University of New Brunswick

Transcription

1 Pension Plan for Academic Employees T he UNB pension plan is designed to pay you a monthly income for life after you retire. The cost of providing this pension is shared equally by you and the University. The amount of pension you eventually receive from the plan depends on your years of service, salary and age at retirement. This guide gives a summary of the plan in simple terms. It isn t a legal document and doesn t cover every detail, but it does give you the basic facts. Key terms are defined in boxes throughout the guide and in Section 22. We have tried to provide an accurate description of the plan. However, if there is a discrepancy between the information provided here and the legal documents, the legal documents will govern. If you have any questions about the pension plan, please contact Human Resources at 506/ Background UNB s pension plan for academic employees was introduced on January 1, Previously, pensions for academic staff were provided under the New Brunswick Public Service Superannuation Plan. The Public Service Plan continues to provide pension benefits for service before January 1, If you have service before January 1, 1993, please ask Human Resources for a copy of the special guide describing your pension. UNB s pension plan is administered by a Pension Board. The Pension Board has eight members, half appointed by the Board of Governors and half appointed by the Association of University of New Brunswick Teachers (AUNBT). The powers and responsibilities of the Board are set out in the plan s legal documents. These documents, as well as annual reports and other information, are available for viewing on-line at or in Human Resources. The day-to-day operation of the plan is handled by Human Resources. University of New Brunswick Summer 2004

2 Contents UNB pension benefits at a glance Section Page 1. Plan membership Contributions Years of service Normal retirement Special early retirement Reduced early retirement Maximum UNB pension Cost of living increases Payment of your pension If you leave UNB If you die before retirement If you die after retirement If you take a leave of absence Buying previous service If you work part-time If you are on a workload reduction If you become disabled If you separate or divorce Pension statements Your RRSP contribution limit If the UNB plan is discontinued Canada Pension Plan Key terms The last word...12

3 UNB PENSION BENEFITS AT A GLANCE Plan membership Section 1, p.1 Plan contributions Section 2, p.1 Retirement age Section 4, 5, 6, p.2-4 Amount of your pension Section 4, 5, 6, p.2-4 If you leave Section 10, p.5 If you die before you retire Section 11, p.6 You automatically join the plan when you become a full-time academic employee, unless you are under age 18 or over age 60. If you work part-time, you may join the plan if you meet minimum pay requirements. You and the University contribute equally to the plan. You contribute by payroll deduction. The amount you contribute depends on how much you earn. Your contributions are taxdeductible. Normal: June 30 th following 65 th birthday Special early: any time after age plus service equals 85 Reduced early: any time between ages 55 and 65 (five years' service required). Normal: 2% of your best average annual salary multiplied by your years of service (integrated with CPP) Special early: same as normal pension (integrated with CPP at age 60) Reduced early: same as normal pension but reduced by 5% for each year you are under age 65 (integrated with CPP at age 60). If you have under two years of plan membership, your total contributions are repaid with interest. If you have two or more years of plan membership (or five years of service), you will receive the full value of the pension you have earned. If you have under two years of plan membership, your spouse, beneficiary or estate will receive a refund of your total contributions with interest. If you have two or more years of plan membership (or five years of service), a pension will be paid to your spouse or children, or a lump sum will be paid to your beneficiary or estate.

