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In this issue
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Market conditions and the OPSEU Pension Plan
Flip to the business section in your newspaper on any given day, and you’re
likely to see the same message. So far, the year 2001 has seen a slowdown in the global
and North American economies, and investors are feeling the effects.
On the Toronto Stock Exchange, for example, the TSE 300 Index dropped by 16.4% between
January 1, 2001 and Labour Day. The TSE 300 tracks the stock performance of many of
Canada’s largest companies.
The same period saw a decline of 10.7% (in Canadian funds) in the Standard and
Poor’s 500 Index, which represents share prices on U.S. stock exchanges.
More recently, this trend has been reinforced since the tragic events of September 11.
Investment earnings
Of course, the OPSEU Pension Plan is not immune from general market conditions.
OPTrust uses a "weighted benchmark" – in effect our own composite index
– to track the average performance of the markets we invest in. Over the first eight
months of 2001, this benchmark fell by 7.1%.
While the Plan’s actual performance has bettered this benchmark so far this year,
OPTrust’s return on investment at the year-end is likely to be lower than in recent
years. In 2000, OPTrust’s annual investment return was 7%. Our average return for the
years 1995 through 2000 was 14%.
A long-term perspective
Like many individuals investing for their retirement, OPTrust’s main goal is
security and stable, long-term growth, rather than short-term speculation. The OPSEU
Pension Plan’s mandate is to ensure that funds are available to pay for members’
pensions now and into the future.
Unlike individual investors, however, the OPSEU Pension Plan has special mechanisms to
buffer the impact of shorter-term market declines in any given year.
"Smoothing"
One such mechanism is "actuarial smoothing." When OPTrust calculates the value
of the Plan’s assets that are available to pay for members’ pensions, we average
our investment earnings over a four-year period.
This means that three-quarters of any earnings from one year are held back as a
reserve, and "recognized" over the three following years. These unrecognized
earnings act as a cushion to reduce the impact of lower earnings or losses from other
years. Similarly, if the Plan were to experience a loss, this would also be averaged over
4 years.
Because of the Plan’s strong performance in 1998, 1999 and 2000, OPTrust had a
smoothing reserve of $706 million going into 2001. This will help offset the impact of
lower returns expected in 2001.
Diversification
Another advantage OPTrust has as an investor is the size of the OPSEU Pension Fund.
With $10 billion in assets in 2000, OPTrust is able to invest in a wide range of
international and domestic markets and in different types of investments. At the same
time, our professional investment managers pursue a range of different investment styles
and strategies.
This diversification helps the OPTrust to reduce the overall impact of lower returns in
individual markets or sectors, while taking advantage of growth opportunities. For
example, while Canadian and international stock prices have declined through 2001, the
Plan’s fixed income investments have delivered a positive return.
OPTrust's Asset Mix (at Dec. 31, 2000)
Looking ahead
It is still too soon to predict the Plan’s returns for the end of 2001, although
they are likely to be lower than in previous years. OPTrust’s investment performance
will be reported next spring in our 2001 Annual Report. The report will also provide an
update on the status of the Plan’s accounting surplus.
Future issues of OPTions will report in more detail on the Plan’s asset
mix, how our investments are managed, and how OPTrust monitors their performance. A
detailed list of OPTrust’s
significant investments as of December 31, 2000, is available on this site.
A special note
Together with our members and pensioners, the Trustees and staff of the OPSEU Pension
Trust were shocked and saddened by the attack on New York’s World Trade Centre and
the Pentagon in Washington, D.C. on September 11.
OPTrust is carefully monitoring the impact of this event on investment markets. As
always, the office of our Chief Investment Officer and our investment managers are
analyzing market conditions to protect the long-term interests of the OPSEU Pension Plan
Fund.
We express our sincerest condolences to all those affected by this tragedy.
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Contributing while on WSIB
Members who are off work due to a workplace injury and apply for benefits from
the Workplace Safety and Insurance Board (WSIB) are eligible to continue contributing to
the OPSEU Pension Plan and receive credit for the period of their leave.
Contributions to the Plan while on WSIB may be mandatory or optional. This depends on
the status of the member’s WSIB claim and whether he or she remains on the
employers’ payroll.
Automatic contributions
As long as the member is still paid directly by the employer, pension contributions
will be deducted automatically and sent to OPTrust.
