Pension Plan Basics
Who pays for what?
Both you and your employer contribute to the Plan.
Employers make pension contributions for all members of the Plan. The employer contribution rate is 9.4% of the member's pensionable earnings up to the YMPE, and 11% above the YMPE.
Your contributions to the Plan are based on your pensionable earnings (this means your regular salary and does not include overtime pay). As long as you continue to receive your regular salary, you continue to make contributions to the Plan (i.e., during a paid leave of absence your contributions to the Plan continue). Contributions to the Plan are based on a formula that takes into account Canada Pension Plan (CPP) contributions.
Under the Plan’s contribution formula, this is how your contributions are calculated: 9.4% of your salary up to the Year’s Maximum Pensionable Earnings (YMPE) plus 11% of your salary above the YMPE.
* The YMPE refers to the maximum earnings from employment on which CPP contributions and benefits are calculated. The YMPE is based on average wage levels and changes every year.
**All calculations use the 2012 YMPE. Actual contributions will vary depending on the YMPE set by CPP.
Most working Canadians are required to contribute to the Canada Pension Plan (CPP). When CPP started in 1966, the decision was made to blend (integrate) CPP contributions with those of the existing pension plan to recognized your contributions to both plans. As a result, a portion of your contributions to the OPSEU Pension Plan is reduced (see Member annual contributions example above).
You make CPP contributions on the portion of your salary between the Year's Basic Exemption (YBE) and the Year's Maximum Pensionable Earnings (YMPE). For 2012 the YBE is $3,500 and the YMPE is $50,100, so the portion of salary used for determining the 2012 CPP contribution is $48,500 ($52,000 minus $3,500). On this amount, you will pay 4.95%
The example above shows that your contributions to the Plan are separated into two parts (9.4% and 11%) and shows how your contributions to the OPSEU Pension Plan and CPP are integrated. You contribute a smaller amount to the OPSEU Pension Plan on the portion of your salary up to the YMPE because you also make contributions to CPP on that portion of your salary.
Your OPTrust contributions are paid on an "annualized" basis. This means that the two rates, the one above and the one below the YMPE, are blended together. This results in level contributions throughtout the year, based on your pensionable salary.
The regular contributions you make to the OPSEU Pension Plan from your earnings are tax sheltered. When you complete your income tax return, you may claim your OPSEU Pension Plan contributions as a deduction from your taxable income.
If you are taking a leave of absence without pay for longer than one month, you have the option of continuing to contribute to the Plan – and earning credit – during your leave.
This applies for:
- pregnancy, parental and adoption leaves
- leaves due to illness or while on Workplace Saftey and Insurance Board (WSIB) benefits
- organ donation, personal or declared emergency, or family medical leave
- special or educational leaves.
Before you start any of these types of leave, you must fill out OPTrust’s Application to Contribute during an Unpaid Leave of Absence form with your human resources representative or complete the application online using OPTrust's Online Services. This form is used to indicate whether or not you want to make pension contributions during your leave. For pregnancy, parental and adoption leaves, the law requires you and your employer to contribute during the leave unless you submit a signed copy of the form declining to contribute.
If you qualify for benefits under the Long Term Income Protection (LTIP) plan, or an equivalent long-term disability plan, and do not resign your employment, your employer makes contributions to the OPSEU Pension Plan on your behalf at the member contribution rate and pays the employer’s share of contributions as well.