Toronto (May 17, 2010) – In February 2010, the Plan’s sponsors – OPSEU and the Government of Ontario – approved a new “open option” buyback. This change to the Plan’s rules allows eligible members to buy back credit after the Plan’s normal 24-month application deadline has expired. Under the new option, active members can also apply for a previous buyback not completed within the 10-year, three month payment window.
For eligible members, buying back a period of past service will increase your pension at retirement and may allow you to retire sooner. Divested and deferred members are not eligible to purchase service under the new provision.
Why cost quotes are delayed
OPTrust experienced technical problems with our internal buyback calculator, which caused a delay in providing you with a formal cost quote.
OPTrust has set up a dedicated team that is now processing the almost 1,800 requests we have received for quotes under the open option buyback provision.
We are very sorry about this unexpected delay and any inconvenience it may have caused.
When you can expect your quote
OPTrust has started to mail quotes to members who have submitted an application. However, given the number of requests, it may be mid-summer before all 1,800 members receive their quotes.
Your cost quote will not be adversely affected by the delay. To determine the cost of your open option buyback, OPTrust uses the data on record (e.g. your salary, credit, age) at the time you submitted an application not when you receive the formal quote.
We know how important it is for interested members to obtain an accurate quote so that you can evaluate the cost of your buyback and its impact on your future pension, and decide if you want to proceed. Rest assured, OPTrust will respond to every member who has submitted an application.
In the meantime, if you plan to retire within the next three months, please inform us and we will provide you with an expedited quote.
Why your quote may be expensive
The cost for an open option buyback is calculated on an “actuarial” basis. As a result, your cost may be considerably higher than if you applied within the Plan’s normal 24-month window.
To calculate the actuarial cost, OPTrust uses a number of factors – such as your age and salary rate, interest rates, and the amount of service you are purchasing – to determine the current cost of the additional pension you will receive if you complete your purchase and the potentially earlier eligibility date.
The cost for an open option buyback will vary based on a number of factors, such as your age, earliest retirement eligibility date, salary and service to purchase.
For example, a member who is closer to one of the Plan’s retirement options may pay more for a buyback than a younger member even for the same period of service. However, both members will have the option to retire earlier once the buyback payments are complete.
Member’s age: 60
Annual salary at application: $46,000
Total credit at application: 18 years
Service to buy back: 1.35 years
Total cost: $51,000
- Earliest retirement date without buyback: February 2, 2012 with an estimated annual pension of $17,810.
- Earliest retirement date with buyback: September 30, 2010 with an estimated annual pension of $17,934.
The member may retire just under two years earlier by paying for an open option buyback.
Member’s age: 30 years
Annual salary at application: $67,000
Total credit at application: 7 years
Service to buyback: 1.5 years
Total cost: $16,000
- Earliest retirement date without buyback: May 1, 2036 with an estimated annual pension of $46,748.
- Earliest retirement date with buyback: August 1, 2035 with an estimated annual pension of $47,807.
The member may retire a year earlier by paying for an open option buyback.
OPTrust members may have noticed a substantial difference in cost even when the change in service to purchase is minimal. Although this might seem incorrect, this is normal under our Plan.
Member’s age: 60 years
Annual salary at application: $50,000
Total credit at application: 18.75 years
Service to buy back in scenario 1: 1.25 years
Service to buy back in scenario 2: 0.75 years
- Total cost under scenario 1: $49,500
- Total Cost under scenario 2: $18,700
The member may retire under Factor 60/20 by paying $49,500. However, if the member purchases less service the difference in cost is significant at $18,700.
How to apply
Want more information?
For members who are interested in an open option buyback and have not submitted an application, you will need to complete an Application to Purchase Past Credit (OPTrust 1036) form and return it to OPTrust.
OPTrust has removed the online buyback estimator from our website and encourages members to contact us directly for a quote. With accurate information, you can decide if an open option buyback makes sense for you and your retirement plans.
For more information about buying back past service credit outside the Plan’s normal application window, download our fact sheet Open option buyback. If you have questions, please contact our Member and Pensioner Services staff. OPTrust will continue to provide status updates on our website.