The quarterly newsletter for members of the OPSEU Pension Trust
Fall 2008, Number 45
In this issue...
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OPTrust identifies funding surplus and eliminates deficit
Good news about your pension plan. OPTrust’s most recent actuarial valuation has identified a funding surplus of $470 million in the Plan, as of December 31, 2007. The surplus is the result of $841 million in gains realized over the three years from 2005 to 2007. Part of the gains was also used to eliminate the remainder of the Plan’s $428 million funding deficit.
Sponsors reach a decision
OPSEU and the Government of Ontario have chosen to allocate their shares of the surplus to the Plan’s stabilization funds. As a result, the stabilization funds have increased to $383 million for OPTrust’s membership, and $495 million for the government.
The sponsors’ decision to increase the Plan’s stabilization funds is a prudent one. With the increase in market volatility since mid-2007 – and the possibility of significant investment losses in 2008 – setting aside substantial reserves is one important way to manage the risk of future funding shortfalls.
These funds can be used by each sponsor to limit or avoid contribution rate increases that would be required if the Plan experiences a funding loss. This could happen if the Plan’s investment results fall short of OPTrust’s 6.75% target return, or if the cost of members’ and retirees’ pensions increases faster than expected. The stabilization funds can also be used to reduce member and employer contribution rates or enhance plan benefits in the future.
Actuarial valuation
OPTrust’s primary goal is to ensure that money is available to pay current and future retirees’ pensions over their lifetimes, while maintaining stable contribution rates for plan members and employers.
To confirm our ability to meet our pension obligations, OPTrust engages independent actuaries to prepare regular funding valuations of the Plan.
While OPTrust carries out an actuarial valuation every year, the valuation must be filed with Ontario’s pension regulators at least once every three years. These valuations provide a snapshot of the Plan’s funded status and a tally of gains or losses experienced since the last valuation.
Shared risks and rewards
When the OPSEU Pension Plan was established, its sponsors – the Government of Ontario and the Ontario Public Service Employees Union (OPSEU) – agreed that any gains or losses would be shared between the Government and the Plan’s members and pensioners.
Deficit eliminated
The Plan went from a deficit of $428 million in 2004 – due to poor investment returns between 2000 and 2002 – to a surplus of $470 million at the end of 2007. The shortfall in 2004 would have normally triggered an immediate increase in pension contribution rates. No increase was required because as sponsors, both OPSEU and the Government of Ontario had set aside a substantial portion of the past funding gains in a separate rate stabilization fund. Since 2002, these funds have been used to keep member and employer contribution rates stable.
Online survey rated your opinion
In August 2008, OPSEU surveyed more than 81,000 members and pensioners to rate seven proposed options on temporary and permanent benefit improvements. OPSEU looked at a cost-efficient, convenient and secure way to distribute the survey and opted to go online, given the short timeframe to file the valuation.
OPTrust worked with OPSEU to deliver the survey in its secure Online Services website. It was designed to prevent duplication and make the tally of results more efficient and reliable. OPTrust did not share individual records or responses with OPSEU, only statistics for each question.
Rate Stabilization Fund
OPTrust’s rate stabilization fund is a reserve of funds that were set aside from past gains by the Plan’s sponsors, OPSEU and the Government of Ontario. OPTrust has been able to avoid increasing member and employer contribution rates from rising above normal rates based on the allocation of funds from past gains.
While other public sector pension plans in Ontario saw contribution rates increase over the last several years, OPTrust was able to maintain normal contribution levels. This is due in part to the Plan’s prudent management of setting aside a rate stabilization fund.
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Responsible investment a priority at OPTrust
In an OPTrust survey conducted earlier this year, over 40% of members indicated that they want more information on OPTrust’s approach to environmental, social and governance (ESG) issues and what we’re doing in this area.
OPTrust recognizes that ESG issues have the potential to affect the performance of our investment portfolios. We have taken an active leadership role to integrate ESG factors within our investment decision making practices in several ways.
In 2007, the Trustees approved changes to the Plan’s Statement of Investment Policies and Procedures identifying ESG concerns as factors to be considered in the Plan’s investment activities.
Secondly, OPTrust has developed a new Environmental, Social and Governance program headed by our Investment Division.
Earlier this year, we appointed a manager to spearhead the gradual integration of our ESG strategy into OPTrust’s operations by working with the Board of Trustees, external fund managers and advisors.
Lastly, OPTrust has been a longstanding participant in active ownership practices. For many years, we have voted our proxies according to custom guidelines that are based on good practices of corporate governance, shareholder rights, and social and environmental issues.
Look for more information and developments on this new program in a future issue of OPTions when we expand on the work conducted to promote corporate social responsibility within our operations.
