1 Conestoga College College Presentation November 17, 2005.
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Transcript of 1 Conestoga College College Presentation November 17, 2005.
1
Conestoga College
College Presentation
November 17, 2005
2
Agenda
The CAAT Pension Plan CPP and OAS Definitions Data Collection Normal Retirement Pension Early and Deferred Retirement Pension Pension Payments Survivor Benefits
3
The CAAT Pension Plan
Multi-employer Pension Plan Defined benefit plan-pension based on the
Plan formula Established June 1, 1967 January 1, 1995 Jointly sponsored Administered by OMERS to Dec. 31, 1995 January 1, 1998 major amendments Plan funding
4
CAAT Pension Formula
1.3% x HAPE up to AYMPE x Pensionable Service
plus
2.0% x HAPE above AYMPE x Pensionable Service
2005 AYMPE = $39,780
5
CPP
You and your employer each contribute 4.95% YMPE is changed annually based on the increase
in Average Industrial Wage For 2005 YMPE is $41,100 YBE is $3,500 Contributions to CPP= 4.95% x earnings between
YBE and YMPE
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Do not contribute to CPP on this amount of Salary
$41,100
& Above
No CPPBenefit
Contribute on earnings in this Salary Band
$41,099
$3,501
CPP Benefit calculated on this amount of Salary
Do not contribute to CPP on this amount of Salary
$3,500 and Below
CPP Benefit calculated on this amount of salary
7
CPP
Your CPP pension based on your work history and earnings, maximum CPP benefit for 2005 is $9,945.00
The CAAT Plan takes CPP into consideration for pension contributions and benefit calculation
8
CPP
Paid in full at age 65, Roughly equal to 25% of APE up to 25% of
AYMPE Paid on a reduced basis from age 60 (6% per
year) 15% dropout roughly equals 7 years over a full
career of 47 years (per CPP definition) (age 18 to age 65)
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OAS 2005
No employee or employer contributions Paid from age 65 Benefit is $471.76 per month Subject to clawback
Starts at income of $60,806 In full at income of $98,547
OAS benefit is reduced by $.15 for each dollar of income over $60,806
10
Definitions
Highest Average Pensionable Earnings (HAPE): sum of your earnings during the 60 consecutive months of Pensionable Service during which earnings were highest, divided by 5.
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Highest Average Pensionable Earnings
Example calculation:Year Earnings Pensionable
Service2005 $34,000 6 months2004 $65,000 12 months2003 $63,000 12 months2002 $62,000 12 months2001 $60,000 12 months2000 $30,000 6 monthsTotals $314,000 60 months
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Highest Average Pensionable Earnings
Example calculation:
Highest Average Pensionable Earnings = $314,000/5 = $62,800
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Definitions
Average YMPE(AYMPE): average of the Year’s Maximum Pensionable Earnings for the year of retirement and the 4 preceding years
14
Average YMPE for 2005
Year YMPE 2005 $41,100
2004 $40,5002003 $39,9002002 $39,1002001 $38,300Total $198,900
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Average YMPE for 2005
Calculation:
Average YMPE for the year 2005 =
$198,900/5 = $39,780
16
Definitions
Bridge Benefit: an extra pension payable from the CAAT Pension Plan from early retirement date to age 65.
