Notes to the Consolidated Financial Statements
1. Description of the OPSEU Pension Plan
The OPSEU Pension Plan (the Plan) is a contributory defined benefit pension plan that provides pension benefits for employees of the Province of Ontario (the Province or Government of Ontario) in bargaining units represented by the Ontario Public Service Employees Union (OPSEU) and certain other bargaining units and employers. The Plan was established under the terms of the April 18, 1994 Sponsorship Agreement between the Province and OPSEU, which also provided for the establishment of the OPSEU Pension Plan Trust Fund (the Fund) to hold the net assets available for benefits of the Plan.
The Sponsorship Agreement establishes the Province and OPSEU as joint sponsors of the Plan. The Trustees of the OPSEU Pension Plan Trust Fund ("OPSEU Pension Trust" or "OPTrust") are responsible for the administration and management of both the OPSEU Pension Plan and the OPSEU Pension Plan Trust Fund, as described in the Trust Agreement between the sponsors. The Board of Trustees comprises five persons appointed by each of the Province and OPSEU.
The Plan is registered under the Pension Benefits Act of Ontario and the Income Tax Act (Canada), registration number 1012046. The Plan is a Registered Pension Trust as defined in the Income Tax Act and is not subject to income taxes in Canada. However, the Plan and its consolidated subsidiaries are subject to other federal, provincial and municipal taxes in Canada, and may be subject to taxes in other countries.
These consolidated financial statements reflect the aggregate financial position of the Plan, including the net assets available for benefits, accrued pension benefits, and surplus of the Plan.
The Plan’s membership comprises members represented by OPSEU or certain other designated bargaining agents and employed by the following organizations:
- The Province of Ontario (civil servants and crown employees)
- Alcohol and Gaming Commission of Ontario
- Centre for Addiction and Mental Health
- Legislative Assembly of Ontario
- Liquor Control Board of Ontario
- Mental Health Centre Penetanguishene
- Niagara Parks Commission
- North East Mental Health Centre
- Ontario Agency for Health Protection and Promotion
- Ontario Lottery and Gaming Corporation
- Ontario Pension Board
- Ontario Public Service Employees Union (seconded or acting employees)
- Ontario Shores Centre for Mental Health Sciences
- Ontario Teachers' Pension Plan Board
- OPSEU Pension Trust (includes non-bargaining unit employees)
- St. Joseph's Health Care Group - Lakehead Psychiatric Hospital
- Workplace Safety and Insurance Appeals Tribunal
Contributions and investment earnings fund plan benefits. The determination of the value of the benefits and required contributions is based on periodic actuarial valuations for funding purposes.
The OPSEU Pension Plan’s contributions and benefits are integrated with the Canada Pension Plan (CPP).
The normal contribution rate is 7.4% (2009 - 6.4%) of salary up to the year’s maximum pensionable earnings (YMPE) under the Canada Pension Plan and 9% (2009 - 8.0%) of other eligible earnings up to the maximum earnings of $140,180 for the year under the Income Tax Act (Canada). The contribution rate for both the employees and employers will be increased by 1% of salary in each of January 2011 and January 2012. Effective January 1, 2012, the contribution rate will be 9.4% of salary up to the YMPE and 11% of eligible earnings over the YMPE.
d. Purchase or Buyback of Past Service
Eligible members of the Plan can purchase or buy back credit for past service for certain absences or non-contributory service, subject to Income Tax Act (Canada) limits. For some types of buybacks, employers make a matching payment.
e. Pension Benefits
The Plan provides for the payment of a pension benefit equal to 2% of the average of the best five consecutive years of salary, for each year of credited service. An unreduced pension can be received at age 65, or before age 65 if the member’s age and credit total 90 (Factor 90) or when the member reaches age 60 and has 20 or more years of credit.
When a member reaches age 65, his or her pension is reduced by an amount that reflects the lower contributions made for CPP pensionable earnings. The reduction at age 65 equals 0.655% multiplied by the lesser of best average annual salary or final 5-year average of YMPE, multiplied by years of credit after 1965 (maximum of 35 years).
Reduced pensions are available to members who retire after age 55 and before age 65 who are not entitled to unreduced benefits. The pension reduction is equal to 5% for each year that the member is under age 65 when he or she retires.
f. Inflation Protection
An adjustment to pension benefits for inflation is made annually based on the Consumer Price Index to a maximum of 8% in any one year. Where the inflation adjustment exceeds 8% in any one year, the excess is carried forward to any subsequent year when the adjustment is less than 8%. The adjustment is made to both current pensions and the future value of deferred pensions. The inflation adjustment was 1.4% at January 1, 2011 (January 1, 2010 - 0.5%).
g. Death Benefits
Upon the death of a member or pensioner, death benefits are available to a surviving eligible spouse, eligible children, designated beneficiary, refund recipient or estate. The death benefit may be in the form of a survivor pension, a lump sum payment or both. The Plan provides a 60% survivor pension to an eligible spouse at no cost to the pensioner. Survivor pensions are also available to the member’s or pensioner’s children in certain circumstances.
In the case of limited life expectancy, provisions exist to access lump sum payouts, provided spouses waive their entitlement to a survivor pension.
h. Disability Pensions
A disability pension is available to members with a minimum of 10 years of credit in the Plan and who meet the criteria as established in the Plan document. The amount of the disability pension depends on the years of credit and the average salary of the disabled member.
i. Deferred Pensions
Members who withdraw from the Plan before age 55 have the option of leaving their money in the Plan and receiving a pension on retirement. In addition, members who are moved to other employers in a divestment situation and enrolled in a new pension plan may be required by law to accept a deferred pension from the OPSEU Pension Plan in order to protect benefits earned. The value of deferred pensions increases annually by the annual inflation protection adjustment.
j. Termination Payments
Subject to certain restrictions, a member who terminates employment may be entitled to transfer the commuted value of his or her pension and/or a refund of contributions to a registered retirement savings plan, or use these funds to purchase a life annuity. Some refunds of contributions or excess contributions may also be paid directly to the former member, subject to withholding of income taxes.
In certain circumstances, a member who terminates employment may be entitled to transfer the value of his or her pension to another pension plan if OPTrust has a reciprocal transfer agreement with this plan. In addition, members who do not terminate employment but must move to the Public Service Pension Plan due to a change in bargaining unit status are subject to mandatory transfer arrangements.