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Service Spotlight: Helping members increase the value of their pension
At OPTrust we’ve developed a service delivery model to target members and retirees with the information they need at key stages in their lives. Our targeted approach means you have more information to help you understand the value of your pension and how it may increase in retirement.
Whether it’s buying back past service or understanding various retirement options, we are always looking at initiatives to keep you informed about one of the most valuable components to your retirement income.
In June, OPTrust sent over 7,000 reminder buyback statements to members who did not purchase credit during the Ontario Public Service strike between March 13 and May 5, 2002. Buying back credit for missed service may increase the value of your pension at retirement or help you qualify sooner for one of the Plan’s early retirement options.
During September, OPTrust mailed 9,000 letters to members aged 55 and older, providing them with pension estimates and possible retirement dates up to age 65. The statement gives members who are planning to retire in the next few years another tool to prepare for retirement.
Of course, if you have a question about your pension and when you can retire, you can send a secure e-mail through Online Services or at email@optrust.com.
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New booklet helps you plan for retirement
Retirement is a major life decision that involves careful planning and a long-term strategy. So you want to make sure you get it right and know what steps are involved in the retirement process.
You can start with our new booklet Your Pension and Planning Your Retirement available online or in print. The updated booklet is designed formembers who are planning to retire inthe next couple of years and outlines:
- how to get started on your retirement plans
- key steps involved
- what you can expect in retirement
- insured benefits coverage
- CPP and OAS benefits.
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You Asked…
Question: I’m buying my first home and plan to withdraw up to $20,000 from my RRSP. Can I take out money from my OPTrust pension to put towards the down payment?
Answer: No. Your OPTrust pension is unlike an RRSP in that way. You cannot withdraw your pension funds for personal use. However, your pension contributions may be transferred to a locked-in retirement account or similar retirement savings arrangement if you leave the Plan before retirement and before age 55.
Question: Both my spouse and I are members of the OPSEU Pension Plan. However, I’m planning to leave the OPS to start my own business. If my spouse remains in the Plan for more than ten years, will we both qualify to receive insured benefits in retirement?
Answer: Yes, provided that your spouse retires with at least 10 years of credit in the Plan or continuous employment with some credit in the Plan for at least some part of each of those 10 years and you remain married. You would qualify as an eligible dependent under the family coverage.
Question: I have a coworker who works part-time for the LCBO. Do they have the option to join the OPSEU Pension Plan?
Answer: Yes. If your colleague is an unclassified, contract or nonpermanent employee within the Ontario Public Service, the LCBO or another OPTrust employer, he or she has the option to join the Plan. Please encourage your colleague to talk to human resources and visit the OPTrust website to learn more under the section “Join the Plan.”
Question: I’m age 60 and qualify for the 60/20 early retirement option. Do I have to retire?
Answer: No, you don’t have to retire even though you qualify for an early retirement option. You can continue working and earn additional credit in the Plan to the end of the year you reach age 71. The normal retirement age in the Plan is 65.
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New transfer agreement means more options for your pension
Your OPTrust pension is portable, meaning that if you leave the Plan and take a job with a new employer you may be able to transfer the value of your pension.
Under a new national transfer agreement for public sector pension plans, you now have more options to take your pension with you, if you change employers before retirement. Effective June 30, 2008 an additional 10 pension plans have been added to the list of 15 pension plans across the country that participate in a national transfer agreement.
New participating pension plans
You may be able to transfer the value of your OPTrust pension, if you take a new job with one of these employers:
- British Columbia College Pension Plan
- British Columbia Municipal Pension Plan
- British Columbia Public Service Pension Plan
- British Columbia Teachers’ Pension Plan
- Province du Québec Commission Administrative des Régimes de Rétrait et d’Assurances
- Province of Manitoba Civil Service Superannuation Fund
- Province of New Brunswick Public Service Superannuation Plan
- Province of Newfoundland and Labrador Public Service Pension Plan
- Province of Nova Scotia Public Service Superannuation Plan
- Province of Prince Edward Island Civil Service Superannuation Plan
Other participating plans
The following pension plans already participate in transfer agreements with OPTrust:
- Colleges of Applied Arts & Technology Pension Plan (CAAT)
- Electrical Safety Authority Pension Plan
- Federal Government Public Service Pension Plan
- Hospitals of Ontario Pension Plan (HOOPP)
- Hydro One Pension Plan
- Independent Electricity Market Operators Pension Plan
- Ontario Municipal Employees Retirement System (OMERS)
- Ontario Power Generation Pension Plan
- Ontario Public Service Pension Plan (OPB)
- Ontario Teachers’ Pension Plan (OTPP)
- OPSEU Staff Pension Plan
- Pathways to Independence
- St. Joseph’s Health Centre Pension Plan
- St. Michael’s Hospital Pension Plan
- Workplace Safety & Insurance Board Pension Plan.
