November 24, 2008, Number 33
OPTrust 2009 pension escalation factor: 2.5%
OPTrust's pension escalation factor for 2009 is 2.5%. The
pension escalation factor is the annual inflation-related increase applied
to all OPTrust pensions. The 2009 increase will be reflected in pensioners’
January 2009 pension payment.
The escalation factor is also used to calculate contributions
for members who:
|qualify for Long Term Income Protection (LTIP), or
| 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 for the periods concerned.
All OPTrust pensions affected
All OPTrust pensions are adjusted annually for inflation.
This adjustment is made each January, beginning the year after a former member’s
pension commences. The pension escalation is applied both to former members’
pensions and to survivors’ pensions.
For recently retired pensioners, the increase after the first year of retirement
is pro-rated. In this case, the increase is based on the number of full months
for which a pension was paid in the preceding calendar year. In following
years, the full escalation is applied.
The pension escalation is also applied to former members’ deferred
pensions and to divested members’ “special deferred” pensions.
In these cases, the deferred pension entitlement is calculated as of the date
of termination or divestment. The cost of living adjustments are accumulated
starting from the next month and applied up to the date the pension begins.
How the pension escalation factor is calculated
OPTrust’s pension escalation factor reflects the
increase in the cost of living in Canada, as measured by the Consumer Price
Index. It is calculated using the average Consumer Price Index for the two
12-month periods ending the preceding September.
For example, the 2009 escalation factor and resulting 2.5% increase were calculated
The maximum increase in any single year is 8%. Any increase
above this level is carried forward and applied in the next year when the
adjustment is less than 8%.
For more information, see OPTrust’s Fact Sheet on
Pension escalation & contributions for members on LTIP or unpaid LOA
OPTrust’s pension escalation factor is used to calculate the annual salary
on which contributions are based for members who:
|qualify for Long Term Income Protection benefits
|are making pension contributions during a leave of absence without pay
|have chosen to have pension contributions deducted from their Supplementary
Unemployment Benefit while on a pregnancy, parental or adoption leave.
The pension escalation factor is used in cases where the member’s LTIP
or leave of absence extends beyond the end of the calendar year.
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
At the end of the first year of the member’s disability, the annual
salary escalation is pro-rated according to the number of full months in the previous
calendar year since the effective date of the member's current salary at the
time of disability. In following years, the full escalation increase is applied.
Contributions for leaves of absence 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.
Contributions for pregnancy, parental and adoption leaves
For pregnancy, parental and adoption leaves where contributions
are deducted 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 the base salary rate by the annual escalation
factor as of January 1, 2009.
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 payments during
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
2009 YBE & YMPE rates and OPTrust contributions
The Canada Revenue Agency (CRA) has announced the Canada
Pension Plan’s Year’s Basic Exemption (YBE) and Year’s Maximum
Pensionable Earnings (YMPE) for 2009.
These figures are used to determine earnings on which CPP contributions are
payable for 2009.
The YMPE is also used to determine the level of member and employer contributions
payable to the OPSEU Pension Plan. CRA has also announced the CPP contribution
rate for 2009.
|The YBE will remain unchanged at $3,500.
| The YMPE for 2009 will be $46,300. This is up from $44,900 in 2008.
|CPP contribution rates for 2009 will remain unchanged at 4.95% for
both employees and employers.
For more information see the CRA website at: www.cra-arc.gc.ca.
OPTrust contributions for 2009
OPTrust contribution rates are determined based on the
Plan’s contribution formula, the member’s salary and the current
year’s YMPE. For 2009, member and employer contribution rates are as
6.4% x pensionable earnings up to $46,300 (YMPE for 2009)
8.0% x pensionable earnings above $46,300
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