1 Conestoga College College Presentation November 17, 2005.

Conestoga College

College Presentation

November 17, 2005

Agenda

The CAAT Pension Plan CPP and OAS Definitions Data Collection Normal Retirement Pension Early and Deferred Retirement Pension Pension Payments Survivor Benefits

The CAAT Pension Plan

Multi-employer Pension Plan Defined benefit plan-pension based on the

Plan formula Established June 1, 1967 January 1, 1995 Jointly sponsored Administered by OMERS to Dec. 31, 1995 January 1, 1998 major amendments Plan funding

CAAT Pension Formula

1.3% x HAPE up to AYMPE x Pensionable Service

2.0% x HAPE above AYMPE x Pensionable Service

2005 AYMPE = $39,780

You and your employer each contribute 4.95% YMPE is changed annually based on the increase

in Average Industrial Wage For 2005 YMPE is $41,100 YBE is $3,500 Contributions to CPP= 4.95% x earnings between

YBE and YMPE

Do not contribute to CPP on this amount of Salary

$41,100

& Above

No CPPBenefit

Contribute on earnings in this Salary Band

$41,099

$3,501

CPP Benefit calculated on this amount of Salary

Do not contribute to CPP on this amount of Salary

$3,500 and Below

CPP Benefit calculated on this amount of salary

Your CPP pension based on your work history and earnings, maximum CPP benefit for 2005 is $9,945.00

The CAAT Plan takes CPP into consideration for pension contributions and benefit calculation

Paid in full at age 65, Roughly equal to 25% of APE up to 25% of

AYMPE Paid on a reduced basis from age 60 (6% per

year) 15% dropout roughly equals 7 years over a full

career of 47 years (per CPP definition) (age 18 to age 65)

OAS 2005

No employee or employer contributions Paid from age 65 Benefit is $471.76 per month Subject to clawback

Starts at income of $60,806 In full at income of $98,547

OAS benefit is reduced by $.15 for each dollar of income over $60,806

Definitions

Highest Average Pensionable Earnings (HAPE): sum of your earnings during the 60 consecutive months of Pensionable Service during which earnings were highest, divided by 5.

Highest Average Pensionable Earnings

Example calculation:Year Earnings Pensionable

Service2005 $34,000 6 months2004 $65,000 12 months2003 $63,000 12 months2002 $62,000 12 months2001 $60,000 12 months2000 $30,000 6 monthsTotals $314,000 60 months

Highest Average Pensionable Earnings

Example calculation:

Highest Average Pensionable Earnings = $314,000/5 = $62,800

Definitions

Average YMPE(AYMPE): average of the Year’s Maximum Pensionable Earnings for the year of retirement and the 4 preceding years

Average YMPE for 2005

Year YMPE 2005 $41,100

2004 $40,5002003 $39,9002002 $39,1002001 $38,300Total $198,900

Average YMPE for 2005

Calculation:

Average YMPE for the year 2005 =

$198,900/5 = $39,780

Definitions

Bridge Benefit: an extra pension payable from the CAAT Pension Plan from early retirement date to age 65.

Bridge Benefit

1. Retire before age 65: a) Retirement to age 65

Lifetime pension + Bridge Benefit b) From age 65 onwards:

Lifetime pension2. Retire at age 65:

Lifetime pension3. Bridge Benefit formula:

0.7% x HAPE up to AYMPE x PensionableService

Bridge Benefit-Example

Member retires at age 60, HAPE =$68,000.00

Pension calculated:

$39,780 x 1.3% x 35 years= $18,099.90

$28,220 x 2% x 35 years= $19,754.00

Lifetime benefit= $37,853.90

Bridge ($39,780 x .7% x 35)= $ 9,746.10

Benefit to age 65 $47,600.00

Bridge Benefit-Example

Benefit to age 65 $47,600.00

At age 65 bridge drops off -$ 9,746.10

Lifetime benefit $37,853.90

Plus CPP (assumes maximum)$ 9,945.00

Total $47,798.90

Definitions

Commuted Value: what a member’s deferred pension is worth today in a lump sum

Pensionable Earnings: earnings on which you pay pension contributions

Definitions

Pensionable Service(PS): service that is used in calculating a pension benefit, earned, purchased or transferred

Eligible Spouse: married and living together at time of retirement/death or living in a common law relationship at the time of retirement/death - covers same and opposite sex

Definitions

Excess Contributions: Member’s Contributions plus interest that exceeds 50% of their Commuted Value.