Each transfer agreement sets out strict application deadlines. If you are interested in transferring your credit to another pension plan, you must submit an application to your new plan within the specified time limit. OPTrust will then work with your new plan administrator to complete the transfer.
Transfer value
Other pension plans may provide different benefits (e.g., early retirement options, survivor benefits, inflation protection). As a result, the actuarial values may vary.
In some cases, your credit in the OPSEU Pension Plan may be worth more, less or the same as the equivalent credit in your new plan.
If your OPTrust pension has a higher value, you may be eligible to transfer the remaining value of your OPTrust pension to a locked-in retirement account (LIRA). If your OPTrust pension has a lower value, you will have the option of paying the difference or accepting reduced credit in your new plan. The relative value of your credit in the two plans – and your available options – will be calculated when you apply for the transfer. You will usually have 90 days to make your decision.
Not sure if you qualify? Contact OPTrust to find out if a potential employer is part of the public sector pension plan Reciprocal Transfer Agreement. The agreement does not apply to divested members.
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Online transactions on the rise
Canada has become one of the “most developed” online banking markets in the world, according to ComScore, Inc., a global internet service provider. ComScore’s report released in July 2008 indicated that 67.1% of Canadians banked online in April 2008, surpassing both the UnitedKingdom and the United States.
With the growing confidence in online banking, OPTrust has noticed that members are increasingly turning to the Internet for financial and personal transactions. In a survey OPTrust conducted on online usage, we found that:
- 73% of members banked online
- 51% of members file taxes online
- 40% of members use online financial planning tools.
In fact, in 2007 almost 20% of members’ pension transactions, (e.g. updating beneficiaries and mailing addresses, applying to buyback credit, etc.) were completed through our secure Online Services.
1Canadians embrace online banks,
The Toronto Star, July 11, 2008
Since launching Online Services, OPTrust’s secure website, registration has grown to over 20,000 member and retiree accounts, with new registrations every month. Registered members are discovering while online they have the options to:
- view and print Annual Pension Statements
- view and print Annual Buyback Statements
- update beneficiary information
- update e-mail and mailing addresses
- send and receive secure messages
- transfer electronic files and documents to OPTrust
- change communication preferences to receive OPTions online only.
Not registered yet? Visit the Online Services section to start the registration process. Or contact our Member and Pensioner Services Staff to walk you through.
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OPTions e-updates to keep you in the know
Want to know about changes in the Plan before each newsletter? Be the first to find out by signing up to receive our new OPTions e-update. OPTrust has introduced OPTions e-updates to keep you informed of what’s going on with your pension plan between each newsletter issue. For example, if a new trustee is appointed or there are plan changes, we'll send you an e-update with the highlights. The more detailed story will appear in the next issue of OPTions.
Anyone with an Online Services account willautomatically receive ane-update in between each newsletter.
Not registered yet? Visit our website to complete your registration for Online Services or contact our Member and Pensioner Services staff to walk you through the process.
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Retirement Options: When can you retire?
Wondering when you can retire? Do you know what retirement options are available? If you have two or more years of credit in the Plan, you are entitled to a pension based on your credit and best five-year average annual salary. The normal retirement age in the Plan is 65. But you can retire earlier if you qualify.
Early retirement
You may be eligible to retire early with an unreduced pension if you qualify for:
- Factor 90 – your age and credit total at least 90.
- 60/20 – you are at least age 60 years old with 20 years of credit.
Reduced pension
You can retire as early as age 55. However, your pension is reduced by 5% for each year you are away from age 65. For example, if you retired at age 62 and did not qualify for 60/20 or Factor 90, your pension would be reduced by 15%.
Ressources disponibles en français
Êtes-vous un participant ou une participante bilingue? Préféreriez-vous recevoir OPTions en français? Vous pouvez choisir une version électronique ou imprimée. Si vous voulez une copie de la version française d’OPTions, veuillez envoyer un courriel à communications@optrust.com ou ouvrir une session dans votre compte de Services en ligne pour transmettre un message sécurisé à la FRRS.
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New Chair and Vice-Chair
As part of OPTrust’s governance structure one Government appointee and one OPSEU appointee fill the positions of Chair and Vice-Chair, with the roles alternating between Government and OPSEU appointees every two years.
In September, Tony Ross became the new Chair of OPTrust’s Board of Trustees. Ross was first appointed to the Board in 2000 by the Government of Ontario. Doug Paolini, an OPSEU appointee, was appointed Vice-Chair of the Board. Paolini first joined the Board in 2007. David Rapaport the former Chair remains on the Board of Trustees.
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Posted on Oct 26, 2008