In the Ontario Public Service, for example, your employer continues to deduct payroll
contributions:
- during the initial 30-day waiting period following the injury
- if the claim is still pending after 30 days
- if the claim is denied by WSIB and the member is converted to short-term sick leave
- up to the end of the 3rd month’s absence, if the claim is approved.
After the third month’s absence, members can receive their WSIB benefit through
the employer’s payroll if they have accumulated credits that can be used to
supplement WSIB up to 100% of their regular salary. In this case, contributions to the
Plan will continue as long as the member stays on the payroll.
After six months’ absence, members may apply for LTIP benefits. If the member is
entitled to LTIP, the employer will pay both the member’s and the employer’s
pension contributions.
Optional contributions
In some cases, however, OPSEU Pension Plan contributions do not continue automatically
for members who are on WSIB.
If the absence from work lasts longer than three months, members who do not have
credits to supplement their WSIB benefits will go off the employer’s payroll and
receive benefits directly from WSIB.
When this happens, members do not receive credit in the Plan for the remainder
of their WSIB leave unless they apply to OPTrust to continue making pension
contributions.
Once we receive your application, we will mail you a notice outlining the amount of
your contributions and your payment options. Your payments will be made directly to
OPTrust. Your employer will pay its normal contributions.
Buybacks and WSIB
Members who choose not to make pension contributions during their WSIB leave still
have the option of buying back credit for their leave. To buy back this service, you must
submit an application to OPTrust within 24 months of the last day of your leave.
The cost of a buyback is based on
- your salary rate at the time OPTrust receives the complete application
- the member contribution rate(s) in effect at the time of the leave, and
- the length of service being purchased.
Interest charges may also apply in some cases.
Depending how long the WSIB leave lasts, this cost can be substantial. In some cases,
members may find it less of a financial burden to continue making regular contributions
during their WSIB leave.
If you have any questions about contributing to the Plan while on WSIB, please contact OPTrust.
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Pregnancy, parental and adoption leaves
and your pension
If you are about to take a pregnancy, parental or adoption leave, you likely have
other things on your mind than your pension.
Still, it’s important to know that under the OPSEU Pension Plan and Ontario’s
Employment Standards Act (ESA) these leaves are considered eligible service for
pension purposes.
This means that you have the option of continuing to contribute and receive credit in
the Plan during your leave. In fact, under the ESA, members and employers are required to
make contributions to the Plan during pregnancy, parental or adoption leaves unless the
member elects in writing not to contribute.
Continuing your contributions
Before you start your leave, you must fill out OPTrust’s Option to Make
Pension Contributions while on LOA without Pay (OPTrust 1025) form with your
human resources representative. The application form will ask whether or not you want to
contribute during your leave.
The ESA provides for up to 17 weeks pregnancy leave and 35 weeks parental/adoption
leave. Under the OPSEU Pension Plan, these periods are considered leaves without pay. If
you choose to contribute during your leave, you will pay the normal contribution rate in
effect at the time.
If you decide to take an additional special leave and want to make contributions for
this period, your contributions will equal two times the members’ contribution rate.
Payment options
If you opt to continue your contributions and are eligible for a Supplementary
Unemployment Benefits (SUB) allowance from your employer, your contributions will be
deducted automatically from your SUB payments.
When your SUB allowance expires (or if you are not eligible) you will make your
contribution payments directly to OPTrust. Once we receive your application form,
we will send you a notice outlining the amount of your contributions and your payment
options.
Electing not to contribute
Some members may choose not to contribute during the leave. In this case, you will not
receive credit in the Plan for the period you are away from work. You will, however, have
the option of purchasing, or "buying back" credit for your leave when you return
to work.
To buy back this period of service, you must submit an application to OPTrust within 24
months of the last day of your leave. The cost of your buyback will be based on your
salary rate at the time OPTrust receives your complete application and the contribution
rates in effect during your leave.
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A report card on how we serve you
"Good work, but there’s still room for improvement." That’s
the message coming out of a recent survey of almost 350 members and pensioners who had
contacted OPTrust about their pension.
Members gave OPTrust an overall satisfaction rating of 7.5 out of 10. The survey
targeted members and pensioners who had dealt with OPTrust about their pensions recently.
Participants were asked to rate various aspects of OPTrust’s service.
