OPTions 26, Summer 2002

The OPSEU Pension Plan has recorded funding gains of $867 million for the three years ending December 31, 2001. The gains were identified in the Plan's recent actuarial funding valuation, which was adopted by OPTrust's Board of Trustees in June.

Shared risks and rewards
Under the terms of the Plan, any gains or losses are shared between OPTrust's members and pensioners and the Government of Ontario.

The members' and pensioners' share of the gains from 1999-2001 is $467 million. This includes a one-time addition of $78 million, under the Plan's original sponsorship agreement. It also reflects a $6 million reduction to cover the members' share of the cost of benefits negotiated between OPSEU and the Government of Ontario.

The Government's portion of the gains totals $297 million, after a reduction of $33 million to cover its share of negotiated benefit improvements.

The Government's share was also reduced to eliminate the $63 million balance of the Plan's initial unfunded liability. As a result, the OPSEU Pension Plan is now fully funded - 27 years ahead of schedule.

Allocating gains
The decision on how to allocate the members' and pensioners' share of gains is up to OPSEU, as a plan sponsor. Gains may be used to:

The Government can use its share of gains to improve benefits, reduce employer contributions or establish a contribution stabilization fund for employers.

Where changes to benefits or contributions require amendments to the Plan text, both sponsors must sign the amendments before OPTrust can administer the changes.

If the Plan experiences a funding loss, members' and employers' contribution rates would have to increase to make up any funding shortfall.

How gains are calculated
Every three years OPTrust's actuaries prepare a funding valuation comparing the Plan's actual experience to the "actuarial assumptions" used to project the Plan's funding requirements.

Funding gains occur when the Plan's assets grow faster than the anticipated cost of members' and pensioners' benefits. If assets grow more slowly than needed to fund the Plan, the result is an actuarial loss.

The two major sources of gains over 1999-2001 were strong investment earnings before 2001 and slower than expected growth in the cost of pension benefits. These gains were partly offset by increased costs for early retirements. The gains were also reduced by changes to the Plan's actuarial assumptions aimed at increasing the long-term security of the Plan.

Funding outlook
While the current gains are substantial, they are lower than the $1.34 billion realized in 1996-1998. This reflects the Plan's lower investment returns over the past two years - including a 3.5% investment loss in 2001.

Another result of changing market conditions is a deferred investment loss of $192 million, as of the end of 2001. This loss was not taken into account when the Plan's $867 million gains were calculated. As a result, the deferred loss will reduce potential gains in the Plan's next funding valuation, due in 2005.

If the investment climate remains challenging and returns for 2002-2004 are below the level needed to fund the Plan, the next funding valuation could show a loss. Any losses would have to be made up either through increased contributions or the use of a contribution stabilization fund.

OPSEU survey seeks your input on gains

In late July, you - and 70,000 other OPTrust members and pensioners - were mailed copies of an OPSEU survey on how to use the membership's $467 million share of the Plan's gains.

The survey asks you to rate a number of available options. To register your opinion, be sure to mail your completed survey to OPSEU by August 16, 2002.
OPSEU - not OPTrust - is responsible for deciding how to allocate gains on behalf of members and pensioners. The union has indicated that it plans to make its decision in September. We will report on OPSEU's decision - and any changes to your benefits or contributions - in a future issue of OPTions and on this site.

Didn't receive your survey?
To ensure your confidentiality, OPTrust mailed the gains surveys on OPSEU's behalf. Surveys will be sent to the home address of active members, pensioners and members who have been divested from the Plan.

If you or one of your co-workers did not receive your copy of the OPSEU gains survey, please contact OPTrust to confirm that we have the correct mailing address. If your address has changed recently, OPTrust will mail a replacement survey to your new address.

An amendment to the OPSEU Pension Plan has extended OPTrust's voluntary Factor 80 option until October 31, 2002. Factor 80 is a time-limited provision that allows qualifying members to retire early with an unreduced OPTrust pension.

To be eligible, a member's age plus his or her of credit in the Plan must total exactly 80 years on or before the new October 31, 2002 deadline. OPTrust's previous Factor 80 provision expired on March 31, 2002.

The new October 31, 2002 deadline took effect in May and applies to all members who reach their Factor 80-eligibility date after March 31. OPTrust has sent personalized letters to every member whose OPTrust records indicate that he or she may qualify for Factor 80 by the new deadline.

Important time limits
To retire under the voluntary Factor 80 option, eligible members must meet strict time limits.

These include submitting written notice to your employer within 92 calendar days after the end of the month in which your age and credit total exactly 80. For members who reached their Factor 80-eligibility date during April 2002, the time limit for submitting the written notice has been extended by one month, to August 31, 2002.