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Bridge Benefit
1. Retire before age 65: a) Retirement to age 65
Lifetime pension + Bridge Benefit b) From age 65 onwards:
Lifetime pension2. Retire at age 65:
Lifetime pension3. Bridge Benefit formula:
0.7% x HAPE up to AYMPE x PensionableService
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Bridge Benefit-Example
Member retires at age 60, HAPE =$68,000.00
Pension calculated:
$39,780 x 1.3% x 35 years= $18,099.90
$28,220 x 2% x 35 years= $19,754.00
Lifetime benefit= $37,853.90
Bridge ($39,780 x .7% x 35)= $ 9,746.10
Benefit to age 65 $47,600.00
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Bridge Benefit-Example
Benefit to age 65 $47,600.00
At age 65 bridge drops off -$ 9,746.10
Lifetime benefit $37,853.90
Plus CPP (assumes maximum)$ 9,945.00
Total $47,798.90
20
Definitions
Commuted Value: what a member’s deferred pension is worth today in a lump sum
Pensionable Earnings: earnings on which you pay pension contributions
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Definitions
Pensionable Service(PS): service that is used in calculating a pension benefit, earned, purchased or transferred
Eligible Spouse: married and living together at time of retirement/death or living in a common law relationship at the time of retirement/death - covers same and opposite sex
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Definitions
Excess Contributions: Member’s Contributions plus interest that exceeds 50% of their Commuted Value.
Normal Retirement Date: last day of the month in which you turn 65
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Data Collection
Enrolment Annual data from college (DCT) Service purchase or transfer Member’s Annual Statement Change forms (marital status, beneficiary.) Termination/Retirement Form Option Document
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Normal Retirement Pension
At age 65 Payable for life Payable monthly on the first business day Formula recognizes part of retirement income
comes from Canada Pension Plan (CPP) Incorporates Highest Average Pensionable
Earnings and Pensionable Service
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Normal Retirement Pension
Pension Formula (Lifetime Pension):
1.3% x Highest Average Pensionable Earnings up to the Average YMPE x Pensionable Service
plus
2.0% x Highest Average Pensionable Earnings over the Average YMPE x Pensionable Service
26
Normal Retirement PensionExample
Member enrolled February 1, 1980 Retired January 31, 2005 Pensionable Service (PS) = 25 years AYMPE = $39,780 Highest Average Pensionable Earnings =
$40,000 Highest Average Pensionable Earnings in
excess of AYMPE = $220 ($40,000-$39,780)
27
Normal Retirement PensionExample
Calculation:
1.3% x $39,780 x 25 years= $12,928.50
plus
2.0% x $220* x 25 years = $ 110.00
Annual pension from 65
for life $13,038.50
* $40,000-$39,780 = $220
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Normal Retirement PensionExample Total annual retirement income:
CAAT Plan as above $13,038.50
Canada Pension Plan(CPP) $ 9,945.00
Old Age Security(OAS) $ 5,661.12
Total retirement income $28,644.62
Note: assumes entitlement to maximum benefit for CPP and OAS
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Early Unreduced Retirement Pension
Conditions 85 Factor: sum of age plus Pensionable
Service equals 85 or 60/20 Rule: must be age 60 or more and
have 20 years of Pensionable Service
30
Early Unreduced Retirement Pension(Example 60/20 Rule)
Member retires in 2005 Age at retirement = 60 Pensionable Service at retirement = 20 Highest Average Pensionable Earnings =
$45,000 AYMPE in 2005 = $39,780 Highest Average Pensionable Earnings in excess
of AYMPE = $5,220 ($45,000-$39,780)
31
Early Unreduced Retirement Pension
(Example 60/20 Rule)
Pension Calculation:
Annual Pension paid from age 60 for life:
1.3% x $39,780 x 20yrs PS = $ 10,342.80
plus:
2% x $5,220* x 20yrs PS = $ 2,088.00
Annual pension paid from
age 60 for life: $ 12,430.80
* $45,000-$39,080 = $5,220
32
Early Unreduced Retirement Pension
(Example 60/20 Rule)
Annual pension paid up to age 65Annual pension paid fromage 60 for life: $12,430.80 Bridge Benefit paid to 650.7% x $39,780 x 20yrs PS= $ 5,569.20Annual pension to age 65 = $18,000.00Note: Individual may be entitled to CPP of as
much as $9,945.00 and OAS of $5,661.12 at age 65.
