Public Service Pension Plan Retirement Planning Information Session

You and Your Pension Plan

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ObjectiveObjective

“ …to help you understandthe benefits of your

Public Service Pension Plan”

This handout is provided for information purposes only and does not constitute a legal document on your

rights and obligations. Should there be any conflict between the information in this document and that

contained in the Public Service Superannuation Act and Regulations, or other applicable laws, the Act and

Regulations apply.

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Today’s TopicsToday’s Topics

• How your pension plan works

• Service Buyback

• Supplementary Death Benefit Plan

• Retirement Benefits

– Indexing

– CPP/QPP Coordination

– Re-employment after retirement

• Survivor Benefits

• Pension Benefits Division

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www.pensionandbenefits.gc.ca

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Pension Plan Contributions for Pension Plan Contributions for 20122012

• Contribution rate is 6.2% on salaries up to yearly CPP/QPP maximum of $50,100

• Contribution rate is 8.6% on salaries above yearly CPP/QPP maximum of $50,100

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Pensionable ServicePensionable Service

• Current service

• Service Buyback

• Canadian Forces / RCMP service

• Pension Transfer Agreements

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Non-Pensionable ServiceNon-Pensionable Service

• Strike

• Suspension

• Unauthorized Leave Without Pay

• Seasonal Lay-off

• Authorized Leave Without Pay(not purchased)

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Can you buyback prior service?

Service BuybackService Buyback

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Types of Service BuybackTypes of Service Buyback

• Prior public service (PSSA) Non-Contributory Contributory Part-time Service Unpurchased periods of Leave Without Pay

• Canadian Forces / RCMP service Non-Contributory Contributory Reserve Service

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Types of Service BuybackTypes of Service Buyback

• Pensionable Employment

Subject to pension plan

Approved pension plan must be registered under the Income Tax Act

Must enter Public Service within 2 years of leaving outside employer

Pensionable Employment Questionnaire must be completed by outside employer

Double rate of contributions

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Methods of PaymentMethods of Payment

• Lump sum payment

and/or

• Monthly instalments Payment period

- under age 45 / up to age 65- age 45 and over / 20 years

• Debt cancelable by death

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Sample of a Public Service Sample of a Public Service BuybackBuyback Service: 1/1/1975 to 31/12/78 (4 years)

Born: 1952 (male)

ElectionDate

Salary LumpSum Cost

MonthlyCost

Repayment Period

TotalCost

Resultant Benefit:

0.02 x 4 years x $48,000 ÷ 12 = $ 320.00

Dec. 80 $ 20,017

Dec. 90 $ 32,128

May 11 $ 50,000

$ 10,269 $ 56.90 26 yrs $ 17,753

$ 33,029 $ 258.17 20 yrs $ 61,960

$ 6, 501 $ 30.05 36 yrs $ 12,981

Benefit Increase = $ 61.83

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The Buyback ProcessThe Buyback Process

• Estimate of cost

• Legally binding agreement

• Medical examination

• Made while employed as a plan member

• Income Tax implications

• Public Service Pension Centre 1-800-561-7930

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Advantages of Purchasing ServiceAdvantages of Purchasing Service

• More service……more pension

• Service is fully credited before it is paid in full

• Life insured

• Earlier retirement

• Reach 35 years service more quickly

• Income tax deductibility

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Supplementary Death BenefitSupplementary Death Benefit

Did you know that you have “life insurance” from your employer?

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Supplementary Death BenefitSupplementary Death Benefit

• Term life insurance

• Coverage: double your annual pensionable salary

(to next multiple of $1,000)

• Cost: 15¢ a month per $1,000 of coverage

• Coverage of $10,000 is free at age 65

• Reduced by 10% per year effective age 66

• Designation of beneficiary 1-800-561-7930

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Naming a BeneficiaryNaming a Beneficiary

• Estate

• A person age 18 and over

• Charitable / benevolent / religious or educational institution

• Estate

A beneficiary can be:

Where no beneficiary is named:

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Retirement BenefitsRetirement Benefits

What are my options when I retire?

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Retirement BenefitsRetirement Benefits

Two types of retirement benefits:

• Lump Sum Payments Return of Contributions Transfer Value

• Monthly Payments Immediate Annuity Annual Allowance Deferred Annuity

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Lump Sum BenefitLump Sum Benefit

Return of Contributions

Only option available to those with less than 2 years of pensionable service (not vested).

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Lump Sum PaymentLump Sum Payment

Transfer Value Payment• Must be less than age 50 at termination

• Must have at least 2 years of service

• Actuarial value of accrued pension benefits

• Must be transferred to a locked-in RRSP, another registered pension plan and/or purchase an annuity

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Lump Sum PaymentLump Sum Payment

Transfer Value Tax Considerations

• Amount within tax limit must be transferred to a locked-in RRSP, another registered pension plan and/or purchase an annuity.

• Amount in excess of the tax limit is paid to the member and taxed.

• Amount in excess of the tax limit paid to RRSP if you have available RRSP “room”.

