OPTrust's Contribution formula before 2010
Revised: December 2009
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Effective the first full pay period that includes January 1, 2005, the OPTrust contribution formula was changed to a two-step formula for calculating members’ and employers’ OPSEU Pension Plan contributions.
Under the new formula, both member and employer contributions will be calculated in 2-steps, based on the member’s earnings:
- For annual earnings up to CPP’s Year’s Maximum Pensionable Earnings (YMPE), contributions will equal 6.4% of pensionable salary.
- For earnings above the YMPE, OPTrust contributions will equal the full 8.0% of salary.
Under the OPSEU Pension Plan, the normal contribution rate for both members and employers is 8% of pensionable salary, integrated with CPP. As a result, for periods when the normal contribution rate is in effect, contributions are calculated using the following formula:
| 6.4% | x | Pensionable salary up to the Year’s Maximum Pensionable Earnings (YMPE) |
| 8% | x | Pensionable salary above the YMPE |
Example The following example illustrates the member and employer contributions payable for an employee who earns an annual pensionable salary of $55,000. This example is based on the Plan’s normal contribution rate and the YBE and YMPE for 2009 ($46,300).
| Contribution Rate | Pensionable Salary (Contribution Calculation) |
Member Contributions | Employer Contributions |
| 6.4% | Pensionable Salary up to the YMPE ($46,300) (0.064 x $46,300) | $2963.20 | $2963.20 |
| 8% | Pensionable Salary above the YMPE ($46,300) (0.08 x $8,700) | $696.00 | $696.00 |
| Total contributions to the OPSEU Pension Plan | $3659.20 | $3659.20 | |
For more information on the OPTrust formula change please see Employer Update 20.
Contributions (Pre January 01, 2005)
For periods prior to January 01, 2005, the following 3-step formula is to be applied.
| 8% | x | Pensionable salary up to the CPP’s Year’s Basic Exemption (YBE) |
| 6.2% | x | Pensionable salary between the YBE and the Year’s Maximum Pensionable Earnings (YMPE) |
| 8% | x | Pensionable salary above the YMPE |
Contributions to the OPSEU Pension Plan are based on the member’s year-to-date pensionable salary. As a result, each year:
- The full contribution rate (normally 8%) is deducted on the member’s pensionable salary until his or her earnings reach the YBE.
- When the member’s year-to-date pensionable salary reaches the YBE, the contributions are calculated based on the CPP-integrated rate (normally 6.2%) until the YMPE is reached.
- When the member’s year-to-date pensionable salary reaches the YMPE, the contributions are calculated based on the full rate (normally 8%) for the remainder of the year.
Example The following example illustrates the member and employer contributions payable for an employee who earns an annual pensionable salary of $45,000. This example is based on the Plan’s normal contribution rate and the YBE and YMPE for 2003.
| Contribution Rate | Pensionable Salary (Contribution Calculation) | Member Contributions | Employer Contributions |
|---|---|---|---|
| 8% | Pensionable Salary up to the YBE (0.08 x $3,500) | $280 | $280 |
| 6.2% | Pensionable Salary between the YBE ($3,500) and the YMPE ($39,900) (0.062 x $36,400) | $2256 | $2256 |
| 8% | Pensionable Salary above the YMPE ($39,900) (0.08 x $5,100) | $408 | $408 |
| Total contributions to the OPSEU Pension Plan | $2944 | $2944 | |
Temporary Contribution Rates
The example above uses the OPSEU Pension Plan’s normal contribution rates. On December 1, 1999 a temporary reduction in the member contribution rate went into effect. The reduced contribution rate, which equaled 4% of the member’s pensionable salary (integrated with CPP), was originally scheduled to end on December 1, 2002. Instead, a portion of the members’ share of the Plan’s actuarial gains has been used to phase the contribution reduction out through a series of annual increments. As a result, contributions were increased to 5% of pensionable salary effective December 1, 2002 and to 6% effective December 1, 2003. For this period the employer rate remained at the normal rate.
These changes in contribution rates apply to the pay period that includes December 1. For example:
Pay Period Information |
Effective Rates |
||||
|---|---|---|---|---|---|
Pay Period Start |
Pay Period End Date |
Pay Date |
Below YBE |
YBE to YMPE |
Above YMPE |
10-NOV-2003 |
23-NOV-2003 |
4-DEC-2003 |
5% |
3.2% |
5% |
24-NOV-2003 |
7-DEC-2003 |
18-DEC-2003 |
6% |
4.2% |
6% |
8-DEC-2003 |
21-DEC-2003 |
31-DEC-2003 |
6% |
4.2% |
6% |