33
Early Reduced Pension
Member can choose to retire on an immediate early reduced pension on or after reaching the earlier of:
1) age 55 with at least 2 years of PS or Plan membership, or
2) age 50 to 54 with at least 20 years of PS If Member does not qualify for unreduced
pension then a reduction is applied
34
Early Reduced Pension
Reduction is permanent and is calculated as 3% multiplied by the number of years and part years retiring before the earliest point that Member would qualify for an unreduced pension: 85 Factor or 60/20 Rule or age 65
35
Early Reduced Pension
Member retires in 2005 Age at retirement = 53 Pensionable Service at retirement = 20 yrs Highest Average Pensionable Earnings =
$65,000 AYMPE in 2005 = $39,780 Highest Average Pensionable Earnings in
excess of AYMPE = $25,220 ($65,000-$39,780)
36
Early Reduced Pension
Member’s age plus service (53+20) = 73 Does not qualify for 85 Factor or 60/20 Rule Reduction Factor is lowest of:
age 65: 65-53 = 12yrs x 3% = 36% redn.
60/20 Rule: 60-53 = 7yrs x 3% = 21% redn.
85 Factor: (85-73)/2 = 6yrs x 3% = 18% redn.
37
Early Reduced Pension
Calculation:
1.3% x $39,780 x 20yrs PS = $10,342.80
plus
2.0% x $25,220* x 20yrs PS = $10,088.00
Total $20,430.80
Early Retirement Reduction (18%) $ -3,677.54
Annual pension from age 53 $16,753.26
* $65,000 - $39,780 = $25,220
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Early Reduced Pension
Annual pension from age 53 $16,753.26
plus Bridge Benefit to age 65
0.7% x $39,780 x 20yrs PS = $ 5,569.20
Early Retirement Reduction 18% = $-1,002.46
Bridge Benefit paid to age 65 = $ 4,566.74
Annual pension paid to age 65 = $21,320.00
Note: Individual may be entitled to CPP of as much as $9,945.00 and OAS of $5,661.12 at age 65.
39
Deferred Pension
Entitled if you have at least two years of Pensionable Service
Payable at age 65 Payable on reduced basis on or after age 55 Reduction is 5% for each full year, prorated
for each part year before age 65
40
Deferred Pension(Example)
Member terminates in 2005 Age at termination = 47 Requests pension at age 60 Pensionable Service at termination = 8 yrs. Highest Average Pensionable Earnings = $37,000 AYMPE in 2005 = $39,780 Early Retirement Reduction at age 60 = 25%
(5% x (65-60))
41
Deferred Pension(Example)
Pension payable from 60:
1.3% x $37,000 x 8yrs. PS = $3,848.00
Early Retirement Reduction (25%) $ -962.00
Annual pension from age 60 for life = $2,886.00
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Deferred Pension(Example)
Annual pension from age 60 for life = $2,886.00
plus Bridge Benefit to age 65:
0.7% x $37,000 x 8yrs. PS = $2,072.00
Early Retirement Reduction(25%) = $ -518.00
Bridge Benefit to age 65 = $1,554.00
Annual pension to age 65 = $4,440.00
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CRA Maximums
Maximum Lifetime Annual Pension:
lesser of: $2,000.00 x yrs of PS and 2% x yrs of PS x HAPE over 3 years
Maximum Transfer Value:
Limits on maximum amount of Commuted Value transferable to Locked-In RRSP
44
Canada Revenue Agency (CRA)
No maximum on service ( was limited to 35 years prior to 1992)
No maximum on your earnings used in pension calculation
CRA limits Maximum Pension Benefit Payable
Impacts: Those earning more than $114,385
Remedy: Pensions for earnings in excess of $114,385 provided from Retirement Compensation Arrangement (RCA)
45
Canada Revenue Agency (CRA)
CRA limits Maximum Commuted Value that can be transferred to a LIRA or Locked-in RRSP
Impacts: Primarily employees terminating from age 50-54 with 20 years of Pensionable Service
Remedy: 1) Excess paid to you as taxable income in cash in a lump sum,
or
2)Excess paid to you as taxable income as a monthly pension until excess is used up.
