Issues related to public sector pension plans have been in the news frequently since the UCP government introduced sweeping changes in its October 2019 budget and the subsequent Bill 22 to the governance and management of a number of pension plans, including the Public Sector Pension Plan (PSPP), in which NASA members in pensionable positions are enrolled.
To help explain what the changes could mean for you, we've created the following FAQ to address some of the common questions we've heard from members.
What pension plan are NASA members enrolled in?
NASA members in pensionable positions are enrolled in the Public Service Pension Plan (PSPP).
Where can I find out more about the PSPP?
Is our pension plan reliable? Will I be able to count on it to support my retirement?
Yes! Our pension plan is in very good shape. An important indicator of the health of the plan is that we actually had a reduction in pension premiums in January 2018. We also don’t anticipate any need for increases in premiums in the near future.
One concern that can arise for pension plans is unfunded liabilities. This happens when a pension plan does not have sufficient assets to be able to pay out the pension liabilities when people retire. This is not a problem for the PSPP, which has $13.7 billion under management and is projected to reach fully funded status in 2026. Fully funded status includes a buffer for market fluctuations or changes in actuarial projections.
Where can I find out how much pension I should get when I retire?
The Forms and Resources tab on the PSPP website will give you a couple of options to estimate your pension at retirement:
- You can use the Pension Estimator tool, or
- You can register and sign in to mypensionplan.ca to find out specific information about your contributions and entitlements.
Who makes decisions about running the pension plan?
PSPP (along with two other government plans, the Local Authorities Pension Plan (LAPP) and the Special Forces Pension Plan (SFPP)) moved to a joint governance model in 2019. This meant that employers and unions each appointed half of the people sitting on both the Sponsor Board and the Corporate Board, which oversee the plan.
You can find out more on the PSPP website’s Governance section.
Does NASA have a seat on the PSPP boards?
Yes, NASA appoints one person to the Sponsor Board and one person to the Corporate Board. Each eight-person board has four labour seats and four employer seats.
What has the UCP government changed about the pension governance boards?
Going forward, the nominees to the Corporate Board will have to be approved by the provincial government before they can sit on the board. This is a change NASA does not support, as it takes power away from unions who represent members in the plan when it comes to selecting their own representatives.
I thought they took a seat away from unions, what about that?
That is happening on the Local Authorities Pension Plan (LAPP) but not on the PSPP, so it doesn’t directly impact NASA members. One of the labour seats on each of the LAPP boards will be transferred to a representative for non-unionized workers enrolled in the plan. This might not sound like a big deal, but the reality is that it puts an additional seat under government control, which eliminates the 50/50 balance of representation between the government and unions.
So far, the seats on the PSPP Boards have not changed in regards to the 50/50 balance of union and employer representatives. We don’t know what may happen in the future.
I’ve heard a lot in the news lately about AIMCo. Are we being forced to use them for our pension investments?
The PSPP investments were already being managed by AIMCo, unlike the Alberta Teachers' Retirement Fund (ATRF), which is being forced to change investment management to AIMCo.
Although PSPP’s investments were already being managed by AIMCo, there was a provision in the move to joint governance that the pension boards would gain the flexibility to choose to use other investment managers five years after the governance transition. The UCP government has now removed the option for the plans to ever use any investment managers other than AIMCo.
The same situation applies to Alberta Pension Services (APS). The PSPP was already using APS administration services for the plan, but after five years would have had the option of using other service providers. That option has been removed and PSPP must stay with APS administering the plan.
Is our pension money safe if it is being managed by AIMCo?
While it is preferable for the pension boards to have an option to choose between AIMCo and another investment manager based on what is best for members of the plan, there is no need to panic about AIMCo as an investment manager. AIMCo manages a broad portfolio of billions of dollars with expert staff.
There is, however, concern that the government will interfere in investment decisions based on political considerations. We feel that it is critical for the plan’s health that all investment decisions made by AIMCo remain arm’s length from government, and it is important that the government respects that. If you’re concerned about political interference in your pension plan, we encourage you to contact your MLA to tell them you do not want government interference in AIMCo investment decisions.
I have only been at the university for a little while. What happens to my pension if I lose my job?
If you have less than two years of pensionable service, you are entitled to receive back your pension contributions plus interest. This has not changed. At two years of service your pension “vests,” which changes your entitlements.
Note that pensionable service is only the time you have been paying into the pension plan, not necessarily your total service as a university employee.
What does it mean when a pension “vests”?
When you reach two years of pensionable service you become entitled to a pension (rather than just getting your own money plus interest back). This is called vesting.
So what happens if my pension has vested and I lose my job?
Once your pension has vested, you are entitled to a pension benefit. This is a complex calculation that takes into account how many years of pensionable service you have and your salary in your five best years of service.
You can get an estimate of your pension amount by using the calculators on the PSPP website, but the final calculation is done when you actually retire.
If you lose your job, you have two options:
- Take a deferred pension. This means you keep your money in the plan and when you retire, you collect your pension. The PSPP is a defined benefit plan, so once your entitlement is calculated you keep receiving that pension until you die, and you can choose a pension option that would also cover your spouse after your death. Cost-of-living increases are also built in. If you get another job that is also on the PSPP, you can just pick up where you left off accumulating pensionable service.
- Take a commuted value (CV) of your pension transferred into a Locked-In Retirement Account (LIRA). This means you are on your own, and the plan has no further obligations to you.
What is a commuted value (CV)?
A CV does a complex calculation that involves considerations such as life expectancy to figure out what your pension would be worth if you collected it from the plan, and additional calculations to figure out how much you would need today in order to have that same value.
*** Important Note ***
The UCP government has legislated a change to how CV is calculated by government pension plans. This change goes into effect on April 1, 2020. This change was a long-standing recommendation of the previous pension boards and uses a measure that many people consider fairer to do the calculation. For those staying in the plan—either continuing in employment or taking a deferred pension—this is a positive step for the plan’s stability. However, if you might be planning to take a CV, your lump sum will be less after April 1, 2020 than it is now.
When looking at options for your pension it is important to get financial advice from someone who will not benefit from any particular choice. Be aware of potential conflicts of interest for banks or investment advisors who would make money off investing a lump sum from a commuted value LIRA.
Did the UCP government make any other financial changes?
Yes, the UCP government legislated a change to something called the 50% rule (also called the excess contributions rule). If you have a vested pension there was a rule in the pension plan that said you should not have had to pay more than 50% of the cost of that pension entitlement. For people with a lot of years in the plan this usually made no difference for them. For people who are vested but with fewer years in the plan they might have been entitled to some extra money back from the plan either when they retire and collect their pension or if they took a CV lump sum into a LIRA.
The new rule is a 100% rule, which means you are only entitled to some extra money back if the calculation finds your contributions plus interest are more than 100% of the value of your pension. This is very unlikely for almost everybody.
This change also takes effect on April 1, 2020. If it might impact your decisions, you should seek independent financial advice.
Please note: Pensions are complex. We have tried in this FAQ to answer the most common questions we have received from members, and communicated changes we think you should know about. You may well have other questions or want to know more about your specific circumstances. We encourage you to register at mypensionplan.ca for information on your personal entitlements.
You can also talk to someone from Alberta Pension Services one-on-one by scheduling a session on the PSPP website.