UNA members should be aware of time limits on LAPP pension buybacks

By Carolyn Olson and Richard West
UNA Pension Advisors

The Local Authorities Pension Plan, which provides retirement savings for a majority of UNA members, has three options for the purchase of pensionable coverage for time missed while on a leave of absence or when the member was eligible to participate in LAPP but for any reason didn’t enroll. 

The kinds of leaves that are eligible for pension buy-backs include include unpaid sick leave, education leave, maternity leave and time on spent on Short-Term or Long-Term Disability.

This is important because of the great value of having more years of pensionable service, something many members do not realize until it is too late. Many members deeply regret not realizing there is limited time available to buy back time missed at a preferential rate. 

To avoid the disappointment of realizing too late that you could have had more generous retirement benefits, UNA’s pension advisors prepared this guide to purchasing pensionable service and the time limits for doing so. 

Options for purchase of pensionable service

LAPP has three types of past service purchase options, commonly known as buy backs:

1. Purchase of Service for the time on Leave of Absence (LOA) for the first pensionable year

During a person's career, LAPP offers a time-limited option to purchase the first pensionable year of service for time on LOA on a contribution-rate basis. 

This option to purchase is offered in June/July of the year following the year in which an LOA ends. A member can also request to purchase time on LOA by December 31 of the calendar year after the leave ended, whichever comes first. For an LOA that spans more than one calendar year, the service from the prior year can be available in a subsequent year if the LOA was continuous.

LAPP prorates service for part-time employees, so a .5 FTE employee could purchase two calendar years, which would be equal to one year of pensionable service.

Purchasing the first pensionable year of LOA is normally good value because the employer is required to pay their share of the contributions if the employee pays their share.

2. Purchase of service for time on Leave of Absence for the second year up to and including the fifth year of pensionable service, plus 3 years of maternity/parental leave.

This is offered in same manner as the first year of service option, with a time-limited notice in June/July from LAPP to the member.

The difference is once the first year of pensionable service has been purchased (in a person's career) the subsequent years being purchased require the employee to pay both the employee and the employer portions of the pension contributions.

3. Actuarial purchase of pension service 

Actuarial Reserve costings are based on today’s value of the pensionable service being purchased, plus a “reserve” to ensure that the plan does not subsidize these purchases. The costing uses age, current salary and pensionable service of a member to project the cost of the future pension being purchased.

The Employer pays no portion of this purchase. 

This is available for the purchase of pensionable service:

• On LOA which missed the deadline for a contribution-based purchase,
• Other periods of time when an employee was eligible to participate in LAPP but did not; and 
• Purchase of the LAPP pension probationary year (practice ended in 2012).

LAPP has no limit on the amount of service which can be purchased on this basis. 

LAPP/ Employer Communication on Buybacks

Both LAPP and employers refer members to the Buyback Estimator on lapp.ca.

This provides the costing based on Actuarial Reserve calculations which often results in much higher costs than a Contribution Based purchase of pensionable service. 

Contact Carolyn Olson at colson@una.ca or, Richard West at rwest@una.ca for greater detail or clarification.