Who pays for what?
Both you and your employer contribute to the Plan. These contributions are invested and it’s the investment returns that pay for your pension. Because this is a defined benefit plan contributions do not directly determine the amount of your pension; they are pooled with the contributions of other members and invested together.
Employers make pension contributions for all members of the Plan. Your employer contributes the same amount as you.
Your contributions to the Plan are based on your salary (this means your regular salary and does not include overtime pay or bonuses). As long as you continue to receive your regular salary, you continue to make contributions to the Plan. Your contributions to the Plan also continue during a paid leave of absence and during temporary part-time work arrangements, unless you elect to make contributions on your reduced hours only.
Just as the calculation of your benefits takes into account that you will receive benefits from CPP, contributions to the Plan are based on a formula that takes into account that you make contributions to CPP at the same time.
The example below shows that your contributions to the Plan are separated into two parts (9.4% and 11%). It shows how your contributions to the OPSEU Pension Plan and CPP are integrated. You contribute a smaller amount to the OPSEU Pension Plan on the portion of your salary up to the Year’s Maximum Pensionable Earnings (YMPE) because you also make contributions to CPP on that portion of your salary.
Under the Plan’s current contribution formula, this is how your contributions
9.4% of your salary up to the YMPE
plus 11% of your salary above the YMPE.
|9.4% of your salary up to the YMPE
contributions to the fund:
.094 x $66,600 = $6,260.40
|11% of your salary above the YMPE
contributions to the fund:
.11 x [$70,000 – $66,600] = $374
|Total member contributions* to the fund:
$6,260.40 + $374 = $6,634.40
* All calculations use the 2023 YMPE. Actual contributions will vary depending on the YMPE set by CPP annually.
You make CPP contributions on the portion of your salary between the Year's Basic Exemption (YBE) and the YMPE. For 2023, the YBE is $3,500 and the YMPE is $66,600. So based on the example, the portion of salary used for determining the 2023 CPP contribution is $63,100 ($66,600 – $3,500). On this amount you will pay 5.95% of your salary to CPP in 2023.
The regular contributions you make to the OPSEU Pension Plan from your earnings are tax deductible which means they reduce the amount of employment income you pay taxes on. They are deducted from your pre-tax income and your employer will report them on your income tax slip (T4).
Contributions to CPP are integrated with your contributions to the OPSEU Pension Plan. This means you contribute a smaller amount to the OPSEU Pension Plan on the portion of your salary up the YMPE because you also make contribution to CPP on that portion of your salary (see previous page).