46
Pension Payments
Paid by direct deposit in equal monthly installments on 1st business day each month
Payments are made in Canadian funds To residents outside Canada cheques in
Canadian funds are mailed.
47
Pension Indexing
Pension may be indexed each January: Up to 2014 inflation protection = 75% of
Consumer Price Index increase to maximum annual increase of 8%
Indexation after 2014 for pension earned prior to December 31, 1991 depends on sufficient Plan surplus being available
48
Survivor Benefits Pre-Retirement
Eligibility Hierarchy:
1. Eligible Spouse (see definition)
2. Eligible children under 18
3. Designated beneficiary/Estate
Entitlement may be altered through a separation agreement
49
Spousal Options Pre-retirement
Member’s accrued pension at time of death
= $2,000/month Converted to Commuted Value of $300,000 Surviving Spouse options:
a) Take Commuted Value of $300,000
b) Immediate pension of $1,500/month (based on Spouse’s age)
c) Pension at age 65 of $1,800/month
50
Eligible Children’s BenefitPre-Retirement
Covers children under 18 Payable where there is no eligible spouse 50% of Pensioner’s lifetime benefit divided
among all dependent children under 18 As each child reaches 18, re-divided among
remaining children under 18 Commuted value of benefit less commuted
value of children’s benefit paid to beneficiary or estate
51
Survivor Benefits Post-Retirement
Eligibility Hierarchy:
1) Eligible Spouse (see definition)
2) Eligible children under 18
3) Beneficiary/Estate (Balance of 60 month guarantee)
Entitlement may be altered through a separation agreement
52
Spousal Pension Post-Retirement
60% of Pensioner’s lifetime pension optional 75% if elected at Member’s
retirement (Member’s pension is reduced)
53
Eligible Children’s BenefitPost-Retirement
Covers children under 18 Payable where there is no eligible spouse 60% of Pensioner’s lifetime benefit divided
among all dependent children under 18 As each child reaches 18, re-divided among
remaining children under 18 Residual paid to last child to reach 18
54
POST RETIREMENT SURVIVOR BENEFITS
Pensioner’s Survivor Situation*
Spouse at Retirement
Spouse at Death of
Pensioner
Survivor Pension Paid to:
1 none none n/a
2 none B B
3 A A A
4 A A deceasednone
n/a
5 A A alivenone
A
6 A A deceasedB
B
7 A A aliveB
A**
8 B A aliveB
A+B
First Spouse = A *No eligible children in any of the situations
Subsequent Spouse = B **unless A waived entitlement to Survivor Pension
55
Retirement Income Sources
At Retirement, the sources of income: CAAT Pension Plan (Based on Earnings and
Pensionable Service) CPP (Maximum with CPP starting at 65 is
$9,945.00) OAS (Maximum payable at age 65 is
$5,661.12) Other sources of income
56
Retirement Examples
HAPE = $40,000 Service = 35 yearsRetire in 2005 at 65, take CPP at 65.
Age: 65 OAS 5,661.12 CPP Full 9,945.00 CAAT Bridge N/A CAAT Lifetime 18,253.90 TOTAL Retirement Income 33,860.02 % of HAPE 85%
57
Retirement Examples
HAPE = $40,000 Service = 35 yearsRetire in 2005 at 55, take CPP at 60. Age: 55 60 65
OAS N/A N/A 5,661.12 CPP Reduced N/A 6,961.50 6,961.50 CAAT Bridge 9,746.10 9,746.10 N/A CAAT Lifetime 18,253.90 18,253.90 18,253.90 TOTAL Retirement Income 28,000.00 34,961.50 30,876.52
% of HAPE 70% 87% 77%
58
Retirement Examples
HAPE = $40,000 Service = 35 yearsRetire in 2005 at 55, take CPP at 65.
