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February 18, 2002, Number 4
In this issue
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OPTrust clarifies definition of
“salary” under the OPSEU Pension Plan
Under the OPSEU Pension Plan, the member’s salary is used in several
important calculations. The Plan requires that current service contributions be deducted
from each member’s “salary” according to a contribution formula. The
member’s earned pension benefit computed under the Plan is based on the member’s
“average salary.” The member’s salary rate is also used in calculating the
cost of contributions for the purchase of past service (“buybacks”) and for
determining the earnings ceiling for re-employed/re-engaged pensioners.
To ensure that the concept of “salary” is applied consistently in all cases,
the OPSEU Pension Trust has clarified the definition of the term. In cases where this
definition differs from employers’ past practice, the policy clarifying the
definition of “salary” will be effective from March 1, 2002.
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Definition
Under this definition, “pensionable salary” has the following
attributes. It:
- must be paid to the member
- must be measured in terms of regular periods of time
- includes, in addition to regular pay, any periodic payments paid on a regular basis as a
permanent component of pay for a position
- excludes fringe benefits and bonuses unless they are paid regularly and computed by
reference to hours, days, weeks or other specific periods of time; these benefits cannot
be ad hoc or unexpected, they must be a regularly recurring payment
- includes all earnings paid at regular rates for all hours up to full-time hours
- cannot include overtime, which is interpreted as being wages paid at a rate greater than
the regular rate
- includes any other amount determined to be part of “salary” by the Board of
Trustees of the OPSEU Pension Trust.
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Application
In applying the above policy, "salary" is defined to include:
- regular earnings/base wages including market value adjustments and yearly increases that
may vary but regularly occur each year (e.g., merit pay)
- payments for vacation when taken as a leave with pay
- allowances that are paid regularly
- retro earnings
- compensating time
- sick pay deemed to be regular wages
- permanent salary notes (e.g., for specific training/certification)
- isolation pay
- on-going long service pay
- statutory holiday pay (4%).
Although a member employed on a full-time basis may be in receipt of reduced wages
under the short-term sickness plan or due to a self-funded leave, pension contributions
are calculated on the full-time salary.
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Payments not included in “salary”
"Salary" does not include:
- overtime (paid at rates exceeding regular rates)
- severance pay
- one-time payments
- reimbursement for expenses incurred
- lump-sum vacation payments in lieu of leave with pay
- 4% vacation pay in lieu of leave with pay
- payments not regularly paid
- shift premiums.
Effective date
This definition of “salary” is not intended to be retroactive in cases
where it differs from employers’ past practice. Accordingly, the effective date of
this definition is March 1, 2002.
Payroll deduction rules
All participating employers should ensure that the deduction rules incorporated
in their payroll systems are consistent with the definition of “salary” outlined
above. If you need any assistance in this regard, please contact Sean Turner, Manager of
OPTrust’s Data Management Group, at (416) 681-6184 or sturner@optrust.com.
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Re-employment/re-engagement ceiling
In addition to the use of “salary” for the computation of pension
contributions and entitlements, the definition of “salary” must also be used to
calculate the earnings ceiling for re-employed/re-engaged pensioners. Employers are
requested to use the definition above when completing the Pensioner’s Quarterly
Re-employed Earnings & Calculation Report (optrust 1008).
In clarifying the definition of “salary,” our intention is to provide
participating employers the opportunity to confirm that their current practice is
consistent with the requirements of the OPSEU Pension Plan. We do not expect that there
are major variances between this policy and employers’ current practice.
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.
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