• OPSEU Allocates Plan Gains
• Plan Changes – Who Is Covered?
• Temporary Early Retirement Options Extended
• Permanent Changes = Bigger Pensions
• Contribution Reduction Phased Out over 3 Years
• $146 Million Set Aside for the Future
• How the Gains Are Shared
• Plan Improvements and Your Taxes
• 2002 OPS Strike: Did You Complete Your Buyback?
• Buying Back Credit for the 1996 OPS Strike
• Coming in 2003…Buyback tax receipts, annual statements
• Changes to the Board of Trustees
• OPTrust Welcomes New Members at OLGC
• You Asked… Answers to Questions about the Latest Gains

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It’s official. The package of improvements to the OPSEU Pension Plan selected by OPSEU earlier this fall is now in effect.

The changes include an extension of the Plan’s Factor 80 early retirement option from November 1, 2002 to March 31, 2005. The temporary “points off” program, which increases the pension of those who retire early with a reduced pension, has been extended to December 31, 2005.

Plan gains are also being used to continue a modified contribution reduction for OPTrust members over the next three years, while $146 million has been set aside to stabilize member contributions against possible losses in the future.

Finally, two permanent changes to the way OPTrust pensions are integrated with the Canada Pension Plan will mean increased pensions for current and future retirees, and for the survivors of retirees who die before age 65.

OPSEU chose the package of improvements after reviewing survey responses from more than 15,000 OPTrust members and pensioners. The survey was mailed to every active OPTrust member, divested member and current and deferred pensioner in late July.

The changes selected by OPSEU will be paid for with the members’ and pensioners’ $467 million share of Plan gains. Total gains of $867 million were identified in the Plan’s most recent funding valuation, covering the years 1999, 2000 and 2001. For more information on the Plan gains, see OPTions #26.

In November, both sponsors – OPSEU and the Government of Ontario – signed the plan amendments needed to implement the changes.

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

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.

Divested members not covered
The package of plan improvements does not apply to 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.

As a result, Factor 80, the extended “points off” program and the changes to CPP integration and survivor pensions do not apply to members who were divested before December 1, 2002. For this group, Factor 80 expired on October 31, 2002.

Current divested members remain eligible for all 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.

Future divestments
Under Ontario’s current pension law, divested members are eligible for all OPTrust benefits that are in place on the date their divestment takes effect. As a result, 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.
 

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The plan improvements chosen by OPSEU include the extension of two temporary early retirement options. As a result, qualifying members will be able to retire sooner and with a bigger pension from OPTrust.

Factor 80
OPTrust’s voluntary Factor 80 early retirement option has been extended for active OPTrust members. Under Factor 80, members can now retire with an unreduced pension if their age plus their credit total exactly 80 years on or before March 31, 2005. About 3,100 members will be eligible for Factor 80 during this period.

OPTrust will send personalized letters to members whose pension records indicate that they may qualify for Factor 80 by June 30, 2003. If you will qualify later, your Factor 80 date will be listed on your 2002 Annual Pension Statement, which will be mailed to you in spring 2003.

There are strict time limits for retiring under Factor 80. If you think you may qualify within the next six months and don’t receive a personalized notice by January 31, 2003, please contact OPTrust as soon as possible to confirm your eligibility.

“Points off”
The “points off” program for members who retire early with a reduced pension has also been extended by 13 months, to December 31, 2005.

The OPSEU Pension Plan allows members who are 55 or older when they leave their jobs – and who don’t qualify for an immediate unreduced pension – to take a reduced pension before age 65. Normally, these members’ pensions would be reduced by 5% for each year they are under 65. Under “points off,” the reduction is based on the number of years the member would have needed to reach the earliest permanent unreduced retirement option (Factor 90, 60/20 or age 65) if he or she had continued working.

“Points off” applies to both active members and deferred pensioners who terminate employment at age 55 or older and take a reduced pension before December 31, 2005.

