• OPTrust Launches Online Services
• Coming Soon: Your 2003 Annual Pension Statement – Online
• 2003 Buyback Statements and Tax Receipts
• New Online Calculator Estimates Your Total Retirement Income
• How OPTrust’s Service Measures Up
• Beating the Case Backlog
• OPTrust’s Investment Strategy: Global Equities
• Funding Update: Past Investment Losses May Affect Future Contributions
• Facts About… Your “Defined Benefit” Pension Plan
• Retirees’ and Divested/Deferred Members’ Pensions Increase by 3.3% for Inflation
• You Asked… “Merit Pay” and Your Pension

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OPTrust has introduced a new package of Internet-based services for members and pensioners. “Online Services” is built using a secure, password-protected section of our Web site, and is personalized for each user.

Once you register for Online Services, you will have access to your own personal home page. From there, you will be able to check important information about your OPTrust pension, carry out certain transactions and communicate directly with OPTrust staff.

The service is available to both active and divested members, as well as OPTrust pensioners.

OPTrust’s Online Services lets you check and update your pension information – anytime, anywhere.

Update your records online
Online Services is being developed in stages. Phase one, which is already live on the OPTrust site, allows you to:

• sign up and select your secret password
• check and update your pension beneficiary information
• update your mailing address, phone and e-mail contact information
• choose whether you want to receive OPTrust publications – including your OPTions newsletter – by mail or electronically through the Web site.

Secure messaging
Starting in February, new functions will include secure two-way messaging. This will let you send and retrieve secure electronic messages from OPTrust. Unlike normal e-mail, messages sent through Online Services use state-of-the-art encryption, to ensure the privacy of your personal information.

In April, you will be able to pick up your 2003 Annual Pension Statement online. (See below for more information.)

Services for retirees
OPTrust pensioners will also be able to view and update:

• tax information they provided on their TD1 form,
• banking information for their monthly pension payment
• their options for insured benefits coverage provided by the Government of Ontario.

Online Services is a response to feedback from our members and pensioners – and their growing interest in accessing pension information online. We will continue to add useful new features to the secure site over the coming year.
 

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Coming in April:
Your 2003 Annual Pension Statement - Online

This year, active and divested OPTrust members have a new option for receiving their personal 2003 Annual Pension Statement (APS). Once you register with the new Online Services section of the OPTrust Web site, you will be able to view and print an electronic copy of your APS.

Why wait for the mail?
The 2003 statements will be available online in early April. Your electronic APS will also be archived for future reference on your personalized, secure home page.

As in past years, OPTrust will also mail printed Annual Pension Statements to all members. This mailing will take place in four stages, between late April and the end of June.

Your 2003 APS will give you a snapshot of your OPTrust pension as of December 31, 2003. It will also provide valuable information to help you plan for your future. This includes:

• an estimate of the pension you have earned in the OPSEU Pension Plan
• the earliest date when you will qualify for an unreduced pension
• a projection of the pension you will receive when you retire
• the pension credit and salary information used for your calculations, and your total contributions, plus interest
• the individuals or organizations you have identified to receive survivor benefits.

A detailed Guide to Your 2003 Annual Pension Statement will be mailed with your statement – and posted to the OPTrust Web site. A list of mailing dates, grouped by ministry/employer, will also be available on the site in April.

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2003 Buyback Statements and Tax Receipts

OPTrust will also be sending you important information if you made one or more buyback payments in 2003.

Income tax receipts
Like your regular pension contributions, buyback payments are tax-deductible. If you made a buyback payment in 2003, OPTrust will send you an official income tax receipt by the end of February. You should report your buyback contributions on your 2003 income tax return – along with the regular pension contributions shown on the T4 slip you receive from your employer.

Annual buyback statements
If you were continuing to make buyback payments as of December 31, 2003, you will also receive an Annual Buyback Statement. This statement will show how much credit you are buying, the total cost, your 2003 payments, and the outstanding balance at year-end. Printed copies of the Annual Buyback Statement will be mailed in mid-March.

If you completed your buyback payments in 2003, you will not receive a buyback statement.

Annual Pension Statements
Finally, any buyback payments made over the year will be listed on your 2003 APS.