4 About your plan... The UNB pension plan is administered by a joint Board of Trustees with equal representation from the Association of University of New Brunswick Teachers and the University of New Brunswick. Costs are shared between employees and the University, including any ongoing actuarial surplus or deficit. 1. Plan membership If you are between the age of 18 and 60, you must join the plan on the date you become a full-time academic employee. If you become a full-time academic employee when you are age 60 or over and will not complete five years of service by the time you reach your normal retirement age, membership in the pension plan is optional. You may join on the first of any month before your 65 th birthday. Membership is also optional if you are a part-time academic employee. You may join on the first of any month if, in each of the two previous calendar years, you have earned at least 35% of the earnings ceiling set by the Canada Pension Plan (CPP). Once you join the plan, you must remain a member for as long as you are an academic employee. 2. Contributions You make regular contributions to the plan by payroll deduction. Your contributions are tax-deductible and are matched equally by the University. The contribution rate changes from time to time based on the advice of the plan's actuary. By law, a complete actuarial review of the plan is carried out every three years. The current rate (effective from July 2003) is: 9.3% of your salary up to the CPP earnings ceiling, and 11% on your additional earnings. For example, if you earned $70,000 in 2004, your contribution would be $7,012 (9.3% on $40,500 and 11% on $29,500). To avoid having to make contributions for a pension that exceeds the maximum allowed under the Income Tax Act, you do not make contributions on your income above a certain level. This level changes from year to year. In 2004, it is about $105,500 and is scheduled to increase to about $114,000 in You are a full-time academic employee if you are employed for 12 or more months and you work at least 29 hours each week. You must be a member of the AUNBT or hold academic rank. The CPP earnings ceiling is the maximum earnings on which you make contributions to the CPP. The ceiling is set each year and is roughly equal to the average industrial wage in Canada it is $40,500. Your salary is your normal, full-time salary including ongoing administrative stipends. 3. Years of service The following periods count as service: service during which you contributed to the plan (see Section 14 for information on how to count part-time employment and Section 15 for workload reduction) 1

5 leaves of absence, including disability leave and maternity/parental leave, for which contributions have been made (see Sections 12 and 16 for details) Remember! Up-to-date pension information is available for viewing at service from a previous period of employment with UNB for which you have accepted a deferred pension or for which you have repaid any amounts transferred from the plan (see Section 13). Your best average salary is your average salary during your five highest consecutive years salary. The average CPP earnings ceiling is the average of the ceilings in the year of the calculation and the two previous years. 4. Normal retirement Your normal retirement date is the 30 th of June following your 65 th birthday. At this time, you will receive an annual pension equal to: 2% x your best average salary x years of service. Since the UNB pension plan is integrated with the Canada Pension Plan (CPP), there is a reduction for benefits paid by the CPP. The formula for this reduction is: 0.7% x average CPP earnings ceiling x years of service. Example: Normal Retirement Age at retirement 65 Best average salary $90,000 Years of service 30 Average CPP earnings ceiling $39,833 Annual UNB pension 2% x $90,000 less CPP reduction 0.7% x $39,833 ($279) $1,521 x years of service x 30 $45,630 plus Canada Pension Plan (2004 maximum) $9,770 Total UNB and CPP $55,400 Important early retirement change July 1, 2003 If you take early retirement between ages 60-65, your UNB pension is reduced at retirement to reflect integration with CPP benefits. If you retire before age 60, the CPP reduction begins at age 60. If you qualified for early retirement of any kind on July 1, 2003, the old rules continue to apply and there is no CPP reduction until you reach age 65, regardless of when you actually retire. 2

6 5. Special early retirement You may retire on an unreduced pension as soon as your age plus years of service (see Section 3) equal 85 or more. For example, if you join UNB at age 35, you may retire at age 60 when your age and service total 85. If you take special early retirement, your pension will be calculated the same way as a normal retirement pension except that your pension will be reduced at age 60 (or at retirement, if you retire later than age 60) to reflect integration with CPP benefits. If you qualified for early retirement of any kind on July 1, 2003 the CPP reduction will not apply until you reach age 65. Example: Special Early Retirement If You DID NOT Qualify for Early Retirement of Any Kind On or Before July 1, 2003 Age at retirement 60 Best average salary $90,000 Years of service 25 Average CPP earnings ceiling $39,833 Annual UNB pension Ages From age 65 2% x $90,000 less CPP reduction 0.7% x $39,833 x years of service plus Canada Pension Plan* (2004 maximum) Total UNB and CPP ($279) $1,521 x 25 $38,025 $6,839 $44,864 ($279) $1,521 x 25 $38,025 $6,839 $44,864 *Assumes CPP starts at age 60 and is reduced by 30%. You can start taking CPP and time after you reach age 60, but it is reduced by 6% for each year you are under age 65. Example: Special Early Retirement If You DID Qualify for Early Retirement of Any Kind On or Before July 1, 2003 Age at retirement 60 Best average salary $90,000 Years of service 25 Average CPP earnings ceiling $39,833 Annual UNB pension Ages From age 65 2% x $90,000 less CPP reduction 0.7% x $39,100 x years of service plus Canada Pension Plan* (2004 maximum) Total UNB and CPP $0 x 25 $45,000 $0 $45,000 ($279) $1,521 x 25 $38,025 $9,770 $47,795 CPP normally begins at age 65. You may begin taking it any time after you reach age 60, but it will be reduced by 6% for each year you are under age 65. *Assumes CPP starts at age 65. CPP would be reduced by 30% if taken at 60. 3