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Lump Sum PaymentLump Sum Payment

Transfer Value Buyback

• Must purchase within the first year of becoming a plan member

• One-time opportunity to purchase

• No monthly instalments

• Lump sum required

• Medical

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How is your pension benefit calculated?

Pension BenefitsPension Benefits

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Benefit Formula (Full-Time)Benefit Formula (Full-Time)

2% X 35 years X $52,934 = $ 37,054 per year/ $ 3,088 per month

2% X 25 years X $52,934 = $ 26,467 per year/ $ 2,205 per month

Years and days of Average salary for 52% X pensionable service X consecutive years of highest paid service

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Benefit Formula (Part-Time)Benefit Formula (Part-Time)

2% X 5 years X $52,934 X 20.0/37.5 = $ 2,823 per year$ 235 per

month

Years and days Average salary Assigned2% X of pensionable X for 5 consecutive X Work Week service years of highest Standard

paid service Work Week

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Benefit Formula (Full-Time and Part-Benefit Formula (Full-Time and Part-Time)Time)

Full-Time Service

2% X 35 years X $ 52,934 X 37.5/37.5 = $ 37,054 annually$ 3,088 monthly

Full-Time and Part-time Service

2% X 30 years X $ 52,934 X 37.5/37.5 = $ 31,760 annually$ 2,646 monthly

2% X 5 years X $ 52,934 X 20.0/37.5 = $ 2,823 annually$ 235 monthly

Total = $ 34,583 annually $ 2,881 monthly

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Calculating your Public Service Calculating your Public Service PensionPension

Your Public Service pension is coordinated with Canada Pension / Quebec Pension PlansPension includes:

Lifetime pension (paid from date of entitlement for life)

and

Bridge benefit (if you are entitled before age 65)

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Lifetime pension and Bridge Lifetime pension and Bridge benefitbenefit

Lifetime Pension(public service pension plan)

Bridge Benefit(public service pension plan)

CPP or QPP Pension

Age 65Retirement

Pen

sion Inco

me

If you retire before age 65 and apply for CPP/QPP at age 65:

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Monthly BenefitsMonthly Benefits

What do these terms mean to you?

• Immediate Annuity

• Annual Allowance

• Deferred Annuity

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Monthly BenefitsMonthly Benefits

Immediate Annuity – (unreduced benefit)

Age PensionableService Years

Termination

Reason 60 or over At least 2 Retirement

55 or over At least 30 Retirement

Any age At least 2 Disability

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Monthly BenefitMonthly Benefit

Immediate Annuity

• Payable upon termination

• Indexed from year of termination

• Supplementary Death Benefit coverage is automatic

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Monthly BenefitMonthly Benefit

• Payable at the latest of : age 50: date of option or

: date of termination• Subject to reduction

• Immediate annuity possible in the event of permanent disability

• Supplementary Death Benefit coverage can be automatic

Annual Allowance (reduced benefit)

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Annual Allowance Reduction Annual Allowance Reduction FormulaFormula

Formula 1 5% x (60 – age)

Formula 2 5% x (55 – age) Greater reduction of: or

5% x (30 – service)

Under 50 years of age or Formula 1Under 25 years of service

50 years of age and over Formula 1 and Smaller reduction of: or25 or more years of service Formula 2

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Monthly BenefitsMonthly Benefits

• Payable on 60th birthday

• Indexed from year of termination

• Annual allowance can be requested at age 50

• Immediate annuity possible in the event of

permanent disability

• Supplementary Death Benefit coverage not

automatic

Deferred Annuity (paid in the future)

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Monthly DeductionsMonthly Deductions

Voluntary - Supplementary Death Benefit - Canada Savings Bond - Income Tax (extra) - PS Health Care / Dental

Compulsory - Income Tax - Buyback Instalments - Provincial Sales Tax

Cease - Pension contributions - Disability Insurance - EI and CPP/QPP - Union dues - Public Service Management Insurance Plan

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Public Service Health Care PlanPublic Service Health Care Plan

Individual Monthly Cost

Employee:

Pensioner:

Family Monthly Cost

Employee:Pensioner:

Level 1 Level 2 Level 3

$ 0.00 $ 1.10 $ 5.31

$ 21.78 $ 38.34 $ 67.19

Level 1 Level 2 Level 3

$ 0.00 $ 3.53 $ 10.34

$ 42.76 $ 59.32 $ 88.17

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Pensioners’ Dental Services PlanPensioners’ Dental Services Plan

Coverage Monthly Cost

Pensioner $ 16.00

Pensioner – plus one dependent

$ 31.96

Pensioner – more than one dependent

$ 47.96

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IndexingIndexing

Am I on a “fixed income” as Public Service retired member?

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• Annual cost of living increase

• Based on average of Consumer Price Index

• Increase is effective January 1

• First increase is pro-rated and based on

month of termination

IndexingIndexing

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Month of Retirement Percentage of Indexing

January 11/12

February 10/12

March 9/12

April 8/12

May 7/12

June 6/12

July 5/12

August 4/12

September 3/12

October 2/12

November 1/12

December 0/12

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Canada/Quebec Pension Plan Canada/Quebec Pension Plan CoordinationCoordination

How does the CPP/QPP coordination affect my pension benefits?