Your notice must specify your resignation date. This must be no later than 92 calendar days after the latest date on which you could have submitted your notice.

"Surplus Factor 80"
A related provision for members who receive a notice of layoff has also been extended. "Surplus Factor 80" allows members who receive a layoff notice, and who have reached or passed their Factor 80 date, to retire with an unreduced OPTrust pension.

Bridging to Factor 80
OPTrust members who receive a surplus notice may also be able to "bridge" to an unreduced pension. Bridging requires special provisions in your collective agreement allowing the use of leaves of absence, the surplus notice period and the period represented by severance payments to reach pension eligibility.

With the recent Plan amendment, members who are surplussed may be able to bridge to Factor 80, provided their age plus credit will total 80 before January 1, 2005.

Who is covered?
Both the voluntary Factor 80 option and Surplus Factor 80 are available to all qualifying members of the Plan. This includes members who work in the Ontario Public Service as well as those employed by other agencies, boards, commissions and organizations that participate in the OPSEU Pension Plan.
Both provisions are also available to divested members - or "special deferred pensioners" - who have the right to a deferred pension from the OPSEU Pension Plan.

Bridging to Factor 80 - or the Plan's other unreduced retirement options - requires special language in your collective agreement. This currently applies to members covered by the Central Collective Agreement between OPSEU and Management Board of Cabinet, and LCBO employees who are members of the OLBEU and are laid off as a result of privatization.

Call OPTrust if you think you are eligible
If you think you may qualify for Factor 80 by October 31, 2002, but have not received a letter from OPTrust - or if you receive a notice of layoff and think you may qualify for Surplus Factor 80 or bridging - please contact OPTrust as soon as possible.

Note: You should contact OPTrust to confirm your eligibility for any of these provisions before you notify your employer that you plan to retire.

If you work in the Ontario Public Service (OPS), your pension may have been affected by the recent OPSEU strike, which took place between March 13 and May 5, 2002.

Strikes and pension credit
Members normally earn credit in the OPSEU Pension Plan for periods of "contributory service." However, when you are on strike, your employer does not pay you, and no pension contributions are sent to OPTrust on your behalf.

As a result, if you did not work during the recent OPS strike, you didn't earn credit for the time you missed. If you worked during the strike period - under an essential services agreement, for example - then you continued to make contributions and received credit for the days you worked. In determining which days were worked during a strike, OPTrust uses payroll data provided by your employer.

Buying back strike service
To receive pension credit for strike periods, members have the option of purchasing, or "buying back," the period of missed service after they return to work.

In August, OPTrust will mail individual statements to every member who missed credit due to the recent OPS strike. This statement will show the details of the service the member missed and the cost of buying back credit for the strike period.

For a member who was away from work for the whole strike period and whose salary is $43,000 per year, the buyback cost is approximately $160.

As your employer, the Government will also pay its share of the cost of your buyback.

Payment options
The buyback statement will also explain the available payment options and include a form members can use to select the option of their choice. Payment options include:

To choose the payroll deduction option, members must return the signed form by September 30, 2002.

Members who want to pay by lump sum must also return their option form, along with their payment, by September 30 to complete the buyback at the quoted cost. The cost of purchasing by lump sum will rise after the September 30 deadline, to reflect interest.

Why credit matters
The amount of credit you have in the OPSEU Pension Plan is important in several ways:

As a result, buying back the credit you missed during the strike could make a big difference to your pension and your retirement.

Planning to retire by October 31?
To receive credit for the strike period, members must normally complete their strike buyback before they leave the Plan or retire.

An exception has been made for members who retire on an immediate pension on or before October 31, 2002. In these cases, the Government has agreed to pay both the members' and the employers' cost for purchasing this service, under the "Return to Work Protocol" is signed with OPSEU.

If you are planning to retire on or before October 31, 2002 and have not started the termination process with your employer, please contact OPTrust Client Services at 416-681-6100 or 1-800-637-0024 to confirm your eligibility and make the necessary arrangements.

The OPS Strike and Missed Buyback Payments

The recent OPS strike has also had an effect on members in the OPS who were paying for a previous buyback through payroll deductions.

During the strike, buyback payroll deductions were suspended for all OPTrust members in the Ontario Public Service, whether they were on strike or not. As a result, more than 2,000 members missed four biweekly buyback deductions.

At the end of June, OPTrust sent these members a special statement showing the amount of the missed deductions and outlining the available options for making up the missed payments. In most cases, members have two options:

making a lump-sum payment no later than August 16, 2002, or
having their remaining buyback payments re-calculated to cover the missed amount.

If you missed payroll deductions for a previous buyback during the strike but have not received your statement, please call us.