7 6. Reduced early retirement If you have at least two years of plan membership (or five years of service), you may retire on a reduced pension any time you wish in the 10 years before your normal retirement date. If you do this, your UNB pension will be reduced by 5% for each year that you are under age 65. The CPP reduction will not apply until you reach age 60, (the earliest age you can collect a CPP pension) or at retirement if you retire after age 60. If you qualified for early retirement of any kind on July 1, 2003 the CPP reduction will not apply until you reach age 65. Pension Example: Reduced Early Retirement If You DID NOT Qualify for Early Retirement of Any Kind On or Before July 1, 2003 Age at retirement 60 Best average salary $90,000 Years of service 20 Average CPP earnings ceiling $39,833 Annual UNB pension Ages From age 65 2% x $90,000 less CPP reduction 0.7% x $39,833 x years of service minus Reduction for early retirement 5% x 5 years = 25% plus Canada Pension Plan* (2003 maximum) Total UNB and CPP ($279) $1,521 x 20 $30,420 ($7,605) $22,815 $6,839 $29,654 ($279) $1,521 x 20 $30,420 ($7,605) $22,815 $6,839 $29,654 *Assumes CPP starts at age 60 and is reduced by 30%. You can start taking CPP and time after you reach age 60, but it is reduced by 6% for each year you are under age 65. Pension Example: Reduced Early Retirement If You DID Qualify for Early Retirement of Any Kind On or Before July 1, 2003 Age at retirement 60 Best average salary $90,000 Years of service 20 Average CPP earnings ceiling $39,833 Annual UNB pension Ages From age % x $90,000 less CPP reduction 0.7% x $39,833 x years of service minus Reduction for early retirement 5% x 5 years = 25% plus Canada Pension Plan* (2004 maximum) Total UNB and CPP $0 x 20 $36,000 ($9,000) $27,000 $0 $27,000 *Assumes CPP starts at age 65. CPP would be reduced by 30% if taken at 60. ($279) $1,521 x 20 $30,420 ($7,605) $22,815 $9,770 $32,585

8 7. Maximum pension The Income Tax Act imposes a dollar limit on the amount of pension you may receive. The current limit is $1,722 x years of service. The current limit is $1,833 x years of service under the UNB plan. This limit is scheduled to increase to $2,000 in Cost of living increases Your pension is increased on the first of each year to help offset inflation. The increase equals the increase in the Consumer Price Index to a maximum of 6% for benefits earned up to July 1, 2003 and a maximum of 4.5% for benefits earned from July 1, 2003 to June 30, For benefits earned from July 1, 2004, the increase equals: (a) the increase in the Consumer Price Index to a maximum of 0.5% plus (b) the lesser of the amount the 3-year average investment return exceeds 7.75%, or the amount the 3-year average increase in the Consumer Price Index exceeds (a). 9. Payment of your pension Pension payments begin in the month following the month in which you retire and continue monthly for the rest of your life. You may have your pension cheques mailed to you or deposited directly to your account. 10. If you leave UNB If you leave before you have completed two years of plan membership (or five years of service), you will receive a refund of your contributions with interest. You may transfer this money tax-free to a registered retirement savings plan (RRSP) or take it as a taxable cash payment. If you have completed two years of plan membership (or five years of service), you are entitled to the current value of the pension you have earned to the date you leave. You have these options: leave your pension benefits in the plan to provide a pension when you retire (this is called a deferred pension ). By taking this option, you will receive all cost of living increases granted before and after your retirement. You may begin taking your deferred pension at the normal retirement age of 65 or at a reduced level any time after you reach age 55. OR 5