Normal Retirement Date: last day of the month in which you turn 65

Data Collection

Enrolment Annual data from college (DCT) Service purchase or transfer Member’s Annual Statement Change forms (marital status, beneficiary.) Termination/Retirement Form Option Document

Normal Retirement Pension

At age 65 Payable for life Payable monthly on the first business day Formula recognizes part of retirement income

comes from Canada Pension Plan (CPP) Incorporates Highest Average Pensionable

Earnings and Pensionable Service

Normal Retirement Pension

Pension Formula (Lifetime Pension):

1.3% x Highest Average Pensionable Earnings up to the Average YMPE x Pensionable Service

2.0% x Highest Average Pensionable Earnings over the Average YMPE x Pensionable Service

Normal Retirement PensionExample

Member enrolled February 1, 1980 Retired January 31, 2005 Pensionable Service (PS) = 25 years AYMPE = $39,780 Highest Average Pensionable Earnings =

$40,000 Highest Average Pensionable Earnings in

excess of AYMPE = $220 ($40,000-$39,780)

Normal Retirement PensionExample

Calculation:

1.3% x $39,780 x 25 years= $12,928.50

2.0% x $220* x 25 years = $ 110.00

Annual pension from 65

for life $13,038.50

* $40,000-$39,780 = $220

Normal Retirement PensionExample Total annual retirement income:

CAAT Plan as above $13,038.50

Canada Pension Plan(CPP) $ 9,945.00

Old Age Security(OAS) $ 5,661.12

Total retirement income $28,644.62

Note: assumes entitlement to maximum benefit for CPP and OAS

Early Unreduced Retirement Pension

Conditions 85 Factor: sum of age plus Pensionable

Service equals 85 or 60/20 Rule: must be age 60 or more and

have 20 years of Pensionable Service

Early Unreduced Retirement Pension(Example 60/20 Rule)

Member retires in 2005 Age at retirement = 60 Pensionable Service at retirement = 20 Highest Average Pensionable Earnings =

$45,000 AYMPE in 2005 = $39,780 Highest Average Pensionable Earnings in excess

of AYMPE = $5,220 ($45,000-$39,780)

(Example 60/20 Rule)

Pension Calculation:

Annual Pension paid from age 60 for life:

1.3% x $39,780 x 20yrs PS = $ 10,342.80

2% x $5,220* x 20yrs PS = $ 2,088.00

Annual pension paid from

age 60 for life: $ 12,430.80

* $45,000-$39,080 = $5,220

(Example 60/20 Rule)

Annual pension paid up to age 65Annual pension paid fromage 60 for life: $12,430.80 Bridge Benefit paid to 650.7% x $39,780 x 20yrs PS= $ 5,569.20Annual pension to age 65 = $18,000.00Note: Individual may be entitled to CPP of as

much as $9,945.00 and OAS of $5,661.12 at age 65.

Early Reduced Pension

Member can choose to retire on an immediate early reduced pension on or after reaching the earlier of:

1) age 55 with at least 2 years of PS or Plan membership, or

2) age 50 to 54 with at least 20 years of PS If Member does not qualify for unreduced

pension then a reduction is applied

Reduction is permanent and is calculated as 3% multiplied by the number of years and part years retiring before the earliest point that Member would qualify for an unreduced pension: 85 Factor or 60/20 Rule or age 65

Member retires in 2005 Age at retirement = 53 Pensionable Service at retirement = 20 yrs Highest Average Pensionable Earnings =

$65,000 AYMPE in 2005 = $39,780 Highest Average Pensionable Earnings in

excess of AYMPE = $25,220 ($65,000-$39,780)

Member’s age plus service (53+20) = 73 Does not qualify for 85 Factor or 60/20 Rule Reduction Factor is lowest of:

age 65: 65-53 = 12yrs x 3% = 36% redn.

60/20 Rule: 60-53 = 7yrs x 3% = 21% redn.

85 Factor: (85-73)/2 = 6yrs x 3% = 18% redn.

Calculation:

1.3% x $39,780 x 20yrs PS = $10,342.80

2.0% x $25,220* x 20yrs PS = $10,088.00

Total $20,430.80

Early Retirement Reduction (18%) $ -3,677.54

Annual pension from age 53 $16,753.26

* $65,000 - $39,780 = $25,220

Annual pension from age 53 $16,753.26

plus Bridge Benefit to age 65

0.7% x $39,780 x 20yrs PS = $ 5,569.20

Early Retirement Reduction 18% = $-1,002.46

Bridge Benefit paid to age 65 = $ 4,566.74

Annual pension paid to age 65 = $21,320.00

Note: Individual may be entitled to CPP of as much as $9,945.00 and OAS of $5,661.12 at age 65.

