Pension Bulletin. Bulletin No from the Pension Corporation

Transcription

1 Pension Bulletin from the Pension Corporation Bulletin No To: Date: Topic: Background: Direction: Municipal Pension Plan and Public Service Pension Plan employers with staff who are members of the Health Employees Union (HEU) October 17, 2000 HEU Retroactive Pay Interpretation and Procedures The September 1999 settlement that awarded nearly 40,000 HEU members retroactive pay requires the Pension Corporation to review the files of all affected pension plan members, active and inactive including plan members who have either retired or terminated employment for the impact of the settlement on salary and pension benefits. HEU members may belong (or have belonged) to either the Municipal Pension Plan or the Public Service Pension Plan. The bulk of this settlement has already been paid to HEU members. This bulletin provides information that may help you in answering questions from your employees regarding what effect the settlement will have on their pension benefits. It also explains how the Pension Corporation will process this retroactive pay for HEU members, and provides procedures for employers to follow in reporting HEU retroactive pay correctly. Because most employers have already paid the settlement to their current and former HEU employees, it does not offer specific advice about how to remit contributions (since they should already have been remitted). It is important to note that the reporting procedures are different for the Municipal Pension Plan (annual reporting) and the Public Service Pension Plan (monthly reporting). For employers who have staff in both pension plans, it will be important to report differently for the two plans. General procedures for reporting pay will be available on-line as a direct link from the What s New section of the Employer sites for both the Municipal and Public Service pension plans. Please do not refer to the Employer Manual for either plan, as it does not currently provide sufficient information on retroactive pay. PB12 HEU Pension Corporation PO Box 9460 Stn Prov Govt Victoria BC V8W 9V8 Web: pensions.gov.bc.ca

2 Questions and Answers: Q. Will the HEU retroactive pay be considered pensionable salary? A. In general, retroactive pay for a period of employment during which an employee was contributing to either the Municipal or Public Service pension plan will form part of the plan member s pensionable salary. This means that both the employee and the employer must make contributions with respect to the retroactive pay, and that the corporation will adjust the pension plan member s account to reflect the impact of the retroactive pay on his/her salary and benefits. The pay advice notice from the employer for the retroactive pay should reflect a deduction for pension contributions. However, if the retroactive payment being made to the employee would not have been pensionable salary at the time of the service (such as overtime pay or pay received for service while not a contributor), then it should not be reported as pensionable salary. The lump sum interest payment being paid to employees for the time they waited for the retroactive pay is not considered to be pensionable salary. If the retroactive payment to a member is reported as a single lump sum, the corporation will assume that the entire payment is pensionable salary and will treat it as such. Q. How are contributions calculated on retroactive pensionable salary? A. Pension contributions are calculated in relation to the total pensionable salary received by a member for the period in question, in relation to the yearly maximum pensionable earnings (YMPE) for the year in which the contributions are made. One contribution rate is applied to salary below the YMPE, and a slightly higher rate is applied to that portion of salary above the YMPE. The following examples are for 1997, but because the contributions are being made in 2000, the YMPE to be used is $37,600, the YMPE for Example 1: If the total pensionable salary for the period, including the retroactive payment, is below the YMPE, then the lower contribution rate should be applied to the pensionable portion of the retroactive payment. This would apply for a member whose annual salary in 1997 was $31,000 and who received $2,000 in the retroactive settlement; member and employer contributions on the retroactive pay would be calculated at the lower of the two rates. Example 2: If the pensionable salary before the retroactive payment already exceeded the YMPE, then the higher contribution rate should be applied to the pensionable portion of the retroactive payment. This would apply for a member whose annual salary in 1997 was $42,000 and who received $3,000 in the retroactive settlement; member and employer contributions on the retroactive pay would be calculated at the higher of the two rates. Example 3: If the retroactive payment causes the total pensionable salary to exceed the YMPE, then contributions on the retroactive payment should be made in the appropriate proportion based on the pensionable retroactive salary above and below the YMPE. If a member received $37,000 in 1997, then received $3,000 in the settlement, the lower rate would be applied to $600 of the retroactive pensionable salary (up to the YMPE of $37,600), and the higher rate would be applied to the remaining $2,400. Q. What impact will the settlement have on a person who has not received or begun receiving pension benefits? A. A member who terminates employment and receives a refund of contributions with interest will receive a larger payment, because more contributions will have been paid and more interest will have accrued. Other pension benefits either a pension or a commuted value payment are based on a member s salary during the five years of highest salary, not directly on contributions. A member who takes a pension or a commuted value of his or her pension may receive a larger benefit, because the benefit could be based on a higher salary, which now includes the retroactive salary.