9 The current value of your pension is sometimes known as the commuted value. The current value is the total cash value today of the pension you are entitled to at age 65 if you leave your pension in the plan. The yearly interest rate paid on refunds from the plan is the average monthly yield on five-year fixed-term bank deposits. transfer the current value of your pension, tax-free, to one of the following (this option applies only if you don t qualify for an early retirement pension): a locked-in retirement savings arrangement, such as a locked-in registered retirement savings plan (RRSP), an insurance company to buy an annuity that will guarantee a lifetime income any time from age 55, or your new employer s registered pension plan if that plan allows transfers. If the current value of your pension is less than the total of your own contributions with interest, you will receive the difference in cash. 11. If you die before retirement If you have a spouse If you have under two years of plan membership at the time of your death, your total contributions to the plan will be paid to your spouse with interest. If you have completed at least two years of plan membership (or five years of service), your spouse is entitled to a survivor's pension equal to 60% of the pension you have earned. This pension will be paid for the lifetime of your spouse and is not affected by remarriage. It will increase each year in line with any cost-of-living increases (see Section 8). Your opposite-sex spouse as defined under provincial pension law is the automatic beneficiary of your pension benefits - even if you've named someone else as beneficiary. A same-sex spouse is the automatic beneficiary only if you do not have an opposite-sex spouse and, as of January 1, 2005, only if you have not named any other beneficiary. If you die within one year of your marriage, and your life expectancy at the time of marriage was under one year, no surviving spouse's pension will be paid. If you don t have a spouse If you have under two years of plan membership at the time of your death, your total contributions to the plan will be paid to your beneficiary or estate. If you have completed at least two years of plan membership (or five years of service),your dependent children under age 18 will share the survivor's pension up to age 18. The Pension Board may also grant a survivor's pension to a disabled child over age 18, or to another member of your family who was dependent on you at the time of your death. 6

10 If you leave no dependents, your beneficiary or estate will receive a cash payment equal to the full value of your pension earned to date or your own contributions plus interest, whichever is greater. 12. If you die after retirement If you have a spouse When you die, 60% of your pension will continue to your spouse. This pension will be paid for the lifetime of your spouse and is not affected by remarriage. It will increase each year in line with any cost-of-living increases. The person who was your spouse when your pension began has first claim. If this spouse has died or you had no spouse when your pension began, the person who was your spouse at the time of your death will receive the pension. An opposite-sex spouse as defined under provincial pension law or, as of January 1, 2005, any other named beneficiary will take precedence over a same-sex spouse. If you die within one year of your marriage, and your life expectancy at the time of marriage was under one year, no surviving spouse's pension will be paid. If you don t have a spouse If you leave no surviving spouse, your dependent children under age 18 will share the survivor's pension up to age 18. The Pension Board may also grant a survivor's pension to a disabled child over age 18, or to another member of your family who was dependent on you at the time of your death. If you leave no dependents, and your contributions plus interest exceed the pension that has already been paid out to you, the difference will be refunded to your named beneficiary or estate. 13. If you take a leave of absence Your membership in the pension plan continues as before while you are on an approved leave with full or partial pay, such as sabbatical leave. If you are receiving partial pay, you will continue to be treated as a full-time employee for up to five years. After five years, you will be considered a part-time employee. Maternity and other authorized leaves without pay count as service for the purpose of calculating your pension as long as you buy back the service on your return. When you return from a leave without pay, you buy service for the period of the leave by paying contributions based on the salary you would normally have made and the contribution rates in effect during that period, plus interest. You may buy service for up to a maximum of two years of unpaid leave. If you re thinking of taking a leave of absence, visit to find out who you ll need to contact. 7