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The package of plan improvements selected by OPSEU includes two permanent changes that will increase the size of your future OPTrust pension.

A higher pension at age 65
Your OPTrust pension is “integrated” with the Canada Pension Plan (CPP). This means that the pension you receive from OPTrust is reduced when you reach age 65. This is the age at which members usually start to receive a pension from CPP.

One of the improvements to the Plan changes the formula used to calculate this “CPP offset”. Starting December 1, 2002, the reduction will be based on a factor of 0.655%, down from 0.675%.

The result is a smaller CPP offset – and a larger OPTrust pension at age 65 for every active member of the Plan.

The change to the CPP offset also applies to OPTrust’s current and deferred pensioners and to survivor pensions. About 6,500 pensioners who have already reached 65 will see an immediate increase in their OPTrust pensions, effective December 1, 2002. Younger retirees and deferred pensioners will benefit from the smaller CPP offset when they reach 65.

Increased survivor pensions
A related change improves survivor pensions when an OPTrust retiree dies before age 65. In the past, these survivor pensions were calculated based on the pension the retiree would have received at age 65, after CPP integration. With the change, these survivor pensions will not be integrated with CPP until the date on which the deceased pensioner would have turned 65.

Note: This change does not affect survivor benefits in cases where an OPTrust member dies before retirement.

A higher commuted value
The two permanent benefit changes also affect the amount that terminating members can transfer into a locked-in RRSP. If you leave your job with an OPTrust employer before age 55, you have the option of:

• leaving your money in the OPSEU Pension Plan and taking a deferred pension, or
• transferring the “commuted value” of your pension to a locked-in RRSP.

The commuted value equals the present, lump-sum value of your future OPTrust pension. By increasing your age-65 pension and the pension payable to your survivors, the permanent benefit changes increase the amount that you can transfer out of the Plan. This applies to active members who leave the Plan on or after December 1, 2002.
 

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Wondering how the plan changes affect your pension? Just visit OPTrust’s online pension estimator to find out.

The estimator has been updated to reflect the current benefit improvements. With a few key strokes, you’ll be able to estimate your:

• Factor 80 pension and eligibility date, if you qualify before March 31, 2005
• early reduced pension under the extended “points-off” program
• pension at age 65, with the lower CPP offset
• spouse’s survivor pension if you die after retirement.

If you were divested before December 1, 2002, you can use the estimator to project your pension under the Plan rules that apply in your situation.
 

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A portion of the gains is being used to continue a partial contribution reduction for active members over the next three years.

Since 1999, your OPTrust contributions have been reduced by 4% of your earnings. This reduction was set to expire on November 30, 2002. With the new gains-related changes, the contribution reduction will be phased out gradually, with contributions rising annually by 1% of earnings, starting with the pay period that includes December 1, 2002.

Your OPTrust contributions are now scheduled to return to the normal rate as of your December 1, 2005 pay period. The normal contribution rate is 8% of earnings. These contributions are integrated with the Canada Pension Plan (CPP). This means your OPTrust contributions are lower for the part of your salary that falls between CPP’s Year’s Basic Exemption (YBE) and the Year’s Maximum Pensionable Earnings (YMPE).

New Contribution Rates

* The YBE and YMPE are set each year by CPP. The YBE for 2002 is $3,500. The 2002 YMPE is $39,100.

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As well as improving benefits and reducing contributions, OPSEU has set aside $146 million to stabilize contributions in the future. This brings the total value of the member’s contribution stabilization reserve to $149 million.

If the OPSEU Pension Plan were to experience a loss, this reserve would be used to reduce the impact on members’ contribution rates. With today’s challenging investment climate, this means added security for OPTrust members.

Shared risks and rewards
The OPSEU Pension Plan is jointly sponsored by OPSEU and the Government of Ontario. Any gains identified in the Plan’s three-year actuarial funding valuations are divided between the Government and OPTrust’s members and pensioners.

