Information About the Private School Teachers' Pension Plan

Recent Events in the Financial Markets and the Impact on Your Plan

The global capital markets were under severe pressure in the past fiscal year ended August 31, 2009, primarily due to the fallout of the sub-prime and asset-backed commercial paper markets, and the resulting extreme credit squeeze that impacted all global markets. It was a very disappointing year for investment returns. Not only were the global markets very negative but our returns fell short of our target benchmark.

At the end of the first half of the fiscal year, the fund was down over 28%. The second half of the fiscal year provided some relief to the extreme downturn in the first half of the fiscal year and the Private School Teachers’ Pension Plan fund ended the 2008-09 fiscal year with a negative 12.7% rate of return.

While the fund has suffered short-term losses, investment returns continue to meet long-term return funding objectives to ensure that plan benefits are funded in accordance with the established funding structure. Over the 17-year period from September 1, 1992, to August 31, 2009 the plan has on average earned 6.6% each year, which is very slightly below the plan’s funding rate-of-return objective of 6.7%.

It is important to understand that ATRF takes on diversified and prudent investment risk and that there will be times where investment shortfalls arise. Although investment losses occurred and contribution rates will increase, the pension benefits under the plans are safe.

• Your pension and cost-of-living adjustments are calculated based on legislated formulas and not on the investment performance of the fund.
• Benefits for pensionable service prior to September 1992 under the Teachers’ Pension Plan are guaranteed by the Government of Alberta.
• The funding of benefits for pensionable service after August 1992 under the Teachers’ Pension Plan is structured to make certain that funding contributions are adequate.
• We carefully oversee the investment policies, asset mix and fund managers to maximize risk-controlled, long-term investment returns.
• The funding status of the plan is regularly reviewed and contribution rate adjustments are made as required to ensure that all pension payments will be made.

About Your Plan

The Private School Teachers’ Pension Plan (PSTPP) is a defined benefit pension plan – a plan that provides a pension based on a benefit formula tied to salary and years of service.

The Plan is relatively small with 11 participating employers and about 210 members. Due to surplus assets arising from investment returns being higher than expected, from 1996 to 2005 teachers and employers benefitted from significant contribution reductions. As of August 31, 2009, the Plan had a funding deficiency of $4.641 million that will be funded through additional teacher and employer contributions over the next 15 years.

Contribution Rates Effective September 1, 2010

The funding actuarial valuation of the Private School Teachers’ Pension Plan as at August 31, 2009 showed that:

• The cost of future benefits to be earned by teachers increased slightly from 16.72% to 17.05%. Under the legislated funding structure, this means both the teachers and the employers must contribute 8.24% of salary for the current benefit cost, including the 60% cost-of-living benefit. Teachers contribute a further 0.57% of salary for the additional 10% cost-of-living benefit they are solely responsible for funding.
• Over the past year, a funding deficiency of $4.641 million has arisen due to the decrease in the long-term investment rate of return assumption and the fund’s investment losses. The cost to amortize the deficiency is 3.19% of salary. Both the teachers and the employers must contribute 1.54% of salary, with teachers contributing an additional 0.11% of salary for the portion of the additional 10% cost-of-living benefit that they are solely responsible for funding.

The combined contribution rate requirement by both teachers and employers is 20.24% of all teacher salaries. The required teacher and employer contribution rates effective September 1, 2010 are shown in the following table.