OPTrust’s client service staff received high marks for their courtesy (8.5 out of
10), ability to provide information quickly (8.4), the accuracy of information provided
(8.3), sensitivity (8.3) and responsiveness (8.2).
Members gave a strong rating to how we keep you informed about your pension. For
example, among those who were referred to one of OPTrust’s publications, 87% found
them very or fairly helpful.
The survey also flagged areas where members would like to see improvement. The most
common source of dissatisfaction was the length of time taken to complete certain types of
transactions. In particular, members who had completed complex transactions – such as
buybacks, pension transfers and divestments – were more likely to feel that the
process took longer than expected.
OPTrust is already working to improve the turn-around time on the full range of member
transactions. For example, this summer a special project completed more than 2,000
transactions over and above our normal case processing activity. A separate project ending
earlier this year completed more than 4,000 backlogged transfers between OPTrust and the
Ontario Pension Board.
In the meantime, we are continuing to improve our computerized pension administration
systems to serve you faster and better. We will also maintain quick, toll-free telephone
access to our member services staff – providing the personal service you’ve told
us you value.
Going forward, we will continue seeking members’ input on how we’re doing,
where we’re improving, what areas need attention.
We would like to thank every member who responded to our survey – and encourage
those who are contacted in the future to give us their feedback. Your views matter!
Members give OPTrust’s member and pensioner services staff high marks
in recent satisfaction survey.
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Q: If I retire early and decide to start receiving CPP before age 65, will
this affect my OPTrust pension?
A: No. Under the Canada Pension Plan, the normal retirement age is 65. However, if
you retire early, you have the option of taking a reduced pension from CPP as early as age
60. Even if you start your CPP pension early, your OPTrust pension wi ll not be reduced for CPP integration until you reach age 65.
"CPP integration" reflects the fact that you pay lower contributions to
OPTrust for the portion of your earnings that is also covered by CPP.
The only time an OPTrust pension is integrated with CPP earlier than age 65 is in the
event of your death. Your eligible spouse's survivor pension is calculated as a percentage
of your CPP-integrated age-65 pension.
More information is available in the OPTrust booklet
Your Pension and the Canada Pension
Plan. To order a print copy, contact us.
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New OPTrust Web site highlights
The new OPTrust Web site gives you quicker access to key information about the
OPSEU Pension Plan.
The new site features:
- a fresh new look
- expanded content
- a new, more powerful version of our popular pension calculator
- a new navigation system
- an enhanced search engine
Improved navigation
Many of the improvements to the Web site reflect suggestions from members and
pensioners like you.
For example, the site is now organized into sections geared to the needs of three key user
groups - members, pensioners and employers. Other sections provide information on OPTrust,
the Plan’s investments and on-line access to key OPTrust publications.
New "members" section
Another improvement members and pensioners asked for is handy pull-down menus that
take users to the information they want in a single click. Key areas of the members’
section of the site include:
- a members’ "home" page
- a schedule of OPTrust’s upcoming pension information sessions and an on-line
registration form
- answers to frequently asked questions
- full text versions of the current edition of OPTions plus back issues
- OPTrust’s member booklets, fact sheets, annual reports and other publications.
Pension estimates calculator
One of the most popular features on the OPTrust site is our pension estimator.
With the launch of the new site, the estimator has been upgraded to:
- estimate your future pension and earliest eligibility date for an unreduced pension from
the Plan
- estimate the reduced pension you could receive after age 55, if you do not qualify for
an unreduced pension
- estimate your pension if you retire at age 65 - or at any other date you choose
- show how your estimated pension will be affected by integration with the Canada Pension
Plan at age 65
- show how working part-time affects your pension and your eligible retirement date.
The new estimator is driven by the same software that OPTrust uses to calculate
members’ pensions. This makes it a more accurate financial planning tool for you. To
make the best use of the estimator, we recommend that you use the information provided on
your 2000 OPTrust Annual Pension Statement.
However, before you make any major pension-related decisions, we recommend
that you contact OPTrust directly to make sure you have accurate information and
understand the plan provisions that affect you.
Other improvements
The redesigned site includes a number of other new features, such as:
Visiting the site regularly is a great way to keep up to date on your pension plan. We
enclosed a magnet showing the site address with your print version of this issue of OPTions.
Keep the magnet somewhere handy, bookmark our site and visit us often.
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