The same principle would apply if a future valuation showed a loss in the Plan. Responsibility for the loss would be shared – and any funding shortfall would be made up by an increase in both the members’ and the employers’ contribution rates.

Stabilizing member contributions
In the event of a loss, the stabilization reserve would be used to offset all or part of the members’ share of the funding shortfall, reducing the impact on members’ contribution rates. If a contribution increase were still required, the payments to make up the deficiency would be spread out over a 15-year period, to further cushion impact on members’ incomes.

Funding outlook
It is still too soon to predict the results of the Plan’s next three-year funding valuation, due in mid-2005. However, any investment losses, including a deferred loss of $192 at the end of 2001, will reduce any gains that may be identified.

In the meantime, OPTrust’s Board of Trustees reviews the Plan’s gains and losses annually and actively monitors the Plan’s financial status on an ongoing basis. OPTrust’s financial results for 2002 will be reported to members and pensioners in April 2003.
 

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Total gains of $867 million were identified in the OPSEU Pension Plan’s most recent three-year actuarial valuation, covering the years 1999-2001. Under the terms of the Plan, these gains are shared between OPTrust’s members and pensioners and the Government of Ontario.

The members’ and pensioners’ share of current gains is $467 million, after a reduction of $6 million to cover the cost of benefits negotiated between OPSEU and the Government this spring.

The Government’s unallocated share of the gains is $297 million. This reflects reductions of $33 million to cover the employers’ cost for the negotiated benefit improvements and $63 million to pay down the Plan’s remaining initial unfunded liability. The OPSEU Pension Plan is now fully funded.

The Government can use its gains to improve benefits, reduce employer contributions or establish a contribution stabilization fund for employers. The province is still considering its options for the employer share of the Plans’ gains.
 

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Under Canada’s Income Tax Act, the pension benefit you earn each year reduces your RRSP contribution room for the following year. This also applies when permanent changes to the Plan increase the value of your earned pension.

The change in the Plan’s CPP offset increases the value of your OPTrust pension. As a result, OPTrust must calculate a “past service pension adjustment” (PSPA) to reflect this additional benefit. This PSPA will reduce your available RRSP contribution room for the 2003 tax year.

The maximum PSPA from the recent plan changes is $900. This will apply to members whose income was at or above the Canada Pension Plan’s YMPE for every year between 1990 and 2001. (The YMPE was $28,900 in 1990 and rose to $38,300 in 2001.) Your PSPA will be smaller if you earned less than the YMPE or did not contribute to the Plan for part of this period.

OPTrust will send you a PSPA notice in early 2003, for your records. You do not need to report PSPAs on your income tax return. Instead, we will report your PSPA directly to the Canada Customs and Revenue Agency. CCRA will take your PSPA into account when calculating your RRSP contribution limit for 2003. This will be listed on the 2002 Notice of Assessment you will receive from CCRA.

PSPAs will be sent to all active members, deferred pensioners and OPTrust retirees. If your total PSPA is less than $50, it will not be reported to CCRA, and your RRSP contribution room will not be affected.
 

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In August, OPTrust mailed almost 30,000 special statements to members in the Ontario Public Service (OPS) who were affected by the 2002 OPS strike.

The personalized statements listed the amount of pension credit that each member missed due to the strike, which took place between March 13 and May 5, 2002. The statements also showed the cost of buying back the missed credit and offered members two interest-free payment options.

Almost 20,000 members responded by the September 30 deadline for buying back the strike period interest-free. For those who selected the one-time payroll deduction option, the buyback payment was deducted from your pay on November 21, 2002.

Didn’t return your “payment options” form?
If you didn’t return your payment options form, you can still buy back the credit you missed during the strike. This also applies to members who missed work during the strike but may not have received a statement from OPTrust.

Buying back this credit will ensure that your OPTrust pension – and your eligibility for the Plan’s early retirement options – is not affected by the time you were away from work.

