pensions are an important benefit offered by LAPP employers as part of overall employee compensation. It has always been important to members, who pay every month towards their future retirement, that LAPP is well governed, now and into the future. In this section you will find a summary of LAPP’s governance before and after the Plan’s March 1, 2019 transition to joint governance.
From 1962 to March 1, 2019 when LAPP’s transition to a new governance structure became effective, the primary oversight function of the Plan belonged to the President of Treasury Board and Minister of Finance, an elected official of the Alberta Government. This person was also the trustee and administrator of LAPP and responsible for the LAPP fund in excess of $45-billion. LAPP members and employers, who have always paid contributions into the Plan, did not have a final say in how the Plan was managed.
Within the pre-reform governance model of the Plan, the LAPP Boards and the executive team at Alberta Local Authorities Pension Plan Corp. (ALAPP Corp.) successfully managed the delegated operations of the Plan and showed a commitment to providing a secure retirement for Plan members at a reasonable cost.
This was all done despite the governance of LAPP often lacking clarity in the authorities and accountabilities of the parties charged with properly managing the Plan.
LAPP members and employers held all the risks associated with funding LAPP, a defined benefit plan, including the risk of investment losses that may have necessitated changes to contribution rates and/or benefits, and the Minister still held the final determination on any changes to LAPP. This meant pension benefits and ultimate control of the Plan still rested with government and was subject to the politics of the day.
By the 2000s, most Canadian public sector plans had already received independence from government and successfully moved into a joint governance arrangement. For many years, LAPP stakeholders told government they wanted more say in how their pension plan was managed. Though some reform attempts were initiated by LAPP and some by government, no mutually-satisfactory agreement on change was ever reached.
In late 2018, Bill 27, the Joint Governance of Public Sector Pension Plans Act, was passed into law by the Alberta Legislature. Bill 27 transitioned LAPP to joint governance effective March 1, 2019.
The new joint governance framework eliminates key risks to the Plan, clarifies roles and responsibilities, and most notably, gives Plan sponsors (the members and employers who pay for the Plan) a direct role in decision-making. Equal say given to those who pay for the Plan is evidenced in the new governance framework.
The Sponsor Board, responsible for decisions about Plan benefits and setting contribution rates, is appointed by the Plan sponsors. LAPP Corporation, which includes a Corporate Board that is also appointed by Plan sponsors, is now the administrator and trustee of LAPP. This role formerly belonged to the various ministers of finance in government over the years.
LAPP continues, with no changes to benefits or how the Plan is funded. Only the governance has changed as a result of the transition. Retired member benefits have and will not be impacted in any way, and the Sponsor Board is required to consider the interests of retired Plan members before making decisions.
In the page titled Joint Governance: A Best Practice, we explore the benefits of joint governance and why it is regarded as best practice.