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December 17, 2003, Number 15
In this issue
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Administering Grievance Awards and Settlements
The OPSEU Pension Trust is often asked to administer provisions of
grievance settlements and awards that affect the member’s accrual of
pension benefits and/or the payment of contributions under the OPSEU
Pension Plan.
These provisions can only be administered if they are permissible under the
terms of the Plan. OPTrust cannot provide a pension benefit that is not
consistent with the terms of the Plan text or that is contrary to
legislation. Any grievance settlement or award that does not meet these
criteria does not have jurisdiction over OPTrust and the administration of
the Plan’s provisions.
We therefore recommend that the parties to a grievance contact OPTrust to
clarify the terms of the Plan and their implications, should they be
considering a possible settlement or seeking an arbitration award where
pension benefits are at issue.
Contribution Payment Requirements
The Plan establishes the proportion of required contributions or buyback
costs that must be paid by the member and the proportion that must be paid
by the employer. Under the Plan, buybacks are either entirely member
funded, or the cost is shared between the member and the employer,
depending on the type of service that is being purchased. Only in the case
of periods when the member qualified for LTIP can the employer make a
payment on behalf of the member.
Any grievance award or settlement that involves the employer paying OPTrust
directly for a member’s share of buyback contributions is contrary to the
terms of the Plan. As a result, OPTrust is not able to administer such
grievance settlement provisions.
The member’s share of contributions for a buyback must be paid directly by
the member – either through payroll deductions or as a lump sum. If the
member does not pay his or her share of the buyback cost to directly to
OPTrust, he or she cannot receive credit in the Plan for the period of
service in question.
This also facilitates tax reporting since the member is entitled to the
income tax receipt showing the amount of his or her buyback contributions
received by OPTrust.
Buyback Eligibility
It is important to note that to buy back credit as a result of a grievance
settlement or award, the member must be eligible to purchase credit for the
period of service in question under terms of the Plan. That is, OPTrust
must receive his or her buyback application within the Plan’s normal
24-month buyback application deadline.
Retroactive Salary & Contributions
Under the Plan, employers are required to deduct member contributions from
all “salary” paid to a member, and to pay the corresponding employer
contributions. This applies to the retroactive payment of wages and other
earnings that meet the Plan’s definition of “salary.”
If a grievance award or settlement provides for a payment of retroactive
wages, the member’s pension contributions, plus interest, must be deducted
by the employer from the lump-sum payment on a mandatory basis and remitted
to OPTrust. The employer must also remit a corresponding contribution
payment, based on the employer contribution formula. The terms of the Plan
do not allow the employer to pay the member’s share of contributions on the
member’s behalf.
Where a grievance award or settlement provides for other payments that do
not meet the Plan’s definition of “salary,” the payments are not considered
pensionable earnings. In such cases, no contributions are payable, and the
payments will have no impact on the member’s earned pension benefit.
For more information on the definition of “salary” under the OPSEU Pension
Plan, please see OPTrust’s
Employer Update #4 (February 18, 2002).
Pension Bridging
Any grievance settlement or award that involves bridging to an unreduced
pension (Factor 80, Factor 90, 60/20 or Age 65) must be consistent the
Plan’s maximum leave of absence rule.
Under the bridging provision, an eligible member who has received a notice
of layoff may be able to qualify for an unreduced pension. This is done by
combining: i) the six-month surplus notice period, ii) the period
represented by the termination pay, when converted into a leave of absence
with pay, and iii) a bridging period of leave of absence without pay.
Under the Plan’s maximum leave of absence rule, the bridging leave without
pay together with all other periods of post-1990 purchased leaves cannot
exceed five years. For example, a member who has already purchased credit
for a four-year educational leave has only one year left that can be used
as a bridging leave without pay.
It is important to note that in the Ontario Public Service, the Central
Collective Agreement also imposes a two-year maximum for the bridging
leave.
Access to Contributions
Under the OPSEU Pension Plan, once a member is vested he or she has earned
the right to a pension benefit payable at age 65. This benefit becomes
accessible to the member only when his or her employment is terminated.
Therefore, OPTrust cannot administer any grievance settlement or award that
provides for the member’s access to the employer pension contributions
prior to termination. In fact, except for a vested member’s entitlement to
the commuted value of a deferred pension at termination – which effectively
includes some portion of the employer’s contributions – there is no
provision in the Plan by which a member can access the employer’s
contributions.
Termination & Reinstatement
Sometimes grievance settlements or awards that reverse a member’s
termination or dismissal seek to “unwind” pension entitlements already
administered by OPTrust at the time the member was terminated.
In such cases, any benefit previously paid would have to be returned to the
Plan, with applicable interest. The status of the member’s employment
between the termination date and the date the member returns to work will
also need to be addressed by the parties in order to determine the
implications for the member’s pension accrual and for the payment of any
required contributions by both the member and the employer.
OPTrust Review
Like many defined benefit plans, the OPSEU Pension Plan contains complex
provisions that reflect both minimum benefit provisions under Ontario’s
Pension Benefits Act and maximum benefit accruals under the Income Tax Act.
We therefore recommend that the parties to a grievance contact OPTrust in
advance to ensure that the terms of any settlement or arbitration award
affects the member’s pension can be administered under the terms of the
Plan.
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