The OPSEU Pension Trust has recently released its updated Proxy Voting Guidelines. The guidelines set out how OPTrust's representatives will vote on a broad range of issues that must be decided by the shareholders of the companies in which the OPSEU Pension Plan invests.

When OPTrust buys shares in a company, we also acquire the right to vote on issues that require shareholder approval. These issues can affect a company's direction and profitability. We therefore treat our voting rights as an important financial asset and vote all our shares.

To handle the growing volume of proxy votes efficiently, OPTrust has hired an outside firm to vote our shares. The Proxy Voting Guidelines set out how our representatives are to vote on questions such as:

The guidelines also address social and ethical issues, including shareholder proposals for disclosure and the adoption of International Labour Organization (ILO) standards.

As a major institutional investor, OPTrust takes an active interest in corporate governance issues. Our approach to voting the Plan's shares reflects our fiduciary responsibility to members and pensioners - and the goal of ensuring the long-term profitability of the companies in which we invest.

OPTrust's new Proxy Voting Guidelines are available in the Investment section of this site, or by calling 416-681-6100 or 1-800-637-0024.

An OPSEU member since 1976, Czekierda is the president of OPSEU Local 104 and serves as the union co-chair of the Ministry of Education's Employee Relations Committee.

For the past eight years, Czekierda has worked as a secretary for Residential Services at the Ministry of Education's Robarts School for the Deaf and Amethyst Demonstration School, in London. She previously worked as a counsellor at the Oxford Regional Centre, until its divestment from the Ministry of Community and Social Services in 1994.

"Older members have always been very keen about their pensions," Czekierda says. "Now younger members are becoming a lot more aware of the importance of a strong pension plan, too.

"The fact that OPSEU has an equal voice in how the Plan is run - and is able to decide how to use the members' share of the Plan's gains - matters to our members.

"As a Trustee, I see my role as bringing their perspective to the decisions that affect the Plan's future."

Answer: This depends on how OPSEU decides to allocate the members' and pensioners' share of the Plan's gains. The available options include improving benefits, reducing members' contributions or holding money aside in a contribution stabilization fund. OPSEU is currently surveying members and pensioners and is expected to make its decision in the fall. Both OPSEU and the Government of Ontario must sign any changes to the OPSEU Pension Plan text before they can take effect. We will provide the details of any changes - including whether Factor 80 is extended or not - on our Web site and in future issues of OPTions. (See pages 1-2 for more information.)

Question: Members are paying reduced contributions until November 30, 2002. Will this continue or will contributions go up in December?

Answer: In 1999, members' contributions to the OPSEU Pension Plan were temporarily reduced by 4% of their salary. This was paid for with gains from the Plan's 1996-1998 funding valuation. Contributions are set to return to the Plan's normal rate on December 1, 2002. OPSEU is now surveying members and pensioners on how to allocate their share of the Plan's gains. A contribution reduction is one of the available options. Once OPSEU has made its decision, OPTrust will inform you of any impact on your contribution rates.

Question: Will it make a difference if I decide not to buy back my strike service?

Answer: Yes. If you don't buy back credit for the strike period, this will reduce the amount of your pension when you retire. It could affect your eligibility for the Plan's early retirement options (Factor 80, Factor 90 and 60/20) or delay the date you would qualify. It may also affect your ability to qualify for post-retirement health and dental benefits, provided by your employer.

Question: If I worked during the strike will I still have to buy back credit?

Answer: Because your employer deducted pension contributions from your pay for any days you worked during the strike, you will have received credit for those days. OPTrust uses payroll data provided by your employer to determine which days were worked. If you were absent on other days due to the strike, you will have the option of buying back credit for the time you missed. OPTrust will provide you with the details, and your payment options, in a special statement to be mailed to you in August. (See pages XX for more information.)

Question: I was on parental leave during the strike, but my SUB allowance was interrupted. Do I have to buy back the strike time?

Answer: Under the "Return to Work Protocol" between the Government and OPSEU, your SUB allowance for the strike period will be paid retroactively. If you arranged to have pension contributions deducted from your SUB allowance prior to the strike, contributions will be deducted from your retroactive SUB payment. As a result, you will not have to buy back credit for the strike period. If you were not having pension contributions deducted from your SUB allowance, you have the option of purchasing credit for the whole period of your pregnancy/parental leave under the Plan's normal buyback rules.

Question: I have been off work on LTIP. Did the strike affect my pension contributions or credit?

Answer: If you were on LTIP before the strike and did not return to work until after the strike ended, your pension credit will not be affected. While you are on LTIP, your employer is responsible for paying your share of contributions, as well as theirs.