Age: 55 60 65
OAS N/A N/A 5,661.12 CPP* N/A N/A 9,040.00 CAAT Bridge 9,746.10 9,746.10 N/A CAAT Lifetime 18,253.90 18,253.90 18,253.90 TOTAL Retirement Income 28,000.00 28,000.00 32,955.02 % of HAPE 70% 70% 82%
* 10 years of no CPP contribution reduces “full CPP” by 9.1% (35 years/ (.85 x 45 years) x 100% - 100% = 9.1%)
59
Retirement Examples
HAPE = $40,000 Service = 35 yearsRetire in 2005 at 60, take CPP at 65.
Age: 60 65 OAS N/A 5,661.12 CPP Full* N/A 9,945.00 CAAT Bridge 9,746.10 N/A CAAT Lifetime 18,253.90 18,253.90 TOTAL Retirement Income 28,000.00 33,860.02 % of HAPE 70% 85%
* In this case, the 5 years of no CPP contributions has no effect on receiving full CPP.
60
Appendix
Retirement Examples:
HAPE = $40,000 Service = 25 years
HAPE = $70,000 Service = 35 years
HAPE = $70,000 Service = 25 years
Links to Finding CPP or OAS on the Internet
CPP Update Process
61
Retirement Examples
HAPE = $40,000Service = 25 years
Retire in 2005 at 65, take CPP at 65. Age: 65
OAS 5,661.12
CPP Full 9,945.00
CAAT Bridge N/A
CAAT Lifetime 13,038.50
TOTAL Retirement Income 28,644.62
% of HAPE 72%
62
Retirement Examples
HAPE = $40,000 Service = 25 yearsRetire in 2005 at 55, take CPP at 60.
Age: 55 60 65
OAS N/A N/A 5,661.12 CPP Reduced N/A 6,961.50 6,961.50 CAAT Bridge 6,439.39 6,439.39 N/A CAAT Lifetime 12,060.61 12,060.61 12,060.61 TOTAL Retirement Income 19,500.00 25,461.50 24,683.23 % of HAPE 46% 64% 62%
63
Retirement Examples HAPE = $40,000 Service = 25 years Retire in 2005 at 55, take CPP at 65.
Age: 55 60 65
OAS N/A N/A 5,661.12 CPP* N/A N/A 9,040.00 CAAT Bridge 6,439.39 6,439.39 N/A CAAT Lifetime 12,060.41 12,060.41 12,060.41 TOTAL Retirement Income 18,500.00 18,500.00 26,761.53 % of HAPE 46% 46% 67%
* 10 years of no CPP contribution reduces “full CPP” by 9.1% (35 years/ (.85 x 45 years) x 100% - 100% = 9.1%)
64
Retirement Examples
HAPE = $40,000 Service = 25 years Retire in 2005 at 60, take CPP at 65.
Age: 60 65 OAS N/A 5,661.12 CPP Full* N/A 9,945.00 CAAT Bridge 6,961.50 N/A CAAT Lifetime 13,038.50 13,038.50 TOTAL Retirement Income 20,000.00 28,644.62 % of HAPE 50% 72%
* In this case, the 5 years of no CPP contributions has no effect on receiving full CPP.
65
Retirement Examples
HAPE = $70,000 Service = 35 yearsRetire in 2005 at 65, take CPP at 65.
Age: 65 OAS 5,661.12 CPP Full 9,945.00 CAAT Bridge N/A CAAT Lifetime 39,253.90 TOTAL Retirement Income 54,860.02 % of HAPE 78%
66
Retirement Examples
HAPE = $70,000 Service = 35 yearsRetire in 2005 at 55, take CPP at 60.