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New Calculator Helps You Estimate Your Total Retirement Income

OPTrust has added a second new feature to our Web site. The new Retirement Income Calculator will help you estimate your total retirement income – including both your OPTrust pension and income from other sources.

For members, the place to start is our popular Pension Estimator.

First, enter your age, credit and salary information. The Pension Estimator will project your future OPTrust pension, based on the retirement date you select. It will also generate a table showing your estimated OPTrust pension for different retirement dates, up to age 65.

Next, to use the Retirement Income Calculator, simply pick a retirement date and select “add other income.” You can then enter details about your other sources of retirement income. These can include:

• RRSPs
• Canada Pension Plan (CPP) and Old Age Security
• employment income, if you plan to work after you retire
• income from other sources.

Results: the Retirement Income Calculator will then produce a detailed comparison of:

• your current estimated income, after pension and RRSP contributions and income tax deductions
• your projected retirement income before age 65, including the income sources you entered, after tax
• your projected income after age 65, once your OPTrust pension is reduced for CPP integration.

Thinking about increasing your RRSP contributions? What about taking CPP before age 65? By changing the information you enter into the calculator, you can estimate your retirement income under a wide range of possible retirement scenarios.

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New Standards to Show How OPTrust’s Service Measures Up

OPTrust has established new service standards as part of our commitment to serving you efficiently. The result is a set of targets for the time it should take to complete a wide range of pension transactions – from enrolling new members to processing retirements.

The new standards offer an important benchmark for evaluating the way we serve you.

• First, the standards give you an objective tool for gauging the timeliness of the services we provide.
• Second, they will help you plan ahead, for example, when you are considering a buyback or your retirement.
• Third, they will help OPTrust identify areas where we need to direct resources, and opportunities for improving the way we work.

Starting in 2004, OPTrust will also publish an annual “report card,” showing members and pensioners how well we are meeting the service standards.

Responding to your priorities
The new standards are a response to feedback from members and pensioners like you. In our regular client satisfaction surveys, for example, OPTrust consistently receives high marks on the quality of our services. A common source of dissatisfaction, however, is the time it takes to complete certain types of transactions.

Along with the focus on timeliness, the standards also reflect our continuing commitment to quality assurance. That means we will still take the time to check your paperwork and verify your pension data up front, before processing each case. This is crucial to ensuring that your transactions are completed accurately – and that you receive reliable information about your pension and any options that may be available.

Key steps in processing your case
Depending on the type of transaction, there can be up to five steps in processing your pension case. The number of steps and the time each step takes vary for different types of transaction.

Step 1: Setting up and verifying your case. When we receive your application, we check the paperwork and send you an acknowledgement letter. If we need more information or other documents, we will contact you, your employer or others, as required. We then check your data for accuracy, complete any calculations and send you a confirmation letter and/or list of options to choose from.

Step 2: Selecting your option. If you have more than one option, you will have up to 45 days to make your choice and notify OPTrust.

Step 3: Processing. Once OPTrust receives your choice, we process and verify the transaction.

Step 4: External approval. Sometimes, external approvals are required. For example, most buybacks must be approved by the Canada Customs and Revenue Agency. This can take up to 45 days. In the meantime, OPTrust will move ahead to set up your payroll deductions or process your payment.

Step 5: Completing your case. Once we receive all the required approvals, we will complete any final administrative steps, update your pension records and send you a confirmation letter.

The table below shows OPTrust’s standard turn-around times for some of our most common case types.

Keeping Your OPTrust Transaction on Schedule Sometimes, factors outside OPTrust’s control can slow down your transaction. In some cases, there are steps you can take to help us complete your case promptly. Three common factors that can slow your transaction include: Incomplete forms and documents. We cannot start a transaction until we have received all required information from you, your employer and/or other organizations (e.g. other pension plans) that are involved. You can help avoid delays by making sure that the forms you submit are complete and accurate, and all required documents are provided.   Delays in choosing your option. In some cases, you may have a range of options to choose from within a 45-day time limit. It is important to send OPTrust your choice within the 45-day deadline. This will help avoid delays and ensure that you are able to select the option that is best for you. If you need more information to make your decision, our Member and Pensioner Services staff will be happy to help. Note: For some transactions, if you miss the 45-day deadline we will close your case. This means it will take longer to process your transaction when you do make your choice. For other transactions, we will notify you in advance that there is a “default option.” If you miss the 45-day deadline, we will proceed with the default option.   External approvals. Some transactions need additional approvals. For example, most buybacks must be approved by the Canada Customs and Revenue Agency before we can complete your case. This can add several weeks to the total transaction time.

