Minutes & Reports
News for Pension Committee
Minutes - Pension Committee
AT EDMONTON HEADQUARTERS (GRANDE PRAIRIE ROOM)
Attendance:
Bill Dechant – Secretary Treasurer
Larry Murray – Union Representative –Pensions (LAPP Board)
Terry Agoto – Union Representative, Disputes and Arbitration (PSP Board)
Fred Demers – Local 050
Paula Elliott – Local 04
Lori Lane-Kluthe – Local 118
Joe Michielsen – Local 004
Nyree Tasco – Local 054
Marcella Thomas – Local 057
Andy McDonald – Local 004
Suzanne Williams – Local 001
Meeting was called to order at 9:30 a.m. with introductions.
Bill explained that Milo Steele had resigned from the Standing Committee and the PSPP board as he had accepted a management position. Appointments to either the LAPP or the PSPP Boards must be either AUPE Members or AUPE Staff. Andy McDonald (a previous committee member) has been requested to return to the Pension Standing Committee and allow his name to be put forward to represent AUPE at the PSP Board. If Andy is approved the three AUPE members on the PSP Board will be Joe Michielsen, Terry Agoto and Andy McDonald. The Chair of the PSP Board is currently the Employer for this next two year period.
Suzanne was requested to continue being the Recording Secretary and agreed.
ADOPTION OF AGENDA
(1) MOTION: To adopt the Agenda. Properly moved and seconded. CARRIEDNEW BUSINESS
(3) MOTION: Properly moved and seconded. CARRIEDPension Committee Mandate – Larry reviewed the mandate for the Pension Committee as set out in the Constitution. He advised that Terry Agoto and he do not have a “vote” on this Committee.
Governance
LAPP (Local Authorities Pension Plan) and PSPP (Public Service Pension Plan) have a single Trustee, the Minister of Finance of the Province of Alberta. The Minister of Finance is also the sole shareholder of AIMCo (the investor of the funds) and APS (Alberta Pension Services) the administrator of the plans. The legislation that set up LAPP and PSPP mandates the services of AIMCo and APS. AIMCo and APS are only accountable to the Minister of Finance not to either of the Boards. The LAPP Board and PSPP Board play no oversight role. The Boards can recommend changes to the plan rules but these changes must also be approved by the Minister of Finance. Likewise, the Minister of Finance requires Board approval to alter plan rules. The Minister of Finance sets the cost sharing for the Boards and the two plans based on APS recommendations.
Neither APS nor AIMCo can be fired.
When members call APS for information they are answered with the face of the particular plan; however, the real face of the two plans is the Government of Alberta as represented by the Minister of Finance.
AIMCo – the investors are given benchmarks to be met but while the Board of Governors sets investment policy guidelines has no direct control over the investments. The last four years AIMCo has not met their benchmarks and have provided a negative increase to the funds.
APS is a crown corporation and is currently going through an upgrade of their systems. Their Chief Executive Office has quit. APS has other staffing issues that are impacting their service levels. Their current organization is top heavy.
As a side note – APS also administers the Special Forces Pension Plan and the Management Employees Pension Plans.
PSPP is a defined benefit plan whose benefits are paid out on the best 60 consecutive months of pensionable earnings. Their web address is www.pspp.ca. This plan is under duress as a result of the ageing of the membership and the poor performance of investments domestically and globally. The fund return is a net loss for the period 2002 through 2011. Contributions represent approximately 20% of the income to the plan. Investments must account for 80% of the expected growth. Unfunded liabilities are amortized over a period not exceeding 15 years. Currently there are unfunded liabilities being paid off through December 2025. Future unfunded liabilities, if any, will require additional contributions amortized over a period not exceeding 15 years.
LAPP is similar to PSPP with a web address of www.lapp.ca. Since 2010 the contributions to LAPP have been approximately 50% of their contributions and has unfunded liability contributions already scheduled through December 2022.
Sustainability
There are many issues on sustainability as projections are difficult and never correct. However, what is obvious is that we are going to have to make changes to these plans or the contribution rates will become unmanageable for the employees. Both plan design and “Governance” must be reviewed with the intent of insuring the sustainability of the plans. We anticipate more discussions on this throughout 2012.
Other
- APS supplies the staff support to both the PSPP and LAPP boards. AUPE had been having difficulty obtaining the PSP Board minutes from APS and finally submitted a FOIP request. The minutes are now being forwarded to AUPE.
- The 2% pension plan was discussed but with the current financial situation with the underfunded liability this isn’t affordable.