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CPP/QPP CoordinationCPP/QPP Coordination

20122012

SALARY PSSA CPP/QPP TOTAL

First $3,500 6.2 % 0.000 % 6.200 %

CPP$3,501 to $50,100QPP

6.2 %4.950 %

5.025 %

11.150 %

11.225 %

Over $50,100 8.6 % 0.000 % 8.600 %

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Bridge Benefit Formula for Bridge Benefit Formula for 20122012

Bridge Years and days Lesser of the averageBenefit X of pensionable X salary or CPP/QPPFactor service average maximum pensionable earnings

0.00625 x 35 years x $ 47,360.00 = $ 10,360.00 / annually $ 863.33 / monthly

0.00625 x 25 years x $ 47,360.00 = $ 7,400.00 / annually $ 616.66 / monthly

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Bridge Benefit FactorBridge Benefit Factor

Year Member will reach age 65

Year of birth Bridging Factor

2007 or earlier 1942 or earlier .00700

2008 1943 .00685

2009 1944 .00670

2010 1945 .00655

2011 1946 .00640

2012 or later 1947 or later .00625

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Pension Formula (Full-Time)Pension Formula (Full-Time)

LESS

Years and days of Lesser of the average .00625 X pensionable service X salary or CPP/QPP average maximum

pensionable earnings

Years and days of Average salary for 5 2% X pensionable service X consecutive years of

highest paid service Bridge

ends at age 65

Bridgeends at age 65

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Bridge Benefit Bridge Benefit ConsiderationsConsiderations

• Bridge benefit ends effective:

First of the month following 65th birthday or

Entitlement to CPP/QPP disability benefits

• Application must be made for CPP/QPP benefits

• Early retirement benefits available with CPP/QPP

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Lifetime pension and Bridge benefitLifetime pension and Bridge benefit

Lifetime Pension(public service pension plan)

Bridge Benefit (public service pension plan)

Early CPP / QPP Pension

Age 65Retirement

Pen

sion Inco

me

Age 60

If you retire before age 65 and apply for early CPP/QPP benefits between age 60 to 64:

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Effect of Bridge Benefit on Effect of Bridge Benefit on IndexingIndexing$ 3,088.00 Monthly pension (retirement age 55) x 22 % Indexing rate 10 years later (age 65)$ 679.36 Monthly indexing increase $ 3,088.00 + $ 679.36 = $ 3,767.36

$ 3,088.00 Monthly pension - 863.33 Bridge benefit ends at age 65

$ 2,224.67 New monthly pension (age 65) x 22 % Indexing rate $ 489.43 New monthly indexing increase (age 65)

$ 2,224.67 + $ 489.43 = $ 2,714.10 Total effect - $ 1,053.26

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Re-employment after RetirementRe-employment after Retirement

• Pension Benefits

• Indexing

• Public Service Health Care Plan

• Pensioners’ Dental Services Plan

• Supplementary Death Benefit

• Contact the Public Service Pension Centre

at 1-800-561-7930.

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Survivor BenefitsSurvivor Benefits

What benefits are available for my survivors?

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Survivor BenefitsSurvivor Benefits

• Surviving Partner50% of the member’s basic pension(1% x years/days of service x average salary)

• Dependants 10% of member’s basic pension to each child or student (maximum 40%)

• Orphans20% of member’s basic pension to each

child or student (maximum 80%)

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Survivor EntitlementsSurvivor Entitlements

• Divorced- Partner is not entitled

• Separated- Partner is entitled

• Common Law - Must provide proof that relationship started prior to retirement- Pension Centre must approve documentation submitted

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Optional Survivor BenefitsOptional Survivor Benefits

• Marriage occurs after retirement

• Option to reduce your own pension to provide a

benefit for your spouse

• Different levels of coverage available

• Original pension can be re-instated

• Estimate provided by the Public Service

Pension Centre

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Five Year Minimum BenefitFive Year Minimum Benefit

How and when is a minimum benefit paid?

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Five Year Minimum BenefitFive Year Minimum Benefit

• Issued when no further benefits payable to any survivors

• Minimum benefit payable is the greater of:

Return of Contributions plus interest

or

Five years of basic pension benefits (less any amount already paid)

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Pension Benefits Division Act

Can my pension be divided?

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Pension DivisionPension Division

Requirements:

an agreement or court order must exist

living apart for at least one year

(when based on a separation agreement)

normally cohabitation benefits only are available for

division (court can order a different period)

Maximum benefit available to the ex-partner is 50% of the value of the member’s pension.

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Pension Division continued…Pension Division continued…Requirements:

Lump sum payment transferred to a locked-in

registered retirement vehicle

Member’s pension is reduced accordingly

Either party can request a division estimate

Non-applicant partner has a 90-day objection period

For information, contact Public Service Pension Centre

at 1-800-561-7930.