To complete your OPS strike buyback, simply contact OPTrust Member and Pensioner Services at 416-681-6100 in Toronto or toll-free at 1-800-637-0024. Our staff will confirm the cost of your buyback, including interest. Payment can be made in a lump sum or by personal cheque or money order.

Payment time limits
To simplify the buyback process, OPTrust is treating all members who were affected by the 2002 OPS strike as having applied to purchase the strike service. As a result, affected members have up to 10 years and 3 months – until November 30, 2012 – to pay for their 2002 OPS strike buyback, plus interest. If you leave your job or retire, you must complete payment before you leave the Plan to receive credit for this period.

If you haven’t made your buyback payment yet, it’s a good idea to do so as soon as possible. If you send your payment to OPTrust by April 30, 2003, your buyback will not require approval by the Canada Customs and Revenue Agency.

Completing your buyback now is the best way to make sure you don’t leave it until it’s too late.

OPTrust mailed special buyback statements to almost 30,000 members whose credit was affected by the 2002 OPS strike.
 

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OPTrust’s 10-year, 3-month buyback payment time limit also applies to members who missed credit during the 1996 OPSEU strike in the OPS.

After the 1996 strike, all affected members were deemed to have applied to buy back credit for the strike period. More than 25,000 members took advantage of special payment options and purchased this credit. However, several thousand other members did not complete their strike buyback.

Under the OPSEU Pension Plan’s buyback rules, these members are still eligible to purchase credit for the 1996 strike.

To buy back this service you must still be a contributing member of the Plan, and you must complete your payment, including interest, by March 31, 2007. For more information, please contact OPTrust Member and Pensioner Services.
 

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Did you make a buyback payment in 2002? If so, OPTrust will be sending you important information in early 2003.

Income tax receipts
Your buyback payments, like your regular pension contributions, are tax deductible. If you made a buyback payment in 2002 – including for the OPS strike period – OPTrust will send you an official income tax receipt by the end of February, 2003. You should report your buyback contributions on your 2002 income tax return.

Note: income tax receipts are not issued for buyback payments made by transferring funds from an RRSP, which are not tax deductible.

Annual Buyback Statements
If you are continuing to make buyback payments as of December 31, 2002, you will also receive an Annual Buyback Statement from OPTrust. The statement will report on the status of your buyback, including how much credit you are buying, the total cost, your 2002 payments and your outstanding balance at year-end. These statements will be mailed in February 2003. Statements will not be sent to members who completed their buyback payments in 2002, including those who bought back credit for the OPS strike.

Your 2002 Annual Pension Statement
Any buyback payments made over the year will also be reflected in your 2002 Annual Pension Statement (APS). The APS will show:

• your buyback contributions and the total credit you purchased in 2002
• the increase in your earned pension over the year
• your projected pension and retirement dates, assuming you will complete any outstanding buyback payments.

OPTrust will mail your 2002 APS between April and late June, 2003.
 

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A new Chair and Vice-Chair have been elected to head OPTrust’s Board of Trustees for the next two years. David Rapaport, an OPSEU appointee to the Board, was named Chair as of November 2002. Stanley F. Sanderson, an appointee of the Government of Ontario, takes on the role of Vice-Chair.

Rapaport was selected as a Trustee by OPSEU in 2001 and has been a member of the Board’s administration and investment committees and its adjudication panel. As Board Chair, he will head the administration committee and continue to serve on the investment committee

An OPSEU activist for more than 15 years, Rapaport served as a member of the union’s executive board for six years at the time the OPSEU Pension Trust was created. He works as a Project Leader and Systems Analyst with the Ministry of Education in Toronto.

Sanderson returns to the role of Vice-Chair after serving as the Board’s Chair since 2000. Appointed to the Board in 1997, he was Vice-Chair for two years starting in 1998 and has chaired both the Board’s administration and investment committees.

Sanderson is a retired Vice-President and Senior Financial Advisor at Assante Capital Management. He will continue to chair the Board’s investment committee, and will sit on the administration committee and the adjudication panel.

