|
November 7, 2001, Number 2
In this issue
Printer Friendly Version: PDF
Buyback time limits and the OPSEU Pension
Plan
The purpose of this Employer Update is to clarify the OPSEU Pension Trust’s
rules regarding the time limits for applying to purchase (“buy back”) past
service credit and for completing buyback payments.
Return to top of page
Advantages of making a purchase
Buying back credit for eligible periods of past service allows members to
increase their total credit in the OPSEU Pension Plan. Buybacks, therefore, have two
important benefits. First, a buyback will increase the amount of a member’s pension
at retirement. Second, the buyback may help the member qualify for one of the Plan’s
early retirement options – or qualify sooner.
To purchase past service credit, eligible members must meet two important time limits:
- a strict 24-month deadline for submitting a buyback application to OPTrust
- a maximum of 10 years to complete payment.
Return to top of page
Types of eligible service
OPTrust members may be eligible to purchase credit for the following types of
service:
Prior government service with the Ontario Public Service (OPS) or another
employer that contributes to the OPSEU Pension Plan, the Public Service Pension Plan or
its predecessor plan. This includes periods when the member did not contribute – such
as unclassified, contract or casual work – or periods for which contributions were
refunded or the entitlement was withdrawn from the Plan.
Prior non-OPS employment with an employer who did not contribute to the
OPSEU Pension Plan but provided another registered pension plan. For service before 1992,
members must still have credit in the prior plan (i.e., they cannot have taken a refund or
transferred the entitlement out of the plan). For service after 1991, the Canada Customs
and Revenue Agency must approve the purchase.
Leaves of absence without pay of more than one month for illness,
pregnancy, parental, adoption, special or educational purposes, or workplace injuries
(WSIB).
Return to top of page
24-month application time limit
The OPSEU Pension Plan sets out strict time limits for applying to buy back
credit for past service. To be eligible, members must submit an Application for Past
Service Credit (OPTrust 1036) to OPTrust within 24 months of the later of:
- the date they become members of the Plan
- the last day of the leave they are applying to buy back.
The 24-month application time limit was first introduced on January 1, 1990. At that
time, members who were eligible to buy back periods of service from before 1990 were given
24 months (until December 31, 1991) to apply – or reapply – under the new rules.
The 24-month time limit has remained in effect for any buyback application received since
that time.
The 24-month time limit is not affected by the recent agreement between OPSEU and the
Province of Ontario concerning the Pension Data Purification Project. (Please see below
for more details.) As well, the OPSEU Pension Plan was not affected by the temporary
change to the buyback application window implemented last year by the Public Service
Pension Plan
Return to top of page
The buyback agreement
Once OPTrust processes the application and determines the cost of the buyback, we
will mail the member an Agreement to Purchase Credit. The agreement states the cost
of the buyback and describes the available payment options.
If the member does not return the signed agreement to OPTrust within three months, the
quoted cost of the buyback lapses. However, the member may still choose to complete the
purchase at a later time, subject to the 10-year payment time limits outlined below. In
this case, the member must contact OPTrust in writing to have the cost recalculated to
include interest.
Return to top of page
10-year payment time limit
Members who applied within the 24-month time limit may take up to 10 years to
complete their purchase. The 10-year payment period starts three months from the date that
OPTrust mails the Agreement to Purchase Credit. This period cannot be extended.
Members may make payments at any time within the 10-year period. This opportunity
remains open to eligible members who apply within the 24-month time limit, even if they:
- did not return the signed Agreement to Purchase Credit form to OPTrust
- initially declined the buyback opportunity
- decided to purchase only part of the service period, or
- chose not to complete their installment payments.
Before the end of the 10-year payment period, members can pay any outstanding amount as
a lump sum. Members who leave the Plan or retire before completing their payments may pay
the outstanding balance as a lump sum when they terminate. Those who do not complete their
purchase within the 10 years – or before terminating or retiring – will not
receive credit for the unpaid portion of the buyback.
