Considering the alternatives

EXAMPLE: Pension options at termination Suppose you are a married 43-year-old OPTrust member when you leave your job on December 31, 2003. Let’s assume you have 20 years of credit in the Plan; 3 years before 1987 and 17 years after 1986. Finally, let’s assume your best average annual salary rate is $45,000. Here are your options: Option 1: Taking a deferred pension based on your total credit. When you reach age 65 you will receive a lifetime pension of $12,962 annually, after integration with CPP. Your pension will increase annually for inflation – both over the deferred period and once your pension starts. Whether you die before or after you retire, your eligible spouse will receive a lifetime survivor pension. Once your pension starts, you, your spouse and eligible dependent children will have health, dental and life insurance benefits provided by the Government of Ontario. Option 2: Transfer the commuted value for your total credit. The commuted value for your entire OPTrust pension equals $103,272. You can transfer this amount into a LIRA or other locked-in retirement arrangement. At retirement you would have to convert your funds to a form of retirement income (a LIF, an LRIF or a life annuity), which could start as early as age 55. If you choose a life annuity, some features are mandatory, such as providing a survivor pension. Other features, such as inflation protection, are optional. You will no longer be eligible for post-retirement insured benefits provided by the Government of Ontario. Purchasing equivalent private coverage may be costly. Option 3: Take a refund of your contributions prior to 1987, plus interest, and a deferred pension for the period after 1986. Your refund would be $10,433 and can be taken in cash (less tax) or transferred to an RRSP (no tax withheld). When you reach age 65, you will receive a deferred annual pension of $11,017 based on your post-1986 credit only. Your pension will increase annually for inflation, and includes a survivor benefit for the post-1986 portion (but not for the part taken as a contribution refund). Because you still have more than 10 years of credit in the Plan, you will be eligible for health, dental and life insurance benefits after your pension starts. Option 4: Take a refund of contributions prior to 1987, plus interest, (as in option 3) and transfer the commuted value of the remaining deferred pension. Your refund would be $10,433 and can be taken in cash (less tax) or transferred to an RRSP (no tax withheld). In this case, the commuted value for your credit after 1986 would be $87,927. This is the amount you can transfer into a LIRA or other locked-in retirement arrangement. At retirement you would have to convert your funds to a form of retirement income (a LIF, an LRIF or a life annuity), which could start as early as age 55. You will no longer be eligible for post-retirement insured benefits provided by the Government of Ontario. Excess Contribution Refund Your contributions plus interest for the period after 1986 total $48,105, while your commuted value for that period equals $87,927. Because your contributions plus interest for this period are greater than 50% of the commuted value, you are eligible for an excess contribution refund of $4,142.