The ATRF Board has decided to reduce teacher and employer/government contribution rates for the Teachers' Pension Plan (TPP) and the Private School Teachers' Pension Plan (PSTPP). These reductions, to be effective September 1, 2018, reflect the overall improvement of the Plans' funded position following the most recent actuarial valuations.
For the TPP, overall teacher contributions will drop by 0.76% of teachers' salaries, while contributions from the Government of Alberta will drop by 0.66% of teachers' salaries. This results in a total contribution reduction of 1.42%.
For the PSTPP, overall teacher contributions will drop by 0.60% of teachers' salary, while contributions from private schools will drop by 0.50% of teachers' salaries. This results in a total contribution reduction of 1.10%.
Here are the current and new rates as of September 1, 2018:
What will this mean for teachers? For example, a Teachers' Pension Plan member earning $90,000 a year will see their pension contributions decrease by around $600 in 2018-19. Teachers will see the reduction in their pension contributions on their pay following September 1, 2018.
On a path to full funding
One reason the contribution rates will be reduced is the continuing growth of plan assets, and the decrease in plan deficiency (the difference between the actuarial value of the Plans assets and its liabilities). On this front, the TPP is now 90% funded, up from being 74% funded five years ago. The PSTPP is 98% funded, up from 81% funded five years ago. Both plans are on a path to full funding.
As of August 31, 2017, the value of the plans' assets grew to $14.8 billion. This represents tremendous growth: a $10.5 billion increase in assets over the last 10 years.
Alongside this growth, ATRF has also taken steps to reduce risk in the plan. This year, the Board took the prudent step of lowering the discount rate used to value the Plan liabilities, reflecting lower expected inflation, lower expected long-term returns, and additional margin for adverse experience. This more conservative assumption helps further enhance the long-term sustainability of the Plans.
Both plans also follow a practice of smoothing investment income over 5 years to dampen some of the volatility in financial market returns. The strong investment markets over the past 5 years has allowed us to establish very healthy fluctuation reserves that provide a cushion against lower than expected future investment returns. The TPP has a fluctuation reserve of $905 million, while the PSTPP has a reserve of $4.39 million.