The ability to complete payment over a 10-year period has no impact on the Plan’s
buyback eligibility rules. The payment period applies only to approved purchases where
members submitted their applications within the 24-month time limit.
Return to top of page
Transitional payment time limit
OPTrust has established a transitional payment deadline of June 30, 2002, for
those members who met the 24-month application deadline but whose 10-year payment period
will expire before this date. This includes members who applied to purchase pre-1990
credit under the new rules introduced on January 1, 1990, as well as members who applied
to purchase post-1989 service in 1990, 1991 or early 1992.
As a result, members must complete their buyback payments by the later of
- June 30, 2002, or
- 10 years plus three months from the date of mailing of the original purchase agreement.
Return to top of page
Confirming the status of incomplete buybacks
Any member who submitted a buyback application within the 24-month time limit and
wishes to complete his or her purchase may contact OPTrust to determine the status of the
buyback and the available payment options.
In November, OPTrust will mail members a special supplement to the OPTions
newsletter outlining the 10-year payment rule. This OPTions Update also
includes a form members can
use to request a review of the status of any outstanding buybacks they have applied for.
Return to top of page
Recalculating the outstanding cost
Employee’s cost. Where members previously elected to make
partial payment, or to discontinue their payments, and now choose to complete their
purchase within the 10-year period, OPTrust will recalculate the outstanding balance to
include interest. In cases where members did not make any payments after receiving the
original purchase agreement, interest will be applied to the original quoted cost.
Employer’s cost. For certain types of buyback, employers are also
required to make payments to OPTrust. Where a member elects to complete this type of
buyback within the 10-year period, the employer’s outstanding balance will be
recalculated to include interest. Once a member re-starts his or her payments, the
employer will be required to remit the corresponding employer contributions, as the
member’s payments are received.
Return to top of page
Payroll deductions
Members who resume payments for an incomplete buyback have the option of completing
their purchase through payroll deductions, depending on the amount of the outstanding
balance. Payments must be completed within the remainder of the 10-year period. OPTrust
will recalculate the payment amount, including interest. As with all payroll deductions,
the minimum payment is $10 and must cover interest and some portion of the principal.
Starting with the first pay period of 2002, OPTrust will assume direct responsibility
for calculating and administering buyback payroll deductions for all members paid through
the Government of Ontario’s CORPAY system. More details will be provided in a future
issue of OPTrust’s Employer Update.
Return to top of page
Processing outstanding buybacks
Due to the number of cases that may be affected and the amount of work involved,
it may take OPTrust several months to verify the status of each affected member’s
buyback. OPTrust staff will prioritize cases where members’ eligibility for Factor 80
may be affected, as well as cases where members are terminating, retiring or nearing the
end of the 10-year payment period.
As with all buyback provisions, the option of completing payments within the 10-year
period is available only to active OPTrust members. Former members, including those who
took an immediate or deferred pension or are divested ("special deferred"
pensioners), cannot make buyback payments after their termination/divestment date.
Return to top of page
10-year rule unrelated to PDPP agreement
OPSEU and the Government of Ontario recently reached a separate agreement
concerning the Pension Data Purification Project. Under this agreement, members who signed
a purchase agreement but did not complete their payments due to a payroll error will
receive full credit for their buyback at no cost to the member. The PDPP agreement applies
to service up to December 31, 1999. Please see Employer Update #1,
dated August 20, 2001, for more details.
The option to complete an approved buyback within the 10-year payment period is open to
all eligible members who applied within the 24-month time limit after 1989.. This
option is a permanent feature of the Plan and is not related to the recent agreement
between the sponsors concerning the correction of payroll errors.
Return to top of page
This Employer Update is intended to provide participating employers
with news and information about the OPSEU Pension Plan. It does not create any rights to
benefits not provided for in the actual terms of the Plan. In the event of any conflict or
omission, the legal documents of OPSEU Pension Plan will govern in all cases. We recommend
that specific questions regarding personal benefits be directed to our office.
Return to top of page
|
