The quarterly newsletter for members of the OPSEU Pension Trust
Spring 2010, Number 49
In this issue...
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New option to buy back credit
OPSEU and the Government of Ontario approved a new “open option” buyback provision for members of the OPSEU Pension Plan. 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.
Effective February 1, 2010, you can apply to buy back credit for eligible periods of past service, even after the 24-month application deadline. Under the new option, you can also apply for a previous buyback that you did not complete within the 10-year, three month payment window.
Completing your buyback will increase the amount of your OPTrust pension and may help you retire sooner.
How much will it cost?
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 current salary rate, current 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.
How to apply
You will need to complete an Application to Purchase Past Credit (OPTrust 1036) form and return it to OPTrust. We will then provide you with a formal cost quote to purchase your eligible past service credit.
When you can expect your quote
We are pleased to inform you that OPTrust has started to mail formal cost quotes to members who applied for an open option buyback. For a number of reasons, OPTrust initially experienced delays in processing the requests and this has lead to a build-up of applications. We apologize for any inconvenience you may have experienced as a result of the delay.
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.
OPTrust has put in place a special team dedicated to providing you with a formal cost quote. This ensures that your quote is prepared as quickly as possible.
Rest assured, OPTrust will respond to every member who has submitted an application. We thank you in advance for your patience.
Want more information?
For more information including who qualifies, what type of service you can purchase and how to apply, please refer to the Open Option Buyback fact sheet. If you are interested in purchasing credit, please contact OPTrust’s Member and Pensioner Services staff.
Your payment options
You have a number of payment options for your open option buyback.
Lump sum payment – you can pay for your buyback in a lump sum, either by cheque or money order. Lump sum payments can also be made through a direct transfer from a tax-sheltered source such as an RRSP.
Financing option (payroll deduction) – you have the option of paying through a series of biweekly payroll deductions for buybacks costing more than $500, with the exception of selected service before 1992. Note: Because you pay the full actuarial cost for an open option buyback, the interest rate is higher than if you applied within the Plan’s normal 24-month application window.
Combined lump sum/financing option – regular full-time and part-time employees may also opt to pay through a combination of lump sum payments and payroll deductions.
Once we provide you with your cost quote, you have three months to inform us of your decision and make a lump sum payment based on that quote. Payroll deductions must also be arranged within the three-month period. If you respond after three months, your cost will be recalculated before payments can start.
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Why buying back credit matters
For eligible plan members buying back credit for past service can be an important way to increase the value of your OPTrust pension.
Completing a buyback has several important benefits:
- By increasing your credit in the OPSEU Pension Plan, your buyback will increase your OPTrust pension when you retire.
- Increasing your credit may help you qualify for one of the Plan’s unreduced early retirement options (Factor 90 and 60/20) – or help you to qualify sooner.
- Your credit is also used to determine your eligibility for post-retirement supplementary health, dental and life insurance benefits provided by the Government of Ontario.
Of course, it is up to you to assess the costs and benefits of buying back credit based on your own circumstances. As with any important financial decision, you may wish to discuss your options with an independent financial advisor before making your choice.
For more information, download our booklet Your Pension and Buying Back Credit and accompanying fact sheet Open Option Buyback.
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Retirement planning tool: Your Annual Pension Statement
Look out for your Annual Pension Statement (APS) coming soon – online and in the mail. Every year OPTrust provides you with a statement that outlines your earned pension at the end of the previous year.
Your statement is an important retirement planning tool, whether you are 10, 20 or 30 years from retirement. You can use your statement to find out:
• your pension at age 65 based on your credit in the Plan up to December 31, 2009
• the earliest date you can retire without a reduction to your pension
• an estimate of your pension if you contribute to the Plan up to age 65.
Your statement also shows the information used to calculate your OPTrust pension and retirement dates, including your: credit, best five-year average annual salary and transfers or buybacks (if applicable). Your contributions are also shown.
View your statement online
Now is a good time to sign up for OPTrust’s secure Online Services to get your statement in advance of the printed version. With your Online Services account, you can view, print or download your Annual Pension Statement weeks before printed statements will be mailed out.
You will receive your statement electronically and help reduce your environmental footprint.
Your beneficiary information
OPTrust provides benefits to your survivors according to your wishes.
That’s why we recommend you confirm the beneficiary information listed on your statement is correct. Need to name a new beneficiary? We’ve made it easier for you to make changes online or by paper copy (see below for more information).
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Your retirement planning checklist
Are you planning to retire soon? Do you know when to apply and what forms are required? Use this checklist to help you get started with your retirement plans.