Deferred Pension

Entitled if you have at least two years of Pensionable Service

Payable at age 65 Payable on reduced basis on or after age 55 Reduction is 5% for each full year, prorated

for each part year before age 65

Deferred Pension(Example)

Member terminates in 2005 Age at termination = 47 Requests pension at age 60 Pensionable Service at termination = 8 yrs. Highest Average Pensionable Earnings = $37,000 AYMPE in 2005 = $39,780 Early Retirement Reduction at age 60 = 25%

(5% x (65-60))

Pension payable from 60:

1.3% x $37,000 x 8yrs. PS = $3,848.00

Early Retirement Reduction (25%) $ -962.00

Annual pension from age 60 for life = $2,886.00

plus Bridge Benefit to age 65:

0.7% x $37,000 x 8yrs. PS = $2,072.00

Early Retirement Reduction(25%) = $ -518.00

Bridge Benefit to age 65 = $1,554.00

Annual pension to age 65 = $4,440.00

CRA Maximums

Maximum Lifetime Annual Pension:

lesser of: $2,000.00 x yrs of PS and 2% x yrs of PS x HAPE over 3 years

Maximum Transfer Value:

Limits on maximum amount of Commuted Value transferable to Locked-In RRSP

Canada Revenue Agency (CRA)

No maximum on service ( was limited to 35 years prior to 1992)

No maximum on your earnings used in pension calculation

CRA limits Maximum Pension Benefit Payable

Impacts: Those earning more than $114,385

Remedy: Pensions for earnings in excess of $114,385 provided from Retirement Compensation Arrangement (RCA)

Canada Revenue Agency (CRA)

CRA limits Maximum Commuted Value that can be transferred to a LIRA or Locked-in RRSP

Impacts: Primarily employees terminating from age 50-54 with 20 years of Pensionable Service

Remedy: 1) Excess paid to you as taxable income in cash in a lump sum,

2)Excess paid to you as taxable income as a monthly pension until excess is used up.

Pension Payments

Paid by direct deposit in equal monthly installments on 1st business day each month

Payments are made in Canadian funds To residents outside Canada cheques in

Canadian funds are mailed.

Pension Indexing

Pension may be indexed each January: Up to 2014 inflation protection = 75% of

Consumer Price Index increase to maximum annual increase of 8%

Indexation after 2014 for pension earned prior to December 31, 1991 depends on sufficient Plan surplus being available

Survivor Benefits Pre-Retirement

Eligibility Hierarchy:

1. Eligible Spouse (see definition)

2. Eligible children under 18

3. Designated beneficiary/Estate

Entitlement may be altered through a separation agreement

Spousal Options Pre-retirement

Member’s accrued pension at time of death

= $2,000/month Converted to Commuted Value of $300,000 Surviving Spouse options:

a) Take Commuted Value of $300,000

b) Immediate pension of $1,500/month (based on Spouse’s age)

c) Pension at age 65 of $1,800/month

Eligible Children’s BenefitPre-Retirement

Covers children under 18 Payable where there is no eligible spouse 50% of Pensioner’s lifetime benefit divided

among all dependent children under 18 As each child reaches 18, re-divided among

remaining children under 18 Commuted value of benefit less commuted

value of children’s benefit paid to beneficiary or estate

Survivor Benefits Post-Retirement

Eligibility Hierarchy:

1) Eligible Spouse (see definition)

2) Eligible children under 18

3) Beneficiary/Estate (Balance of 60 month guarantee)

Entitlement may be altered through a separation agreement

Spousal Pension Post-Retirement

60% of Pensioner’s lifetime pension optional 75% if elected at Member’s

retirement (Member’s pension is reduced)

Eligible Children’s BenefitPost-Retirement

Covers children under 18 Payable where there is no eligible spouse 60% of Pensioner’s lifetime benefit divided

among all dependent children under 18 As each child reaches 18, re-divided among

remaining children under 18 Residual paid to last child to reach 18

POST RETIREMENT SURVIVOR BENEFITS

Pensioner’s Survivor Situation*

Spouse at Retirement

Spouse at Death of

Pensioner

Survivor Pension Paid to:

1 none none n/a

2 none B B

3 A A A

4 A A deceasednone

5 A A alivenone

6 A A deceasedB

7 A A aliveB

8 B A aliveB

First Spouse = A *No eligible children in any of the situations

Subsequent Spouse = B **unless A waived entitlement to Survivor Pension

Retirement Income Sources

At Retirement, the sources of income: CAAT Pension Plan (Based on Earnings and

Pensionable Service) CPP (Maximum with CPP starting at 65 is

$9,945.00) OAS (Maximum payable at age 65 is

$5,661.12) Other sources of income

Retirement Examples

HAPE = $40,000 Service = 35 yearsRetire in 2005 at 65, take CPP at 65.