Age: 55 60 65
OAS N/A N/A 5,661.12 CPP Reduced N/A 6,961.50 6,961.50 CAAT Bridge 9,746.10 9,746.10 N/A CAAT Lifetime 39,253.90 39,253.90 39,253.90 TOTAL Retirement Income 49,000.00 55,961.50 51,876.52 % of HAPE 70% 80% 74%
67
Retirement Examples
HAPE = $70,000 Service = 35 yearsRetire in 2005 at 55, take CPP at 65.
Age: 55 60 65 OAS N/A N/A 5,661.12 CPP* N/A N/A 9,040.00 CAAT Bridge 9,746.10 9,746.10 N/A CAAT Lifetime 39,253.90 39,253.90 39,253.90 TOTAL Retirement Income 49,000.00 49,000.00 53,955.02 % of HAPE 70% 70% 77%
* 10 years of no CPP contribution reduces “full CPP” by 9.1% (35 years/ (.85 x 45 years) x 100% - 100% = 9.1%)
68
Retirement Examples
HAPE = $70,000 Service = 35 yearsRetire in 2005 at 60, take CPP at 65.
Age: 60 65 OAS N/A 5,661.12 CPP Full* N/A 9,945.00 CAAT Bridge 9,746.10 N/A CAAT Lifetime 39,253.90 39,253.90 TOTAL Retirement Income 49,000.00 54,860.02 % of HAPE 70% 78%
* In this case, the 5 years of no CPP contributions has no effect on receiving full CPP.
69
Retirement Examples
HAPE = $70,000 Service = 25 yearsRetire in 2005 at 65, take CPP at 65.
Age: 65 OAS 5,661.12 CPP Full 9,945.00 CAAT Bridge N/A CAAT Lifetime 28,038.50 TOTAL Retirement Income 43,644.62 % of HAPE 62%
70
Retirement Examples
HAPE = $70,000 Service = 25 yearsRetire in 2005 at 55, take CPP at 60.
Age: 55 60 65
OAS N/A N/A 5,661.12 CPP Reduced N/A 6,961.50 6,961.50 CAAT Bridge 6,439.39 6,439.39 N/A CAAT Lifetime 25,935.61 25,935.61 25,935.61 TOTAL Retirement Income 32,375.00 39,336.50 38,558.23 % of HAPE 46% 56% 55%
71
Retirement Examples
HAPE = $70,000 Service = 25 years Retire in 2005 at 55, take CPP at 65.
Age: 55 60 65
OAS N/A N/A 5,661.12 CPP* N/A N/A 9,040.00 CAAT Bridge 6,439.39 6,439.39 N/A CAAT Lifetime 25,935.61 25,935.61 25,935.61 TOTAL Retirement Income 32,375.00 32,375.00 40,636.73 % of HAPE 46% 46% 58%
* 10 years of no CPP contribution reduces “full CPP” by 9.1% (35 years/ (.85 x 45 years) x 100% - 100% = 9.1%)
72
Retirement Examples
HAPE = $70,000 Service = 25 years Retire in 2005 at 60, take CPP at 65.
Age: 60 65 OAS N/A 5,661.12 CPP Full* N/A 9,945.00 CAAT Bridge 6,961.50 N/A CAAT Lifetime 28,038.50 28,038.50 TOTAL Retirement Income 35,000.00 43,644.62 % of HAPE 50% 62%
* In this case, the 5 years of no CPP contributions has no effect on receiving full CPP.
73
Links to Finding CPP or OAS on the InternetFrom the web site www.caatpension.on.ca click on1. Members2. Tools3. Links4. Government5. Human Resources and Skills Development Canada6. English/French7. Financial Benefits8. Public Pension and Retirement9. Choose Canada Pension Plan(CPP) or Old Age
Security(OAS)
74
CPP Update Process
1. File tax return2. Tax return is processed by CRA3. Year end master file created including CPP
contributions4. CPP contributions are transferred to CPP
contribution master file5. CPP master file used to produce statement of CPP
contributions6. Master file will not include current year and may not
include immediately preceding year. 2005 file should include record up to 2003