The OPSEU Pension Trust is jointly sponsored by OPSEU and the Government of Ontario. Each sponsor names five volunteer trustees to the Board, which is responsible for overseeing the investment of the Plan’s assets, the administration of members’ and pensioners’ benefits and the provision of quality service to OPTrust’s clients. Every two years, the roles of Chair and Vice-Chair alternate between a Government and an OPSEU appointee.

New Trustee Brings Board to Full Strength
Deborah Stark has been appointed to the OPTrust Board by the Government of Ontario. She is the Assistant Deputy Minister for Research and Corporate Services with Ontario's Ministry of Agriculture and Food in Guelph, Ont. Stark’s appointment fills a vacancy created by the departure last year of Paul Scott, who served as a Trustee since 1996.

Other Trustees include: Bob Bellamy, Jennifer Brown, Alicia Czekierda, Heather Gavin, Don Jordan, Daniel Kott, David Rapaport (Chair), Tony Ross and Stan Sanderson (Vice-Chair).

David Rapaport, Chair, (left) and Stan Sanderson, Vice-Chair, will head the OPTrust Board of Trustees for the next two years.


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OPTrust is welcoming its three newest groups of members to the OPSEU Pension Plan. The new members are security officers employed by the Ontario Lottery and Gaming Corporation (OLGC) Windsor Slots, OLGC Fort Erie Slots and OLGC Thunder Bay Charity Casino.

The three groups transferred membership from the Public Service Pension Plan to OPTrust earlier this year, following OPSEU’s certification as their bargaining agent. All permanent OLGC employees at the three locations who are represented by OPSEU are required to join the OPSEU Pension Plan. As in all workplaces covered by the Plan, contract and casual employees may enrol voluntarily starting from their first day of employment.

OPTrust staff recently delivered a series of presentations to welcome these new members and introduce them to features of the OPSEU Pension Plan. These include the benefit enhancements and the extended contribution reduction that took effect as of December 1, 2002.

At OPTrust, we are looking forward to serving these members now and into the future.
 

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 Answer: Every three years, OPTrust’s actuaries prepare an “ actuarial funding valuation” of the OPSEU Pension Plan, which is filed with Ontario’s pension regulators. This independent study compares the growth in the Plan’s assets to the anticipated cost of members’ and pensioners’ benefits. Gains result when the Plan’s investments grow more quickly than its liabilities. If assets grow more slowly than needed to fund the Plan, the result is an actuarial loss.

Question: Why weren’t the gains just paid to us in cash?

 Answer: Under the terms of the OPSEU Pension Plan, gains cannot be paid out in cash. Instead, the members’ and pensioners’ share of gains can be used to:

• pay for temporary or permanent benefit improvements
• reduce members’ contributions, and/or
• set aside a reserve to stabilize contributions in the event of a future loss.

As a Plan sponsor, OPSEU is responsible for deciding how to use the members’ and pensioners’ share of gains.

Question: When is the next funding valuation?

Answer: The Plan’s next funding valuation will cover the years 2002, 2003 and 2004. The results will be available in mid-2005.

Question: I was divested in 1998 and started receiving an OPTrust pension in 2000. Do I get the benefit improvements?

Answer: Yes. Since you were receiving an OPTrust pension before December 1, 2002, your pension at age 65 will be higher because of the improved CPP offset. You also have the security of knowing that if you die before age 65, your survivor’s 60% pension will not be reduced for CPP integration until the date you would have turned 65.

Question: I left my job and terminated membership in the OPSEU Pension Plan in 2001. I’m now thinking of taking my commuted value out of the Plan. Do the changes affect how much I can transfer?

Answer: No. There is no change in your commuted value if you terminated membership before December 1, 2002. Your CV is based on the pension benefits in effect at the time you terminated. However, if you take a deferred pension, the improvements to the Plan’s CPP offset and post-retirement survivor benefits will apply when you start to collect your pension from OPTrust.

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