5+ years before retirement
Look at your retirement picture to get a clear sense of the income you can expect
from OPTrust and other sources (government benefits, RRSPs or personal savings) and determine your retirement options.
- Figure out how much you’ll need in retirement. Will you have enough income to maintain the same standard of living you enjoy today?
- Most financial advisors estimate that you will need 60% to 80% of your pre-retirement income to maintain your current lifestyle after retirement. Use the estimated income and expenses budget form in our booklet Your Pension and Planning Your Retirement to help you.
- Deciding when to retire is an important decision and you should consider:
- OPTrust’s early retirement options (e.g. Factor 90, 60/20 or age 55+)
- Canada Pension Plan (CPP) benefits – either a full CPP pension at age 65, or reduced benefits as early as age 60 (6% reduction for each year you are under age 65)
- Old Age Security (OAS) benefits available starting at age 65. For more information on CPP and OAS, visit the federal government website at www.servicecanada.gc.ca.
- Review your Annual Pension Statement or your most recent Annual Pension Estimate chart (sent to members age 55 and older) for a clear picture of your pension benefit.
- Attend a Direct Contact pension information session (see page 7).
- Keep OPTrust informed of any life changes (e.g., marriage, separation, divorce, death of spouse, change in beneficiaries, etc.).
6 to 9 months before your retirement date
- Collect the required documents to process your pension application:
- Proof of birth for your spouse (if applicable)
- Proof of your marriage or common-law relationship
- Statement of Marital Status form
- Separation agreement, court order or Minutes of Settlement (if applicable).
- Request a pension estimate from OPTrust for an up-to-date snapshot of your pension income.
- Do you plan to collect CPP and OAS benefits? Visit www.servicecanada.gc.ca for an application kit. Applications should be made at least six months before your retirement date.
3 to 6 months before your retirement date
- Provide a resignation letter to your employer.
- Your human resources representative will provide you with a number of forms. The most important form to complete for your retirement is OPTrust’s Termination of Membership form – it will confirm your intention to retire.
- Provide OPTrust with a VOID cheque for your pension payment.
At retirement
OPTrust will send you a retirement package outlining your pension benefit and any required documents that we may need from you. Pensions are effective the first day of the month following the month you retire, paid on the 26th of the month and are payable for your lifetime. Your pension will be deposited directly to your bank account.
Your planning tools
OPTrust provides a wide range of online pension planning information and tools including our pension estimate and retirement income calculators. You can learn more about getting started on your retirement plans in our booklet Your Pension and Planning Your Retirement.
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Facts about…Protecting your privacy
At OPTrust, safeguarding your personal information is always a priority. We’ve introduced several measures to protect your personal information on record. For example over the last seven years, OPTrust has:
- designated a Privacy Co-ordinator as the contact person at OPTrust to deal with privacy issues
- implemented a privacy policy that outlines OPTrust’s procedures in protecting your personal information
- continued to provide comprehensive training to staff about privacy practices at OPTrust
- adopted procedures to respond to your queries about privacy at OPTrust
- replaced the use of your Social Insurance Number (SIN) with a unique OPTrust ID number for all communications with you
- implemented encrypted web-based technology to protect your personal pension information through secure Online Services.
When you communicate with OPTrust – whether online, over the phone, by mail or in person – our top priority is to ensure that your personal information is always protected.
Six ways to protect your privacy
Here are some quick reminders to help us protect your personal information.
1. When you visit OPTrust in person, bring two pieces of identification, including one with a photo (e.g. driver’s licence, health card, passport, etc.).
2. Do not share your secure Online Services password or verification questions andanswers with anyone.
3. When communicating with OPTrust electronically – send your message through your secure Online Services account or the “Contact Us” section on our website. Both options use encrypted technology unlike regular e-mail.
4. Use your OPTrust ID number when communicating with OPTrust.
5. Keep your personalized pension information, such as your Annual Pension Statement in a safe place along with other important financial documents.
6. Inform OPTrust of your new home address. If you move we can continue to provide you with important information about your pension.
OPTrust recognizes the value in protecting your personal information and has created a privacy policy to deliver on that commitment. You can read our privacy policy online and download our booklet Privacy Matters at OPTrust.
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Changes to the Canada Pension Plan
In May 2009, the federal government introduced changes to the Canada Pension Plan (CPP) to be phased in gradually starting in 2011, pending legislative approval. Under the proposed changes:
- If you start CPP in 2011 and continue to work, you will be required to contribute to CPP at the same time. Contributions are optional for individuals who are 65 and over. Contribution rates to CPP will remain unchanged at 4.95% for both employees and employers.
