+ RMA Rural Municipalities
of Alberta

Resolution ER1-14S

Proposed LAPP Reforms

March 26, 2014
Expiry Date:
March 18, 2014
Active Status:
Sturgeon County
Municipal Governance and Finances
Vote Results:

WHEREAS municipal interests must continue to be represented adequately in any pension plan governance structure; and

WHEREAS pension sustainability is more complex than the available provincial government resource materials outline and beyond the scope of expertise of most member municipalities; and

WHEREAS the basis for plan sustainability needs to be understood. Any pension reforms must be based on valuation and considered analysis in order to make informed decisions; and

WHEREAS increased understanding regarding the true risks facing LAPP and analysis of the outcomes of the proposed pension reform is necessary for municipalities and the Province to make informed decisions; and

WHEREAS independent actuarial evidence should be provided to prove that the proposed reforms will in fact increase plan sustainability and not unduly impact municipalities; and 

WHEREAS the announcement made by the Provincial Government on February 24, 2014 does not appear to recognize the municipal concerns that were brought forward in the feedback provided through the Alberta Association of Municipal Districts and Counties;

Operative Clause:

THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties (AAMDC) hires a consultant to ensure that proper analysis and independent actuarial evidence is sought to support AAMDC members in understanding the current state of LAPP, and the effect of proposed LAPP reforms and to informed advocacy to the province. Also, to ensure that the interests of all municipalities are fully represented AAMDC should work with the Alberta Urban Municipalities Association if possible.

Member Background:

Pension reforms will be a discussion topic at the spring sitting of the Alberta Legislature. Legislative decisions that affect the future of LAPP should be based on careful analysis and understanding of the current state of the pension fund and clarity regarding how the proposed reforms will impact sustainability.

The information communicated or provided to date does not appear to be supported by appropriate analytical data to guide these decisions. LAPP is being considered in aggregate with other Public Sector pensions in these discussions; the state of LAPP must be understood on its own merit.

Most municipalities do not have the required expertise to fully understand the impact of these pension reforms, this knowledge is necessary to make informed decisions and provide relevant feedback.

Municipalities are at a competitive disadvantage relative to the private sector to attract and retain professional employees, LAPP is one of the few motivators that can be used to overcome this disadvantage. Current Alberta Government communications appear to include LAPP as part of other Public Sector pension plans; this affects the public perception of the plans stability.

 LAPP changes will cause employees to question the long term stability of the plan, creating a risk of losing these employees to private sector careers for short term pay benefits. Pension benefits are future oriented, if employees perceive that the stability of the pension is questionable and that the rules can change over time, without satisfactory analysis, the motivation to join or stay in the public sector is lost.

As a result municipalities will face retention and recruitment challenges. To overcome these challenges municipalities’ costs will escalate to provide these services. Either through increasing wages to compete with private sector or to hire consultants with profit and overhead costs embedded in their fees.

A stable pension plan serves the interest of both the municipality as employers and the employees who have chosen service in the public sector. The current financial state of the LAPP must be understood and communicated.  How the proposed LAPP reforms will achieve greater sustainability must be clearly demonstrated and communicated. The sustainability of the LAPP must be measured on its own merit and not in concert with other pension plans.

Independent actuarial evidence and financial analysis should be conducted to understand the current and future financial health of LAPP. The document AAMDC Concerns and Recommendations Regarding Proposed LAPP Reforms articulates these concerns well, however falls short of recommending an action plan to address these. This resolution proposes that AAMDC takes action to address these concerns. LAPP reform affects all municipalities; AAMDC should work together with AUMA to ensure that these interests are represented to the province.

RMA Background:

The AAMDC has no active resolutions directly related to this issue.

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