• OPSEU Pension Plan Improvements Now in Effect
• Plan Improvements – Who Is Covered
• Changes to the CPP Offset and PAs for 2002
• CCRA Announces YBE & YMPE for 2003

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OPSEU Pension Plan Improvements Now in Effect

Improvements to the OPSEU Pension Plan selected by OPSEU earlier this fall are now in effect. In September, OPSEU’s Executive Board chose to allocate $467 million in plan gains to pay for a package of temporary and permanent benefit improvements, an extended contribution reduction for members and a fund to stabilize member contributions in the future. Both plan sponsors – OPSEU and the Government of Ontario – have now signed the plan amendments needed to implement these changes.

The $467 million represents the members’ and pensioners’ unallocated share of funding gains realized by the Plan in 1999, 2000 and 2001. In total, the Plan experienced gains of $867 million for the period, which were shared between the members and pensioners and the Government of Ontario. The province is still considering its options for the employer share of the gains.

In deciding how to allocate its share of the gains, OPSEU reviewed more than 15,000 responses to a survey sent this past summer to OPTrust members, divested members, deferred pensioners and current retirees. After considering this input, OPSEU decided to use the gains as follows:

Factor 80 extended
The Factor 80 early retirement option has been extended from November 1, 2002 to March 31, 2005. Under Factor 80, active members may retire early with an unreduced pension if their age plus credit in the Plan total exactly 80 years.

Members’ time limits for submitting their election notice to the employer and for retiring remain unchanged.

“Points off” for early reduced pensions extended
The “points off” program for active members and deferred pensioners who choose to retire early with a reduced pension at age 55 or older has been extended to December 31, 2005. Points off was previously scheduled to expire on November 30, 2004.

Under this program, the pension reduction is based on the number of years the member would need to reach one of the of Plan’s permanent unreduced retirement options – Factor 90, the 60/20 option or age 65 – if he or she continued working. Under the Plan’s normal rules, the reduction is based on the number of years the member is from age 65.

CPP offset reduced
Effective December 1, 2002, the reduction applied to retirees’ OPTrust pensions for CPP integration (the “CPP offset”) has been permanently reduced. The CPP offset is now based on a factor of 0.655%, down from 0.675%. The result is a higher pension at age 65 and after, than under the old formula.

Under the new formula, the CPP offset equals:

Post-retirement death & CPP integration of survivor pensions
As of December 1, 2002, the CPP offset applied to survivor pensions in the event of a former member’s post-retirement death has been eliminated prior to the date the former member would have reached age 65. Before this change, the CPP offset was applied immediately. These survivor pensions will now be reduced for CPP integration on the date the former member would have reached age 65.

Note: this change does not affect survivor pensions in cases where the member dies before starting to receive a pension from OPTrust.

Member contribution reduction to be phased out over three years
Since 1999, members’ contributions have been reduced to 4% of earnings, integrated with CPP. This reduction was scheduled to end on November 30, 2002. With the recent plan improvements, the contribution reduction will be phased out gradually over the next three years.

The new member contribution rates are as follows:

Member contribution rates are currently scheduled to return to the normal rate of 8%, 6.2% and 8% as of the pay period that includes December 1, 2005.

Employer contributions are currently paid at the Plan’s normal contribution rate of 8%, 6.2% and 8%.

Member contribution stabilization fund increased
Finally, $146 million has been set aside to stabilize members’ contributions in the future. This brings the total value of the members’ contribution stabilization reserve to $149 million. This reserve will reduce the impact on members’ contribution rates should the Plan experience future losses.

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Plan Improvements – Who Is Covered

Active members
The package of improvements selected by OPSEU applies to all active OPTrust members. While most of the changes take effect on December 1, 2002, the extension of Factor 80 is effective from November 1, 2002.

Current & deferred pensioners
The changes in the CPP integration formula and survivor pensions apply to retirees and eligible survivors who were receiving an OPTrust pension on November 30, 2002. These two improvements – and the extension of the “points off” option for those who qualify for a reduced pension – are also available to OPTrust’s regular deferred pensioners.

Changes do not apply to current divested members
The package of plan improvements does not apply to the current divested members who are eligible for a “special deferred pension” from OPTrust. This group includes members whose jobs were transferred or divested to a non-OPTrust employer before December 1, 2002 and became members of a pension plan provided by their new employer.  The Factor 80 option expired for this group on October 31, 2002.

Current divested members remain eligible for all the OPTrust benefits that were in effect as of November 30, 2002. These include:

• access to the “points off” program until November 30, 2004

• eligibility for “surplus Factor 80” (or “Factor 80 reopener”) and “bridging” to Factor 80, for those who are laid off before January 1, 2005

• early retirement under OPTrust’s permanent Factor 90 and 60/20 options

Members who are divested on or after December 1, 2002, will be eligible for the benefits in effect on their divestment date – including the current benefit improvements.

Notice to affected members
OPTrust will mail written notices of the changes to the OPSEU Pension Plan to all active members and deferred pensioners, along with a special issue of OPTrust’s member newsletter OPTions, containing extensive coverage of the Plan improvements. Divested members will receive copies of the newsletter. Notices will be sent to the Plan’s current pensioners (including those receiving survivor pensions) along with a special issue of our pensioner newsletter The Pension Connection.

These mailings will take place in mid-December. In the meantime, the details of the Plan changes, have been posted to the OPTrust Web site at www.optrust.com.

OPTrust will send personalized notices and/or pension estimates to members whose pension records indicate that they may qualify for Factor 80 by June 30, 2003. Members who will qualify later will see their Factor 80 date listed on their 2002 Annual Pension Statement, which will be mailed between late April and late June, 2003.

Members who think that they may qualify for Factor 80 within the next six months and who do not receive a personalized notice by January 31, 2003, are encouraged to contact OPTrust as soon as possible to confirm their eligibility.

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Changes to the CPP Offset and PAs for 2002

The change in the Plan’s CPP offset will affect the way employers calculate pension adjustments (PAs) for members who contributed to the OPSEU Pension Plan in 2002.

The member’s PA for 2002 is calculated using the following formula:

(Benefit Entitlement x 9) - $600* = PA

* prorated for partial years and/or part-time employment

The benefit entitlement is calculated according to the OPSEU Pension Plan’s benefit formula, which incorporates the CPP offset. In determining the benefit entitlement, employers should use the following CPP offset factors: