In this issue

• Agreement restores credit for past under-contributions
• Contract/unclassified employees eligible to join
• OPTrust-OPB transfers: Your pension and your career in Ontario’s public service.
• Did you receive your 2000 Annual Pension Statement?
• OPSEU names two Trustees to Board
• Survey asks members to rate OPTrust’s service
• You Asked…

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Agreement restores credit for past under-contributions

OPSEU Pension Plan members who missed regular pension contributions or buyback payments due to payroll errors before 1999 will receive full credit for the affected service, at no cost to the member.

Affected members will have their credit reinstated as the result of a recent agreement between OPSEU and the Government of Ontario. The agreement also means that members who paid too much in contributions will receive a refund.

Reinstating credit
The new agreement applies to service up to December 31, 1998 for which members under-contributed to the Plan due to payroll errors. This includes:

• regular service where mandatory contributions were not deducted from the member’s pay
• other periods of service for which contributions are mandatory (e.g., LTIP)
• buybacks for which the member had signed an Agreement to Purchase Credit form, provided the member did not later ask to stop their payments.

Full credit for affected service will be reinstated at no cost to the member.

The cost to the Plan for missed contributions before 1993 will be added to the initial unfunded liability that the Government of Ontario owes to the Plan.

Costs for service after 1992 and before 1999 will be paid for from future funding gains in the Plan. Costs for this period will be shared as follows:

• any required employer contributions, 50% of missing employee contributions and any interest charges will be paid from the Government of Ontario’s share of future gains.
• the other half of members’ missing contributions will be paid from OPSEU’s share of gains.

Refunding over-contributions
Under the agreement, members who contributed too much to the OPSEU Pension Plan will receive a refund of their over-contributions, plus interest.

In addition, those who paid for missed contributions after receiving a letter from OPTrust will get a refund of the amount they paid back, plus interest.

The terms of the agreement apply to active members, retirees, deferred pensioners, and divested members who had credit in the Plan as of April 2, 2001. Affected individuals could receive an increase in their credit – and their monthly pension amount – or a refund of over-contributions.

"Data purification"
The agreement between OPSEU and the Government settles a number of issues concerning members’ pension data and entitlements. These issues were uncovered by the Government’s Pension Data Purification Project (PDPP).

When the OPSEU Pension Plan was launched in 1993, both sponsors recognized that there were many discrepancies in members’ past pension records. The Government created PDPP as part of its commitment to correct these errors.

Since 1995, OPTrust has been working with PDPP staff to review and correct members’ pension data files and notify those who are affected. The project will be completed by the end of 2001.

Verifying the accuracy of these records will ensure that members receive their earned pensions. It will also allow OPTrust to confirm that the Plan has received the funds needed to pay for these benefits.

As of June 1, OPTrust had reviewed 28,000 files and sent notices to almost 12,000 members concerning a credit correction. Of these, 9,591 members had their credit increased, while 2,295 had their credit reduced. We will continue sending notices to members whose credit is affected by corrections as we review the remaining files.

Some PDPP corrections reversed
In some cases, the agreement between the sponsors means that members whose credit was reduced by a PDPP correction will have that credit reinstated, at no cost to the individual.

For example, where PDPP identified a member who received credit for a buyback without making full contributions, the member’s credit would have been reduced. Under the agreement, if the member had signed an Agreement to Purchase Credit form, he or she will now have credit for the buyback restored at no additional cost to the member.

However, other credit corrections resulting from PDPP are not affected by the agreement. This includes cases where the member’s credit was reduced:

• because of a leave for which there was no application or agreement to purchase service
• for a buyback where the member had asked to stop making payments. In these cases, the member may still be eligible to complete his or her payments under OPTrust’s normal buyback rules.
• because the credit exceeded the members’ eligible service (e.g., where a part-time employee mistakenly received credit for full-time service). Canada’s Income Tax Act does not allow the Plan to grant credit for time that the member was not employed.

Implementing the agreement
OPTrust has set up a special project team to:

• identify members and pensioners who are affected by the agreement
• make the necessary adjustments to their pension records
• recalculate pensions and issue retroactive payments to affected retirees
• issue refunds to members or pensioners who are found to have over-contributed to the Plan.

With the number of cases and the amount of work involved, it will take several months to implement all aspects of the agreement.

OPTrust will notify all members and pensioners whose pension entitlement change as a result of the agreement. Any refunds or retroactive increases will be made by mid-2002.

In the meantime, OPTrust will fast-track adjustments affecting members who are nearing retirement. We ask for your patience while OPTrust completes the work necessary to administer the agreement.

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As an OPSEU Pension Plan member, you earn the right to a lifetime pension at retirement through your contributions and those made by your employer. Your OPTrust pension also includes important early retirement options and survivor benefits and is protected against inflation.

For most members, being part of the Plan is mandatory. However, other employees have the option of joining the OPSEU Pension Plan, but are not automatically enrolled when they are hired.

Optional membership
Optional membership is open to contract, "unclassified" or other non-permanent staff who work for the Ontario Public Service or another OPTrust employer and are represented by OPSEU or the OLBEU.

Joining the Plan gives these members access to all the pension benefits available to permanent employees. All members pay the same contribution rate and, like other members, those who join voluntarily cannot leave the plan unless they terminate their employment.

Members who join voluntarily may also qualify for supplementary health, dental and life benefits after they retire. This coverage is available to all pensioners who have at least 10 years of credit, or 10 years of continuous employment with credit for some part of each of those years.

Voluntary enrolment vs. buybacks
Enrolling in the Plan voluntarily has a number of advantages for members who later become permanent employees.

Unclassified employees who become permanent are automatically enrolled in the Plan. These members then have the option of buying back credit for their unclassified service. There is a 24-month time limit for applying to buy back past service.

However, unclassified employees who enroll voluntarily already have credit for their contract or unclassified service. So, once they become permanent they do not have to buy back this service to have it count towards their OPTrust pension.

Voluntary enrolment also avoids the increased costs that may be involved in buying back unclassified service at a later date. The cost of any buyback is based on the member’s salary rate at the time OPTrust receives the member’s complete buyback application. So, members whose salary goes up will have to pay more to buy back their unclassified service than if they had enrolled in the Plan voluntarily.

Employees who would like to join the Plan voluntarily can obtain membership forms from their human resources representative.

For more information on optional membership in the OPSEU Pension Plan, contact the OPSEU Pension Trust at 1-800-906-7738 or (416)-681-6161 in Toronto.

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As you move between jobs over your career, one important consideration is what happens to your pension.

That’s why the OPSEU Pension Plan includes a number of options if you leave the Plan. Depending on your circumstances, you may be able to take a deferred pension, transfer the commuted value of your pension to a locked-in retirement account, or transfer your pension to a pension plan provided by a new employer.

For members who leave the OPSEU Pension Plan and take a job covered by the Public Service Pension Plan (PSPP), special rules apply.

The PSPP is the pension plan for managers, excluded staff and members of certain associations in the Ontario Public Service and other OPTrust employers. The PSPP and the OPSEU Pension Plan have been administered separately since 1995, when joint trusteeship of the OPSEU plan came into effect. The PSPP is administered by the Ontario Pension Board.

Mandatory vs. Optional Transfers
Employees who leave a bargaining unit position for a management/excluded/association position stop being members of the OPSEU Pension Plan and enroll in the PSPP. Similarly, those who move into a bargaining unit position stop contributing to the PSPP and join the OPSEU Pension Plan. (Taking an "acting" assignment or secondment does not affect your pension plan membership.)

Under the rules of both plans, pension transfers from one plan to the other may be either mandatory or optional. This depends on whether the member moves to the new position without terminating his or her employment.

Mandatory transfers: If a member moves between plans without terminating employment, his or her pension credit in the original (or "exporting") plan is automatically transferred to the new (or "importing") plan.

Optional transfers: When there is a break in employment between the member leaving a job in one plan and starting a job covered by the other plan, the member may have the option of transferring his or her credit to the new plan.

To make an optional transfer between plans, the member must:

1. have terminated employment while a member of the "exporting" plan
2. have an earned benefit or contributions still in the "exporting" plan, and
3. file an application to transfer their pension within 24 months of joining the "importing" plan.

Calculating the transfer amount
The amount transferred from the "exporting" plan to the "importing" plan depends on a number of factors. These include the member’s service and annual salary, and the permanent pension benefits provided by the "exporting" plan. The transfer amount is then compared to the cost of benefits provided by the "importing" plan using actuarial assumptions set out by both plans. This determines how much pension credit the member will receive under the new plan.

Until December 1999, the benefits provided by the OPSEU Pension Plan and the PSPP were identical. However, funding gains in the OPSEU Pension Plan were used to make permanent improvements to OPTrust’s retirement and spousal survivor benefits. As a result, service with the OPSEU Pension Plan now has a greater transfer value than the same service under the PSPP. This affects OPTrust/OPB transfers that have taken place since December 1, 1999.

Transfers from OPTrust
When a member moves from the bargaining unit to a management/excluded position, there may be either a mandatory or an optional transfer of their credit from the OPSEU Pension Plan to the PSPP.

Because of OPTrust’s improved benefits, the transfer value of the member’s service in the OPSEU Pension Plan is greater than the cost of the same service with the PSPP.

As a result, the member will receive the credit for their full service, plus a payment of the difference between the value of the benefits under the two plans. The member has the choice of receiving the excess payment in cash (less income tax), transferring it to an RRSP, or a combination of both options.

Transfers from the PSPP
The difference between the two plans also comes into play when a member of the PSPP transfers into the OPSEU Pension Plan.

In this case, the transfer value of the member’s service with the PSPP is not as high as the cost with OPTrust. As a result, the member has the option of receiving a reduced amount of credit in the OPSEU Pension Plan or "buying back" the credit shortfall.

If the member does not purchase the shortfall, the reduction in credit could affect his or her eligibility date for early retirement under OPTrust’s Factor 80, Factor 90 or 60/20 provisions.

Members who decide to purchase the additional credit can pay in a lump-sum, by payroll deduction (for amounts over $500), through a combination of lump sum and payroll deductions, or with a transfer from an RRSP.

OPTrust-OPB transfer examples
Because of improvements to the OPSEU Pension Plan made in 1999, the same period of service has a higher value under the OPSEU Pension Plan than under the PSPP.

Here are examples showing how this difference affects transfers from OPTrust to OPB and from OPB to OPTrust taking place after December 1, 1999.

Example 1: OPTrust to OPB*: Sarita has taken a new job as a manager in her ministry. At the time of her transfer, she:

• is 40 years old
• has 10 years, 1 month of credit in the OPSEU Pension Plan
• has an annual salary of $44,600

The transfer value of Sarita’s OPTrust pension is $45,780. The cost of the same service in the PSPP is $45,040. As a result, Sarita will receive full credit for her service in the PSPP, plus a payment of the excess amount of $740 (before income tax) from OPTrust.

Example 2: OPB to OPTrust*: Kyle has just taken a bargaining unit job after holding an excluded position for several years. At the time of his transfer, he:

• is 44 years old
• has 16 years of credit in the PSPP
• has an annual salary of $51,000

The transfer value of Kyle’s PSPP pension is $92,600. This equals the cost of approximately 15 years, 6 months of credit in the OPSEU Pension Plan, at Kyle’s salary rate. The cost of Kyle’s full 16 years of service under the OPSEU Pension Plan is $95,410.

Kyle therefore has the option of buying back the shortfall in credit at a cost of
$2,810 plus interest, or not making this purchase and being credited with 15 years and 6 months of credit with OPTrust.

*Note: Figures have been rounded.

Catching up on OPTrust/OPB transfers
Between September 1999 and April 2001, a special team of OPTrust staff processed more than 4,200 transfers between the OPSEU Pension Plan and the PSPP.

Most of these files were for transfers taking place before 2000. This backlog arose because of the time needed to establish a transfer agreement between the two plans and to create a system for processing transfer payments.

OPTrust now has fewer than 175 pre-2000 cases outstanding. Most of these files involve data problems that we are working to resolve.

In the meantime, OPTrust staff are working to process new transfers in a timely manner. Since both plans must process the transaction, OPTrust/OPB transfers normally take up to 6 months to complete.

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OPTrust mailed Annual Pension Statements  to approximately 44,000 active and divested members in April, May and June 2001.

Your Annual Pension Statement provides important financial information about your OPTrust pension. This includes a snapshot of your earned pension as of December 31, 2000, your average annual salary, pension credit and contributions, and the people or organizations you have listed as your beneficiaries.

Your statement also projects your pension at your earliest unreduced retirement date (if applicable) and at age 65.

Some members may not have received a statement. This includes members who have moved without sending OPTrust their new home address and members for whom we have incomplete or inaccurate address information.

In other cases, errors in a member’s pension records may have made it impossible for us to issue an Annual Pension Statement. For example, we are unable to generate a statement where a member’s date of birth is missing from our database. In other cases, missing salary, credit or contribution information meant that we could not calculate the member’s pension entitlement.

If you did not receive your statement – or if you have any questions about the information it contains – please contact OPTrust’s Annual Pension Statement Hotline at 1-800-637-0024, or (416)681-6398 in Toronto.

In the meantime, we are working to correct files that are found to be missing key pension information.

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Two new appointees have been named to the OPSEU Pension Trust’s Board of Trustees, bringing the 10-member board to full strength.

David Rapaport has been an OPSEU activist for more than 15 years, including six years on the union’s executive board. He works as a Project Leader and Systems Analyst in the Elementary/Secondary Schools Division of the Ministry of Education in Toronto. In addition to his activities in OPSEU, Rapaport is the author of the book No Justice, No Peace, an analysis of the 1996 OPSEU strike.

"As a Trustee, I share responsibility for ensuring that the Plan continues to meet its pension promise to our members," Rapaport says. "The union also has an interest in seeing that the Plan is managed in a way that reflects members’ broader interests as workers."

"I was on OPSEU’s executive board when the OPSEU Pension Plan was created, so I know how important it is to our members," he adds. "Joint trusteeship was a major step forward."

As OPSEU’s Supervisor of Strategic Planning and Policy Development since 1997, Jordan Berger is responsible for policy research and planning on a wide range of issues facing the union. During the early 1990s, he worked as a policy advisor to the Chair of Management Board of Cabinet during Ontario’s Rae government.

"I was at Management Board during the negotiations to create the OPTrust as a separate Plan," Berger told OPTions. "That was a real achievement for the membership. The pension plan represents members’ deferred wages, so it’s important that they have a say in how the Plan is invested."

"OPTrust has done very well over the six years since it was launched. With increasing market volatility, managing the Plan’s investments and making sure that it remains well-funded will be a major focus for the Board."

The new OPSEU appointees replace two Trustees who left the Board in early 2001. Len Hupet was a founding member of the OPTrust Board and served two terms as its Chair. Janine Johnson joined the Board in 1998 and served on its audit and adjudication committees.

The 10-member board includes five Trustees appointed by OPSEU and five appointed by the Government of Ontario. Other Trustees include Stan Sanderson (Chair), Paul Sharkey (Vice-Chair), Bob Bellamy, Jennifer Brown, Heather Gavin, Daniel Kott, Tony Ross and Paul Scott.

New Trustees: Jordan Berger (left) and David Rapaport joined OPTrust’s Board in March 2001.

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Giving members and pensioners prompt, friendly, efficient and knowledgeable service is a key part of our mandate at the OPSEU Pension Trust. Now a new OPTrust survey is asking you to tell us how well we’re doing – and where we can improve.

In April, OPTrust distributed more than 2,000 customer service questionnaires to members and pensioners. The survey was sent to people who had recently contacted OPTrust, whether it was to ask a question, update their personal information or complete a major transaction such as buying back credit or retiring.

The survey asks a range of questions, from how prompt our telephone service was and whether our forms and publications were easy to understand, to how quickly the transaction was completed and whether our staff was friendly and knowledgeable. Participants are also asked to rate their overall satisfaction with the service they received.

Survey responses will help us gauge how well we are serving you, where we are doing a good job, and where there is room for improvement. Once we have analysed the initial responses, we will continue surveying members and pensioners on a regular basis. This will help us track changes in members’ satisfaction as we work to improve our services.

In the next issue of OPTions we’ll report back on the survey findings.

We’d like to thank everyone who completed one of our questionnaires. Your input will help us to continue improving the service you – and your fellow members and pensioners - receive.

We’d also like to thank those who took the time to note high quality service provided by a particular member of our staff. We are proud to serve you, and your feedback is important to us.

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Q: Who decides whether Factor 80 will be extended beyond March 31, 2002?
A: While OPTrust is the administrator of the OPSEU Pension Plan, it is OPSEU and the Government of Ontario, as sponsors of the Plan, who have the authority to make temporary or permanent changes to plan benefits.

There are two ways that benefit changes can be made.

Negotiated changes: Plan changes can result from the collective bargaining process or through a separate agreement between the sponsors. Any change negotiated during bargaining must be incorporated into an amendment to the Plan text and signed by both sponsors before it comes into effect. Funds must also be available to pay for negotiated changes to the Plan, so funding arrangements must also be dealt with.

Plan gains: The second way that benefits can be improved is as a result of Plan "gains." Every three years OPTrust’s actuaries carry out a valuation of the Plan. If the Plan has more money than it needs to pay for members’ benefits, the excess is referred to as a funding "gain."

Any gains are divided between the two sponsors. The Government must first use its share to pay down the Plan’s remaining initial unfunded liability. It may then use any remaining funds to reduce employer contributions, create a stabilization fund or improve benefits. OPSEU can use its share to improve benefits, reduce contributions or set aside a stabilization fund.

The next funding valuation, for the years 1999-2001, will be ready in mid-2002. While the Plan had gains of $1.334 billion for the previous period of 1996-1998, lower stock market returns since 2000 are likely to reduce the amount of gains available in 2002.

Q: OPTrust uses the "best five years’ average annual salary" to calculate my pension. Is this based on calendar years or the best five years’ starting from any date?
A: The OPSEU Pension Plan text defines the average annual salary rate used in calculating your pension. It is defined as the average of your salary rate over the 60 consecutive months of plan membership that produces the best average. OPTrust calculates your average annual salary starting from the day of the month that results in the highest figure.

The 60-month period includes prior contributory service with another pension plan that you transferred into the OPSEU Pension Plan from the PSPP or under a reciprocal transfer agreement. If you do not have 60 consecutive months’ membership in the Plan, the average annual salary is calculated based on your longest period of consecutive membership.