• OPTrust 2005 Pension Escalation Increase: 1.7%
• Long Term Income Protection (LTIP) contributions
• Contributions for Leaves of Absence (LOA) without pay
• Salary Escalation and Pension Adjustments
• OPTrust Employer Manual and Online Forms

OPTrust 2005 Pension Escalation Increase: 1.7%

OPTrust's pension escalation factor for 2005 is 1.7%. The pension escalation factor is the annual inflation-related increase applied to OPTrust pensions. The 2005 increase will be reflected in retirees’ January 2005 pension payment.

The escalation factor is also used to calculate employer-paid contributions for members who qualify for Long Term Income Protection (LTIP) or who are on leaves of absence without pay that extend beyond the end of the calendar year. In these cases, the escalated salary amount is also used to calculate the members’ annual pension adjustment (PA) for such periods.

All OPTrust pensions affected
Under the OPSEU Pension Plan, all OPTrust pensions are adjusted annually for inflation. This adjustment is made each January, beginning the year after a former member’s pension starts. The pension escalation is applied both to former members’ pensions and to survivors’ pensions.

The increase for the first year after retirement is pro-rated. The first annual increase is based on the number of complete months for which a pension was paid in the preceding calendar year.

The pension escalation is also applied to deferred pensions and to divested members’ “special deferred” pensions. In these cases, the member’s deferred pension entitlement is calculated as of the date of termination or, in the case of a divested member, the divestment date. The cost of living adjustments are accumulated starting from the next month and applied the date the pension begins.

How the pension escalation factor is calculated
The adjustment reflects the increase in the cost of living in Canada, as measured by the Consumer Price Index. It is calculated using the average of the Consumer Price Index for the two 12-month periods ending the preceding September. For example, the 2005 escalation factor was calculated as follows:

The maximum increase in any one year is 8%. Any increase above 8% is carried forward, to be applied in a subsequent year when the adjustment is less than 8%.  For example, an OPTrust pensioner who received a typical annual pension of $18,000 in 1995 would receive $21,851 in 2005.

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Long Term Income Protection (LTIP) contributions

For members who qualify for LTIP benefits, the pension escalation factor is used to calculate the annual salary on which contributions are based during the period of disability.

The employer pays both the member’s and the employer’s pension contributions for periods when members qualify for LTIP. These contributions are based on the member’s regular salary rate on the date of disability. If a member’s disability extends beyond the end of the calendar year, this base salary is increased by OPTrust’s pension escalation factor every January.

At the end of first year of the member’s disability, the annual salary escalation is pro-rated according to number of full months in the previous calendar year since the effective date of the member's current salary at the time of disability.

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Contributions for Leaves of Absence (LOA) without pay

Members who take an unpaid leave of absence may choose to continue paying pension contributions to OPTrust during their leave. If the leave spans more than one calendar year, the annual OPTrust escalation factor is used to adjust the salary rate on which both the member’s contributions and the employer’s contributions (as required) are based.

At the end of the first year of the member’s leave of absence, the annual salary escalation applied is pro-rated according to the number of full months in the previous calendar year that the member was on leave. In following years, the full escalation increase is applied.

For pregnancy, parental and adoption leaves where contributions are deducted the from the supplementary unemployment benefits (SUB) allowance, both the member and employer contributions are paid to OPTrust through regular payroll contributions. Where a leave extends beyond the calendar year end, the employer is required to adjust base salary rate by the annual escalation factor as of January 1, 2005.

For leaves where the member chooses to pay contributions directly to OPTrust, we calculate the total member and employer contributions for the period of the projected leave. If the leave is expected to extend beyond the calendar year, OPTrust uses a projected escalation factor to calculate contributions for the second calendar year. The projected total contributions are used to set the amount of the member’s and employer’s quarterly payments during the leave. At the end of the member’s leave, OPTrust recalculates the total contributions required based on the actual escalation factor and makes any adjustments as required.

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Salary Escalation and Pension Adjustments

The inflation-adjusted salary amount in effect for a given calendar year should also be used when calculating the pension adjustment for members who are eligible to receive LTIP benefits or are contributing while on a leave of absence (LOA) without pay.

Pension Adjustment (PA) Reporting for Leaves of Absence
For employers who use the CORPAY system, OPTrust will report the PAs for all qualifying LOAs whether or not the payment was received. This applies regardless of the type of payment.

Non-CORPAY employers are asked to calculate and report PAs for members who elect to make payments by payroll deduction or combination of payment methods for these LOAs.

Pension Adjustments (PA) Reporting for Non-Contributory Buybacks
OPTrust will advise the respective employer to amend the member’s PA for all non-contributory buybacks with the period ending in the tax-reporting year (December 31, 2004). This applies to both CORPAY and non-CORPAY employers. Once the member’s PA is amended, it should be reported to Canada Revenue Agency and OPTrust to ensure that the member’s records remain accurate.

Past Service Pension Adjustment (PSPA) Reporting
OPTrust will calculate and report PSPAs for Canada Revenue Agency service ending prior to the current tax year for both CORPAY and non-CORPAY employers.

T4 Filing
For employers who use the CORPAY system, OPTrust will file T4s for all buybacks paid through payroll deductions, quarterly, monthly or lump sum payments.

For non-CORPAY employers, OPTrust will file T4s for buybacks paid through quarterly, monthly or lump sum payments. The employer is required to file T4s for members who make payments through payroll deductions.

2005 YBE and YMPE Rates
The Canada Revenue Agency (CRA) has announced the Year’s Basic Exemption (YBE) and Year’s Maximum Pensionable Earnings (YMPE) for 2005 under the Canada Pension Plan (CPP).  These figures are used to determine earnings on which CPP contributions are payable for 2004.

The YBE and YMPE are also used to determine the level of employee and employer contributions that are payable to the OPSEU Pension Plan. CRA has also announced the CPP contribution rates for 2005.

• The YBE remains unchanged at $3,500.
• The YMPE for 2005 is $41,100, up from $40,500 in 2004
• The CPP contribution rates for 2005 remain unchanged at 4.95% for both employees and employers.

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OPTrust Employer Manual and Online Forms

Two new sections on terminations and retirements have been added to OPTrust’s online Employer Manual, giving you more information on how to process each transaction.

OPTrust’s online Employer Manual is a practical tool that provides employers with user-friendly access to information on the administration of the OPSEU Pension Plan. From enrolling a member to reporting pension data and retirements, the Employer Manual gives you immediate access to the information you need. For each type of pension transaction, you will find:

• key information needed to complete the transaction
• step-by-step procedures
• forms, checklists and other tools.

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