Age: 65 OAS 5,661.12 CPP Full 9,945.00 CAAT Bridge N/A CAAT Lifetime 18,253.90 TOTAL Retirement Income 33,860.02 % of HAPE 85%

Retirement Examples

HAPE = $40,000 Service = 35 yearsRetire in 2005 at 55, take CPP at 60. Age: 55 60 65

OAS N/A N/A 5,661.12 CPP Reduced N/A 6,961.50 6,961.50 CAAT Bridge 9,746.10 9,746.10 N/A CAAT Lifetime 18,253.90 18,253.90 18,253.90 TOTAL Retirement Income 28,000.00 34,961.50 30,876.52

% of HAPE 70% 87% 77%

Retirement Examples

Age: 55 60 65

OAS N/A N/A 5,661.12 CPP* N/A N/A 9,040.00 CAAT Bridge 9,746.10 9,746.10 N/A CAAT Lifetime 18,253.90 18,253.90 18,253.90 TOTAL Retirement Income 28,000.00 28,000.00 32,955.02 % of HAPE 70% 70% 82%

* 10 years of no CPP contribution reduces “full CPP” by 9.1% (35 years/ (.85 x 45 years) x 100% - 100% = 9.1%)

Retirement Examples

Age: 60 65 OAS N/A 5,661.12 CPP Full* N/A 9,945.00 CAAT Bridge 9,746.10 N/A CAAT Lifetime 18,253.90 18,253.90 TOTAL Retirement Income 28,000.00 33,860.02 % of HAPE 70% 85%

* In this case, the 5 years of no CPP contributions has no effect on receiving full CPP.

Appendix

Retirement Examples:

HAPE = $40,000 Service = 25 years

Links to Finding CPP or OAS on the Internet

CPP Update Process

Retirement Examples

HAPE = $40,000Service = 25 years

Retire in 2005 at 65, take CPP at 65. Age: 65

OAS 5,661.12

CPP Full 9,945.00

CAAT Bridge N/A

CAAT Lifetime 13,038.50

TOTAL Retirement Income 28,644.62

% of HAPE 72%

Retirement Examples

Age: 55 60 65

OAS N/A N/A 5,661.12 CPP Reduced N/A 6,961.50 6,961.50 CAAT Bridge 6,439.39 6,439.39 N/A CAAT Lifetime 12,060.61 12,060.61 12,060.61 TOTAL Retirement Income 19,500.00 25,461.50 24,683.23 % of HAPE 46% 64% 62%

Retirement Examples HAPE = $40,000 Service = 25 years Retire in 2005 at 55, take CPP at 65.

Age: 55 60 65

Retirement Examples

HAPE = $40,000 Service = 25 years Retire in 2005 at 60, take CPP at 65.

Retirement Examples

Age: 55 60 65

Retirement Examples

Age: 55 60 65 OAS N/A N/A 5,661.12 CPP* N/A N/A 9,040.00 CAAT Bridge 9,746.10 9,746.10 N/A CAAT Lifetime 39,253.90 39,253.90 39,253.90 TOTAL Retirement Income 49,000.00 49,000.00 53,955.02 % of HAPE 70% 70% 77%

Retirement Examples

Age: 55 60 65

Retirement Examples

Age: 55 60 65

Retirement Examples

Links to Finding CPP or OAS on the InternetFrom the web site www.caatpension.on.ca click on1. Members2. Tools3. Links4. Government5. Human Resources and Skills Development Canada6. English/French7. Financial Benefits8. Public Pension and Retirement9. Choose Canada Pension Plan(CPP) or Old Age

Security(OAS)

CPP Update Process

1. File tax return2. Tax return is processed by CRA3. Year end master file created including CPP

contributions4. CPP contributions are transferred to CPP

contribution master file5. CPP master file used to produce statement of CPP

contributions6. Master file will not include current year and may not

include immediately preceding year. 2005 file should include record up to 2003

1 Conestoga College College Presentation November 17, 2005.

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