3 Q. What about terminated or retired employees? Do employers need to make pension deductions for retroactive payments to these employees? A. Yes. Although the retroactive pay is being distributed in 2000, there are pension implications for all plan members who were active contributors to the Municipal or Public Service pension plans at any time between 1996 and Today, these plan members may be current employees, former employees or pensioners. Deductions for pension plan contributions must be made from the retroactive payments made to all plan members who were active contributors to the Municipal or Public Service pension plans between 1996 and 2000 and who are receiving retroactive pay for service during the time they contributed to either plan. Q. What impact will the settlement have on a person who has already received a pension benefit, or is currently receiving a pension? A. If the employee had already received a refund of his/her contributions with interest or a commuted value payment of his or her pension benefit, before the settlement was paid, an appropriate payment will be made directly to the member. If the employee is now in receipt of a pension, the Pension Corporation will adjust the retired member s pension payment to reflect the impact of the retroactive pay on the pension benefit, unless the increase to the monthly benefit is very small. Q. When will these payments be made, and when will the pensions be amended? A. Because this represents significant workload for the corporation, there may be a considerable delay before payments are received by members. Priority will be given to members who are retiring or terminating employment, followed by those who have already received a lump sum payment, and those whose pensions require amendment. Our timely response is dependent on complete and accurate information being provided by employers. Q. Will this retroactive salary adjustment affect an employee s annual Pension Adjustment statement? A. There will be some impact on current and former Pension Adjustment (PA) statements. According to Canada Custom and Revenue Agency regulations, the corporation must recalculate the value of each employee s pension benefit. As a result, depending on a member s individual circumstances, plan members may receive an Amended PA statement, a PA Reversal or an adjusted PA for the year Procedures: 1. Reporting the Retroactive Pay: The following instructions are provided to ensure that the retroactive pay for each affected pension plan member is reported accurately so that it may be easily accepted by the corporation database. Municipal and Public Service employers should report the retroactive event separately from the regular payroll events. To assist you with these lists/ reports, we have attached a sample copy of the Contributions, Salary and Service Report form, and (if you would prefer not to use the form) an example of a Excel spreadsheet that could serve the same purpose. The form would be preferred, but in any case the report must include for each member: the member s Social Insurance Number and name the amount of retroactive pensionable salary the periods covered by the retroactive pay broken down by year the contributions for each period identified, and the date the contributions were remitted to the corporation. Employers should submit completed retro-reports to the corporation along with regular payroll. Municipal employers should send the retro-report along with the regular annual report, and Public Service employers should send the retro-report along with the regular month-end report. PB12 HEU

4 If you do not report the retroactive pay by separate lists, the retroactive pay will not be identified as such in the corporation database. As a result, when the individual account of each affected member is researched for benefit calculations at termination of employment or retirement, you will be asked at that time to provide an individual breakdown of these details for each member. maximum pensionable earnings in each of two consecutive calendar years of continuous employment.) If the retroactive settlement has increased the salary for one of your employees who enrolled when first eligible for optional enrolment in the period covered by the settlement, please inform the corporation as arrears may be owing for this period. To access Employer Reporting Instructions on-line at: pensions.gov.bc.ca, select the appropriate pension plan; select Employers from the menu line; then select Employer Reporting Instructions from the sub-menu at the right-hand side of the screen. You will also find this information under the What s New section of the Employer site. If you do not have web access, please pensionline@gems3.gov.bc.ca, or call the corporation s Help Desk at (250) If you have questions about data reporting or completing the forms, or if you require a copy of the Excel spreadsheet, please contact Employer Data Services toll-free at or in Victoria at ; by at eds.pensioncorp@gems9.gov.bc.ca; or by fax at: (250) Employer Remittances: There are no special procedures required. Employers should follow normal procedures for remittances linked to the retroactive pay. 3. Other Important Information: It would be helpful if the employer could provide the Pension Corporation with a list of inactive plan members who will receive or already have received the retroactive pay. Also, when you are completing a Termination Notice or advising a plan member on completing a Retirement Application, it would be most helpful if a note could be made that the plan member received the retroactive pay. Municipal employers should also be aware that the retroactive salary increase may affect the date at which a person would first have been eligible for optional enrolment. (Employees of Municipal employers become eligible for optional enrolment once their total salary exceeds 35% of the year s The information in this bulletin is based on the relevant pension statutes and regulations as enacted by the Legislative Assembly of British Columbia. Although the information has been assembled with care, it is provided for information purposes only. In the event of any error, omission or disagreement over interpretation, the pension statutes and regulations will be the defining text. If you wish to understand exactly what your legal rights are, we recommend that you refer to the governing legislation and regulations or seek legal advice. Contacts Client Services Teams Municipal Pension Plan: Robin Hansen (250) Shirley Granger (250) Public Service Pension Plan: Carol Wright (250) Toll-free in BC: Pension Bulletin is published by the Pension Corporation. For additional copies of this publicaiton contact: Communications Branch PO Box 9460 Stn Prov Govt Victoria BC V8W 9V8 Or fax us: (250)