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Beating the Backlog

Over the past year, OPTrust has gone a long way to reaching one of our key service objectives – eliminating the backlog of overdue cases left over from OPTrust’s “start-up” phase.

In 2003, our Member and Pensioner Services staff gradually reduced the number of open cases from almost 7,400 to approximately 5,500. Over the same period, the case backlog – the number of cases overdue by more than 30 days – has been cut from 5,377 to 2,200 at year-end. Many of the remaining overdue cases are the result of delays outside OPTrust’s control.

In an average month, our staff completes about 4,500 cases, or almost 55,000 per year. While we receive about the same number of new cases each month, we expect to continue reducing the backlog in 2004. After all, we know that timeliness matters to you.

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OPTrust moves to active strategy for majority of Plan’s global stock portfolio

OPTrust’s Investment Division has adopted an “active” investment strategy for the majority of the OPSEU Pension Plan’s foreign equity holdings. Approximately three-quarters of the Plan’s $3.0 billion global stock portfolio is now actively managed.

The OPTrust Board of Trustees approved the move to a predominantly active strategy for the Plan’s non-Canadian equities in spring 2003. At the same time, the Trustees adopted a new structure for the management of the Plan’s foreign equity portfolio.

New foreign equity management structure
As a result, OPTrust’s foreign equities are now managed by nine specialized investment management firms. Eight of these firms have been hired with active mandates, focusing on specific international markets. A ninth, Barclays Global Investors, continues to manage $800 million in US and European stocks according to a “passive” or “index” strategy.

There are many factors for a major investor like OPTrust to consider in striking the right balance between active and passive strategies (see side bar). In some cases – for major U.S. “large capitalization” equities, for example – relatively few active managers consistently outperform the benchmark index. In other markets – including Europe, Australasia, the Far East and emerging markets – active managers are expected to perform better than their respective index, after costs, over the long term.

Due diligence
OPTrust’s Board of Trustees approved the new foreign equity management structure following a major review of the Plan’s asset mix. The eight active managers were chosen from a pool of investment management firms recommended by the Trust’s external investment consultants. Each was then subjected to an extensive due-diligence review before the selection was confirmed.

Using external firms to manage the Plan’s stock portfolios allows OPTrust to benefit from the specialized expertise of a wide range of investment professionals. OPTrust Investment Division staff regularly monitors all our investment managers, both to track their performance and to ensure that they are operating within their designated mandates.

OPTrust also uses a combination of active and passive strategies with the Plan’s $2.3 billion Canadian equity portfolio. Currently, about 50% of the Plan’s Canadian stock holdings are actively managed. The remaining 50% are managed according to an index strategy.

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Funding Update:
Past investment losses may affect future contributions

The OPSEU Pension Plan is jointly trusteed. This means that OPTrust members and pensioners have an equal say with the Government of Ontario in how their pension plan is run. It also means that members and employers share equally in the Plan’s financial risks and rewards.

As an OPTrust member, you earn the right to a secure pension based on your salary and years of credit in the Plan. This “defined benefit” is funded from two sources: OPTrust’s investment earnings and the contributions paid by members and employers.

Shared risks and rewards
By law, OPTrust must carry out an “actuarial funding valuation” at least once every three years. This valuation confirms whether the Plan’s assets are able to cover the future cost of members’ and retirees’ pensions.

If the fund grows more quickly than needed, the extra money – known as an “actuarial gain” – is shared between the Government and OPTrust’s membership. For example, OPTrust’s strong investment returns in the late 1990s generated significant gains in the Plan’s 1999 and 2002 funding valuations.

