Numerous AUPE members have contacted the union about recent advertisements and statements by a group called the Alberta Society for Pension Reform (ASPR).

The ASPR has filed a statement of claim against the government of Alberta and Local Authorities Pension Plan and Public Service Pension Plan employers. In its statement of claim, the group argues that recipients of the LAPP and PSPP benefits are entitled to larger benefits.

Some AUPE members have wondered why their union is not supporting the society’s lawsuit.

There are two reasons:
1) AUPE believes the lawsuit is without merit and that it will be dismissed. Just because an individual or a group files a legal action does not mean that it has a realistic chance of succeeding. It is the opinion of AUPE that this suit will not be successful and that formally backing it would be a waste of our members’ union dues.

2) To support the lawsuit, AUPE would call into question its membership on the boards of the LAPP and PSPP. AUPE believes the best way to represent its members’ interests and protect their retirements is to play an active role on the boards of the various pension plans and to push for improved plans and benefits.

In its lawsuit, the ASPR argues that LAPP and PSPP members were promised a 2-per-cent plan and that the LAPP and PSPP do not provide a 2-per-cent plan. (A 2-per-cent plan promises a pension of 2 per cent times the number of years of pensionable service, to a maximum of 35 years, times the average of the highest five consecutive years of a full-time employee’s salary.)

However, while the LAPP began in 1962 as a 2-per-cent plan, it was legally changed in 1966 to complement the Canada Pension Plan, which was introduced that year. The LAPP at that time reduced the 2-per-cent rate to 1.4 per cent to allow for the amount of salary covered by the CPP. Likewise, the PSPP, introduced in 1947, was brought in line in 1966 with a similar formula.

The formulas adopted in 1966 were based on 1.4 per cent of salary up to the Year’s Maximum Pensionable Earnings (YMPE) and 2 per cent above the YMPE. At that time, there was also a corresponding drop in the contributions paid by employees.

In the view of AUPE, the changes in the LAPP and the PSPP in 1966 were done legally and properly, with full notice provided to all contributors.

In its advertisements and other materials, the ASPR does not highlight the cost of operating a 2-per-cent plan. Naturally, pension plans must set their contribution rates to match their pension liabilities. LAPP and PSPP contributors, both employers and employees, have not paid for a 2-per-cent plan.

Costs would be much higher with a 2-per-cent plan. For example, the LAPP Actuary has advised contributions to that plan would have to be in excess of 18 per cent, compared with current combined employer and employee contributions of 15 per cent of salary. Moreover, this would be for future costs alone and would not cover the cost of paying a 2-per-cent benefit retroactively.
By way of comparison, employees and employers will pay a combined contribution rate at 28.5 per cent, effective July 1, 2005, under the 2-per-cent Management Employees Pension Plan open to managers who work for the Alberta Government.

LAPP and PSPP set their own contribution rates annually to meet the costs of LAPP and PSPP members as a group. It is the view of the pension plans’ boards that meeting the ASPR’s claim would require the modification of existing plan rules to benefit a particular group of members.

Current and existing LAPP and PSPP members would have to pay significantly higher contributions to pay for that group’s increase in benefits.

Read with care, the ASPR’s complaint is not that the rules of the pension plans are being applied wrongly, but rather that they disagree with what the rules say.

None of this is to say that there are not strong arguments for improving the pensions and benefits of AUPE members and all working people.

AUPE will continue to work hard to improve the retirement benefits of its members and all Albertans.

Backing the ASPR lawsuit, however, would be counterproductive and against the interests of AUPE’s members.

Click here to read answers to frequently asked questions about the ASPR’s arguments.

Click here and follow the appropriate links to read the LAPP’s and Government of Alberta’s positions on the ASPR lawsuit.