- Each employee should track their best 60 months of pensionable income especially if working part time. This could make an impact on your pension.
- Ontario Teachers last year cut their COLA from 100% to 50% as the 100% COLA was not sustainable.
- With our pension plans deferred members get COLA (these are members that left employment but left their pension funds in the plans). This is unusual and an oddity not seen in private sector plans.
- When bargaining unit employees move to management positions the manager’s salary rate is used for the PSPP payouts – which negatively affects the plan. The PSPP calculations are based on the average pensionable salary for 60 consecutive months which usually doesn’t max out at more than $60,000. When the calculations are done for someone that has moved to a management position these calculations are based on salaries in the vicinity of $90,000 – but the member stops contributing to the PSPP when they are promoted.
- It is important for all employees to know who they have named as their pension partner. If they are married it is automatically the spouse. However, to have the spouse removed as a pension partner requires that it be spelled out in the divorce decree. There are also pension partner rules for other forms of co-habitation.
- Plan funding is a multi-generational issue; the plans are sustainable and need to be well managed. These plans are 50 years old and the terms of the plans have not been reviewed for at least 30 years. Career lengths and life spans are now very much different from when the plans were started. They weren’t designed for a 30 year payout cycle. The administration costs of these plans are low.
- False retirements are negatively affecting the plans.
- PSPP and LAPP have approximately $26 billion in assets; however, when the markets are not performing well members are the ones that pay the differences.
- The distribution of the administration costs is set by the Minister of Finance and LAPP and PSPP are paying more of the costs than do the MEPP and Special Forces Plans.
- PSPP is currently approximately $4 billion underfunded.
- Europe’s plans were often set up as a pay as you go system, provided benefits well beyond what could possibly be sustained – they were poorly funded and too rich and that is why they have required extreme cut back on the promised benefits.
Motion:
That AUPE (Larry Murray and Terry Agoto) will contact and set up a meeting with the ATA as soon as possible to obtain more information regarding their January 9, 2012 letter to Bill Dechant “Pension Envy—An Attack on Defined Benefit Plans. They are to report back to the AUPE Pension Standing Committee with the options. If necessary, a special meeting will be called. This was Moved/Seconded/Carried.
Post Retirement Health Plans – A post retirement health plan arrangement was set up so that retired government employees could join the ATA plan. AUPE is working with ATA officials to expand this to all AUPE members
Quorum – was discussed and it was requested that each committee member promptly respond after receiving an e-mail. It is not to be assumed that you have received the e-mail and are in agreement. There have been difficulties in the past with the lack of reply to e-mails. Members are also to contact Larry Murray should they not be able to attend a Committee Meeting after indicating that they will be in attendance. Some of the Committee members drive a long distance and it is not fair to have them drive and then not be able to make quorum at the meeting because of “no shows”.
Meeting Dates:
Pension Committee Meeting dates have been set as (all will be at Headquarters): Other special meetings may be called.
Monday, April 30th – 9:00 a.m. Monday, July 30th – 9:00 a.m. Wednesday, September 19th – 9:00 a.m. Monday, December 3rd – 9:00 a.m.Committee members are to acknowledge receipt of the meeting notice as soon as they receive it. It is expected that members will make every effort to attend.
Action Items for AUPE Staff to e-mail to committee members:
- Provide a list of the pension training available. It is necessary for younger members to become involved and take training. Pension specific education is beneficial when dealing with pensions.
- Provide a list of the acronyms
- Provide a list of contacts
Motion to adjourn was at 12:00 p.m.
AUPE reminds retiring Government employees about applying for retirement health benefits
EDMONTON – AUPE wants to remind Government of Alberta employees who are approaching retirement or have recently retired that they can take advantage of the Alberta Public Service Retiree Health and Wellness Benefits Program.
AUPE Standing Committees Orientation
AUPE Standing Committees members received an orientation and held their first meetings Dec. 2 in Edmonton.
AUPE seeks volunteers for standing committees
EDMONTON – AUPE is seeking volunteers from among the union’s members to serve on standing committees.
AUPE has 13 permanent committees established by the union’s constitution to advise the Provincial Executive on matters of concern to AUPE members.
Public Service Pension Plan contribution rates to increase in 2010
EDMONTON – The Public Service Pension Plan Board has made the decision, based on the recommendation of their actuary, to increase contribution rates for members and employers in an effort to handle increased liabilities and offset investment losses that occurred in worldwide markets last year.