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January 21, 2002, Number 3
In this issue
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OPTrust pension escalation factor: 3.0% in
2002
The OPSEU Pension Trust's pension escalation factor for 2002 is 3.0%. This figure
represents the annual inflation-related increase applied to monthly pensions paid by
OPTrust, effective January 1, 2002. The increase will be reflected in pensioners’
January 25, 2002 pension payment.
The escalation factor also affects employer-paid contributions for members on Long Term
Income Protection (LTIP) or leaves of absence without pay that extend beyond the end of
the calendar year.
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All OPTrust pensions affected
Under the OPSEU Pension Plan, all OPTrust pensions are adjusted annually for
inflation. This adjustment is made each January, beginning the year after a former
member’s pension commences. The pension escalation is applied both to former
members’ pensions and to survivors’ pensions.
The increase for the first year after is pro-rated. The first annual increase is based
on the number of complete months for which a pension was paid in the preceding calendar
year.
The pension escalation is also applied to deferred pensions and to divested
members’ “special deferred” pensions. In these cases, the member’s
deferred pension entitlement is calculated as of the date of termination or, in the case
of a divested member, the divestment date. The cost of living adjustments are accumulated
starting from the next month and applied the date the pension begins. The attached
table shows the accumulated adjustment ratios for 2002 calculated from the first month
after the former member terminated from the Plan.
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How the pension escalation factor is calculated
The adjustment reflects the increase in the cost of living in Canada, as measured
by the Consumer Price Index. It is calculated using the average of the Consumer Price
Index for the two 12 month periods ending the preceding September. For example, the 2002
escalation factor was calculated as follows:
| October 2000 to September 2001 |
= |
116.1 |
= |
3.0% |
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| October 1999 to September 2000 |
112.7 |
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Long Term Income Protection (LTIP) contributions
In the case of LTIP, the escalation factor is used to calculate the annual salary
on which contributions are based during the period of disability.
Pension contributions for periods of LTIP are paid by the employer. These contributions
are based on the member’s regular salary rate on the date of disability. If a
member’s disability extends beyond a single calendar year, this base salary is
increased by the OPTrust escalation factor annually on January 1. For the first year of
the member’s disability, the escalation is pro-rated according to the date of
disability.
The inflation-adjusted salary amount is also used in calculating the affected
member’s Pension Adjustment amount for income tax purposes.
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Leaves of absence without pay
The escalation factor is used to adjust the annual salary on which contributions
are based for unpaid leaves of absence that span more than one calendar year. For illness,
pregnancy, parental and adoption leaves, both the member’s and the employer’s
contributions are based on the inflation-adjusted salary figure.
For example, if a member took a 12-month pregnancy/parental leave starting in July 1,
2001 and elected to make contributions while on leave, both the member’s and the
employer’s contributions from January 1, 2002 would be increased to reflect
OPTrust’s 2002 escalation factor.
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Table: OPTrust 2002 pension escalation factors
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This Employer Update is intended to provide participating employers
with news and information about the OPSEU Pension Plan. It does not create any rights to
benefits not provided for in the actual terms of the Plan. In the event of any conflict or
omission, the legal documents of OPSEU Pension Plan will govern in all cases. We recommend
that specific questions regarding personal benefits be directed to our office.
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