- You will be able to collect a CPP pension before age 65, while continuing to work without a break in employment or reduction in earnings, which is the current requirement.
- You will be able to “drop out” more years of low or no earnings from your CPP pension calculation, which could increase your pension. The current provision of 15% (about 7 years) will be increased to 16% in 2012 and 17% in 2014 (to a maximum of 8 years).
- If you start CPP before age 65, your pension will be reduced by 0.6% (up from 0.5%) per month for each year you are under 65. On the other hand, if you start CPP after age 65, your pension will increase by 0.7% (up from 0.5%) per month. For example, your CPP benefits will be reduced by 36% if you start at age 60 (up from 30%) and increased by 42% if you start as late as age 70.
For more information on the proposed changes, visit the Department of Finance website at: www.fin.gc.ca.
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Question: Are my OPTrust pension contributions tax deductible?
Answer: Yes. This means the increase in your contributions will reduce your overall taxable income, starting in 2010. This will help reduce the impact on your take-home pay.
Question: Will my employer’s contributions increase by 1% each year over the next three years, too?
Answer: Yes. The increase approved by OPSEU and the Government of Ontario applies to both members’ and employers’ contribution rates. As a result, the contributions paid by your employer rose by 1% of salary in January, and will increase by another 1% in 2011 and 2012.
Question: When I joined the Plan five years ago I did not buy back my contract service. Can I use a portion of my RRSP to pay for my open option buyback?
Answer: Yes. You can make a lump sum payment through a direct transfer from your RRSP account for your open option buyback.
Question: I received a quote to purchase two years of past service outside the 24-month application window. Why is the cost for my open option buyback so high?
Answer: The actuarial cost of each open option buy back varies for each member. It depends on your age, current salary rate, the amount of service you are buying back and current interest rates. Generally, the closer you are to retirement the more your buyback will cost. While the open option buyback is another way to purchase past service credit, we recommend that members apply within the Plan’s normal 24-month application window.
Question: Can I finance my open option buyback or do I have to pay for it all at once?
Answer: Yes. You can pay for your buyback through OPTrust’s financing options. (See above).
Question: How long do I have to complete my buyback payments?
Answer: As with a regular buyback, you can finance your buyback payments over a 10 year period. Any service not paid for within the 10-year window, will be re-costed and you can continue your payments, subject to the Plan's payment rules.
Question: I applied to buy back a maternity leave in 1996. I started my payments but did not complete the purchase. Under the new open option buyback, can I pay for that period of service?
Answer: Yes. Under the open option buyback you can apply to purchase the remaining service. Please contact us for a new quote.
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Coming in June… OPTrust’s Annual Highlights Report for 2009
Want to know how the OPSEU Pension Plan’s investments performed in 2009? Interested in an update on the Plan’s funding outlook? The answers will be coming to your home or e-mail inbox this June, in our 2009 Annual Highlights Report to OPTrust Members.
As in past years, the highlights report will be sent as a special supplement to your OPTions newsletter. Our full annual report, including the Plan’s audited financial statements, will also be available in June.
Want to know when both reports are available online? Simply go to www.optrust.com and register or log in to our secure Online Services. Then click on “Communicate with OPTrust” and follow the links to set your communications preferences and start receiving your newsletter and news alerts online.
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Do you qualify for Surplus Factor 80?
In 2009, OPTrust announced a plan change for an early retirement option – approved by the Plan’s sponsors OPSEU and the Government of Ontario.
Surplus Factor 80 is an early retirement option that is available to eligible plan members who are permanently laid off.
If you work in the Ontario Public Service (OPS), you may qualify for the temporary Surplus Factor 80 provision if you meet all of the following conditions:
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you are a member of the Plan and are covered by the Central Collective Agreement
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you are laid off before January 1, 2013
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your age plus your credit in the Plan total 80 years or more before January 1, 2013 and on the date your employment ends, and
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your employer provides OPTrust with confirmation that the layoff is consistent with the OPS collective agreement. Appendix 17 of the collective agreement says, in part, that a laid-off member is eligible for Surplus Factor 80 only if the available options for reassignment, redeployment or displacement have been exhausted.
If you work for a non-OPS employer, accessing the Surplus Factor 80 provision requires a special agreement between OPSEU and your employer.
For more information
If you receive a notice of layoff and think you may be eligible for Surplus Factor 80, please contact your human resources representative and OPTrust for more information.
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Posted on April 28, 2010
Secure Online Services
