APEX/APEX Plus Update LGAA Convention – Red Deer

1. APEX/APEX Plus Update LGAA Convention – Red Deer Presented by: Rainer Semler, Director, Benefits Services, AMSC Insurance Services Ltd.

2. The Federal Income Tax Act is discriminatory against senior management and professional employees. TWO PRIMARY CONCERNS – WHY APEX/APEX PLUS? • LAPP is a good base pension plan but more competitive plans exist for senior management and professional employees. • It is capped by the Federal Income Tax Act and has not moved with the times

3. COMPETITIVE DISADVANTAGE LAPP- local authorities pension plan SFPP- special forces pension plan UAPP-university academics pension plan MEPP-management employees pension plan OMERS-Ontario municipal employees pension plan PSSA-public sector superannuation act

4. APEX and APEX Plus – Part of An Overall Strategy • APEX and APEX Plus can be included as a part of an overall strategic compensation plan used to attract and retain qualified employees-present and future; • Total Compensation can include wages, benefits, pensions, vacation, etc.;

5. APEX and APEX Plus – Part of An Overall Strategy • Canada’s Retirement System built upon ‘3 Pillars’: • Government based programs such as Old Age Security (OAS) and the Canada Pension Plan (CPP); • Employer based programs such as Local Authorities Pension Plan LAPP and APEX; • Employee based programs such as Registered Retirement Saving Plans (RRSPs) and Personal Savings/Assets; • Overall target/goal to provide 70% Income Replacement upon retirement

6. Overview of APEX

7. WHAT IS APEX? • APEX is a Registered Supplementary ‘Defined Benefit Pension Plan’ to Enhance and Improve Upon the ‘Base’ LAPP Plan for earnings up to $105,556 in 2006; • Registered as Pension Plan with Canada Revenue Agency and Province of Alberta; • Requires LAPP Participation; • Requires Employee and Employer Contributions in similar proportions as applicable for LAPP;

8. WHAT IS APEX? • For contributory earnings on a prospective ‘go forward basis’ only from January 1, 2006; • Voluntary Participation; • Impacts ‘PA’ Value and RRSP Contributions going forward;

9. Investment Mix for the APEX Plan APEX 1 year rate of return to January 31, 2006 = 11.69%

10. The Benefits of the APEX Supplementary Pension Plan • For ‘go forward’ contributory service • Including the Local Authorities Pension Plan (LAPP), the APEX Supplementary Pension Plan will provide for: • Full 2% of the Member’s best five years’ consecutive earnings • 2/3 pension to surviving PENSION PARTNER on member’s death only • Participation builds pension value over time • Pension is capped at the CRA maximum annual pension accrual of $2,111.11 ($105,556 at 2006 CRA Maximum)

11. The APEX Supplementary Pension PlanPension Benefit Calculation - Pensionable Salary of $75,000

12. The APEX Supplementary Pension Plan Vesting Provisions • Vested and terminated, may either: • choose a deferred pension to commence between ages 55 and 69 • transfer pension commuted value to a Locked-In Retirement Account (LIRA) • transfer pension commuted value to another pension plan with formal consent of the transferee • defer decision until a future date • Transfer pensionable service with another employer, dependent on that employer and classification of employees being eligible to participate in APEX • Monthly pension benefits (if option chosen) paid from APEX Fund to Pensioner with annual indexing (60% of Consumer’s Price Index)

13. The APEX Supplementary Pension Plan Non-Vested Provisions • Non-Vested and terminated and before two (2) years’ APEX participation, may either: • leave contributions on deposit upon which interest will continue to be credited • receive contributions plus interest as a lump sum cash refund (less tax withheld at source) • transfer contributions plus interest to Registered Retirement Savings Plan (RRSP) • Only employee contributions are eligible for refund/transfer as outlined; • Employer contributions remain in APEX Fund and are not eligible for refund/transfer

14. The APEX Supplementary Pension Plan Contributions: • APEX Member Contributions for 2006, (pensionable earnings up to $105,556): • 2.5% for Employee = $2,638.90 (45% of cost) • 3.0% for Employer = $3,166.68 (55% of cost) • Combined APEX and LAPP Contributions are comparable to other pension plans such as the Management Employees Pension Plan (MEPP)

15. APEX Plan Current Status: • Net Assets as of February 2006 = $2.7 million; • 415 Employees Registered in APEX; • 30 Municipalities Participating in APEX Including: • Regional Municipality of Wood Buffalo • City of Red Deer • City of Lethbridge • City of St. Albert • City of Spruce Grove • City of Camrose • Town of Stony Plain • Sturgeon County • Red Deer County • County of Athabasca • Lacombe County

16. APEX Plus Overview

17. WHAT IS APEX Plus? • APEX Plus is a Non-Registered Supplementary ‘Over-CAP Retirement Plan’ (SERP - Plan) to Extend LAPP and APEX Pension Benefit Levels beyond the Canada Revenue Agency (CRA) Maximum; • APEX Plus applicable if the final average 5 years of salary greater than CRA maximums* depending on the year of calculation as follows: • $86,111 for 2003 • $91,667 for 2004 • $100,000 for 2005 • $105,556 for 2006 • $111,111 for 2007 • $116,667 for 2008 • $122,222 for 2009 • *Based on current values for CRA Maximums and subject to change

18. WHAT IS APEX Plus? • Involves only Employer Contributions; • Contribution rates based on Actuarial Calculations for each affected employee; • Voluntary Participation; • Has ‘retroactive’ capability as far back as January 1992 due to regulatory maximums in place as of that date

19. DISCRIMINATORY TAX TREATMENT WITHOUT APEX PLUS FOR SENIOR MANAGEMENT POSITIONS 100% Replacement Ratio for a 2% Plan After 35 Years of Service 90% Point of diminished pension 80% 70% Replacement Ratio 60% 50% 40% 30% $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 $180,000 $200,000 Final Average Earnings

20. APEX Plus Process: • APEX Plus requires funding calculations determined by actuary for liability costs for each employee • APEX Plus Initial Fee = $580.00, plus $25.00 Specified Employee • Initial actuarial cost is determined by actuary for each employee eligible for APEX Plus based on individual factors such as: • Salary; • Estimated Retirement Date; • Date of Birth; • Pension Partner Date of Birth • LAPP/APEX Pension Participation Information

21. APEX Plus Process: • Actuarial cost for eligible employee(s) is transferred from participating employer to AMSC and then to ‘earmarked asset account’; • Annual re-calculation of actuarial costs for each employee; • Final calculations upon retirement or when terminating for employees (at least 2 years of participation in APEX Plus)

22. APEX Plus Process: • Upon retirement/termination subject to final calculations for eligible employee, funds from ‘earmarked asset account’ are transferred from ‘earmarked asset account’ to AMSC to participating employer; • Participating arranges for settlement with eligible employee

23. Your Questions & Discussion Thank you!