Under OPSEU’s direction, the members’ share of these gains was used to:

• pay for temporary benefits like Factor 80
• fund permanent benefit improvements, such as improved survivor benefits
• pay for a temporary reduction in member contributions, and
• set aside a contribution stabilization fund for the future.

By the same token, when investment earnings and contributions are not high enough to cover the Plan’s liabilities, the Government and OPTrust’s members share equal responsibility for any funding loss.

Interim Valuations
As part of its strategy for managing the Plan’s liabilities, OPTrust carries out an interim valuation every year. This helps us track any changes that could affect the Plan’s funded status and explore alternatives for prudently managing any funding loss.

Like all large institutional investors, OPTrust was affected by the declines in the world’s stock markets in 2001 and 2002. As a result, the Plan’s most recent interim valuation showed a funding shortfall of $564 million at the end of 2002.

While investment returns improved significantly in 2003, OPTrust still expects a funding shortfall as of the end of 2003. This is because we “smooth” each year’s investment returns over several years. As a result, a portion of the Plan’s past losses still have to be paid off, while some of the earnings from 2003 will be held in the smoothing reserve for future years.

Liability Management
If a funding valuation identifies a loss as of the end of 2003, the shortfall would normally be made up through an increase in member and employer contributions. Fortunately, both the Government and OPSEU have set aside separate contribution stabilization funds. Each sponsor would therefore have the option of using these funds to reduce or delay the impact of a required contribution increase.

It is the sponsors’ decision how to use these funds if the Plan experiences a funding loss. Nonetheless, it is possible that contributions may need to increase at some point.

A funding loss would have no impact on the value or security of your earned OPTrust pension or on the pensions now paid to OPTrust retirees.

In the meantime, OPTrust’s Board of Trustees is continuing to explore a range of alternatives for managing various funding scenarios while ensuring the long-term security of the pension fund.

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Facts about… Your Defined Benefit Pension Plan

The OPSEU Pension Plan is what is known as a “defined benefit” pension plan.

Unlike most RRSPs and other personal investments, the value of your future pension does not rise and fall with changes in the financial markets. Instead, your OPTrust pension is calculated using a set pension formula. This means one thing – financial security for your future.

Under OPTrust’s pension formula, the amount of your retirement pension depends on your salary and your years of credit in the Plan.

Calculating Your OPTrust Pension

Over your career, as your credit grows and your salary rises, the value of your pension will increase, too. And once you retire, your pension will keep pace with inflation.

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OPTrust Pensions Increase by 3.3% for Inflation

Every year, OPTrust pensions are increased to reflect changes in the cost of living. This inflation protection is an important feature of the OPSEU Pension Plan – and a source of security for your future.

In January 2004, the most recent increase – of 3.3% – took effect. For OPTrust retirees, the pension escalation meant an immediate jump in their monthly pension payment.

The annual inflation increase also applies to the deferred pensions that will be paid to divested and terminated members in the future.

For these individuals, the annual inflation increases start from the first day of the month following their divestment or termination. The increase for the first year is prorated. In each subsequent year, the full increase applies.

When the member retires, OPTrust calculates the cumulative escalation factor for the whole deferred period and increases the member’s pension accordingly. From that point on, the member’s pension will continue to rise each January, based on the change in Canada’s Consumer Price Index. The maximum pension increase in any year is 8%, with any additional adjustment carried forward to the next year.

For divested members, the 2004 pension escalation factor – and the increase in your future pension – will be shown on your 2003 Annual Pension Statement (APS). Please see page 3 for more information on the 2003 APS.

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You Asked…

Question: Does my annual “merit increase” affect my OPTrust pension?

Answer: Yes. For pension purposes, your “salary” includes all your earnings that are paid at a regular rate, for work up to the normal number of full-time hours.

If you work in the Ontario Public Service, this includes your normal salary rate plus the annual merit increases paid to members who are at the top of their salary range. Other examples of pensionable earnings include retro pay, paid vacation leave and paid compensating time off.

Because these earnings are part of your pensionable salary, your employer will deduct pension contributions from these payments. They will also be included in your annual salary when OPTrust calculates your pension benefit.

Earnings that are not part of your pensionable salary include shift premiums, overtime pay, severance pay and any other irregular or one-time payments.

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