5 Municipal Pension Plan ORGANIZATION NAME CONTRIBUTIONS, SALARY AND REPORT Pension Corporation Employer Data Services PO Box 9460 Stn Prov Govt Victoria BC V8W 9V8 Victoria Toll-free in NA Fax ORGANIZATION ID CORPORATION USE ONLY FILE EMPLOYER INSTRUCTIONS: This form replaces the Contributor Report form (PMA 17) and Long Term Disability Report (PMA 18). Submit one copy of this form to the corporation each reporting period. Service event information for up to five different members or five different service events may be combined on one page. Please refer to the IPAS Employer Reporting Instructions, on-line at pensions.gov.bc.ca in the For Employers section of your plan, for the latest coding, definitions and procedures. Direct questions and completed forms to Member Accounts (contact info above). TEAM REPORTING PERIOD PREPARED BY (Please print) DATE REPORT PREPARED CONTACT PHONE NUMBER REPORTING PERIOD SOCIAL INSURANCE NUMBER EMPLOYEE GROUP (8 CHARACTERS) PENSIONABLE CONTRIBUTIONS ($) PENSIONABLE SALARY ($) SOCIAL INSURANCE NUMBER EMPLOYEE GROUP (8 CHARACTERS) PENSIONABLE CONTRIBUTIONS ($) PENSIONABLE SALARY ($) SOCIAL INSURANCE NUMBER EMPLOYEE GROUP (8 CHARACTERS) PENSIONABLE CONTRIBUTIONS ($) PENSIONABLE SALARY ($) SOCIAL INSURANCE NUMBER EMPLOYEE GROUP (8 CHARACTERS) PENSIONABLE CONTRIBUTIONS ($) PENSIONABLE SALARY ($) SOCIAL INSURANCE NUMBER EMPLOYEE GROUP (8 CHARACTERS) PENSIONABLE CONTRIBUTIONS ($) PENSIONABLE SALARY ($) PENSIONABLE CONTRIBUTIONS ($) PENSIONABLE SALARY ($) PENSIONABLE CONTRIBUTIONS ($) PENSIONABLE SALARY ($) TOTALS THIS PAGE TOTALS ALL PAGES THIS BATCH Freedom of Information and Protection of Privacy Act The personal information on this form is collected under the authority of the Public Sector Pension Plans Act and will be used by the Pension Corporation for the purposes of administering the plan member s pension. If the employer or plan member has questions about the collection and use of this information, contact the chief executive officer at the above address or by telephone (250) PMA

6 S A M P L E EXCEL SPREADSHEET FORMAT

7 SAMPLE - Retro List for MPP Employer XXXXXX SIN Name Retro Amount Retro period Contributions Date Remitted Smith Jan. 1/97 - Dec. 31/97 $ Sept.30/ Jan. 1/ 98 - Dec. 31/98 $ Sept.30/ Jan. 1/99 - Dec. 31/99 $ Sept.30/00 Note: in this example, all contributions were based on the rate (7%) above the YMPE (37,600) because this employee has reached the YMPE prior to this retro being paid in year Wilson Jan. 1/97 - Dec. 31/97 $11.23 Sept.30/ Jan. 1/98 - Dec. 31/98 $68.11 Sept.30/ Jan. 1/99 to Dec. 31/99 $39.29 Sept.30/00 Note: in this example, contributions for Jan. 1/97 - Dec. 31/97 were based on the rate (6%) below the YMPE (37,600.) The cumulative salary for year retro payment brought the salary for year 2000 up to the YMPE. The remainder of the retro payments have been calculated based on 7% (rate above the YMPE). Total Retro $$ 7, Total Contributions $$