11 You may buy service for periods of leave without pay or previous employment with UNB. 14. Buying previous UNB service If you accepted a deferred pension at the end of your previous period of employment with UNB (your pension benefits are still in the UNB plan), your full period of previous service is recognized automatically. If you transferred a lump-sum payment from the plan when you left, you have one year to decide whether you wish to buy back your previous service by repaying the lump sum with interest. If you are interested in buying past service, please see Human Resources in order to work out a payment schedule. 15. If you work part-time Contributions If you work part-time, your contributions are pro-rated based on the ratio of your part-time salary to what you would make if you were employed in the same position full-time. For example, if your full-time earnings would be $70,000 and you worked half-time, you would calculate the contribution on $70,000 and divide the result in half. Service and your benefit To find out when you can retire, whether you qualify for special early retirement, and when calculating the amount of your pension, your years of service are pro-rated on the same basis as your contributions (ratio of your actual salary to a full-time salary). However, for the purpose of deciding whether you have the two years of plan membership (or five years of service) required for reduced early retirement, death and termination benefits, your part-time employment is counted as full-time employment. If you are on permanent workload reduction, you must continue making your pension contributions. 16. If you are on a workload reduction You will continue to be treated as a full-time employee for up to five years. After five years, you will be considered a part-time employee. This means that for the first five years of workload reduction, you continue your pension contributions based on your regular, full-time salary. After that, your contributions are pro-rated based on your actual salary. If you are on a temporary workload reduction, you may allow your contributions to lapse until you return to full-time work, and then repay them with interest. If you are on a permanent workload reduction, you must continue making your pension contributions as described in the previous paragraph. If you are contemplating a workload reduction, please discuss the pension implications with Human Resources. 8

12 17. If you become disabled You are not required to make contributions to the plan while you are disabled and receiving benefits from UNB's long-term disability plan. Your service is uninterrupted and you continue to earn pension benefits. 18. If you separate or divorce The value of the pension you earn during the marriage is included by law in your shared family assets. This means that if you divorce before retirement, the value of your pension must be taken into account when dividing the family assets. If you divorce after retirement, your pension may be split according to the settlement and the laws of New Brunswick. Provincial pension law does not allow pension splitting between same-sex spouses. 19. Pension statements To help you keep track of your pension benefits, a personal statement is sent to you each year. Your statement shows contributions, the amount of pension you have earned to date, and your projected pension at retirement. 20. Your RRSP contribution limit The Income Tax Act sets an overall limit on how much you may tax shelter for retirement each year. This limit is 18% of your earned income from the previous year up to $15,500 (in 2004). This amount is scheduled to increase as follows: $16,500 in 2005 $18,000 in To find out how much you may contribute to your RRSP, you must first subtract the value of your previous year s membership in the UNB pension plan from your overall limit. The amount you subtract is called a pension adjustment (PA). Your PA is calculated by UNB using a Canada Revenue Agency (CRA) formula. It is then reported on your T4. CRA uses the PA amount shown on your T4 to prepare your personal RRSP contribution limit statement for the upcoming year. You can find your current RRSP contribution limit on your most recent CRA Notice of Assessment. 21. If the UNB plan is discontinued If the plan is terminated, the University is not required to make any additional contributions to the fund. If there are any insufficient assets in the fund at termination to pay the pensions and benefits under the plan, the pensions and benefits payable will be reduced pro-rata or as otherwise determined by the Pension Board in an equitable manner subject to the requirements of the Pension Benefits Act and Regulations. If the plan is terminated and a surplus exists, the excess funds will be shared between the University and the members. 9

13 22. Canada Pension Plan (CPP) The CPP is intended to replace about 25% of the average industrial wage. For information on your CPP pension, call or visit the website at teways/nav/top_nav/p rogram/isp.shtml. Most employees in Canada between the age of 18 and 65 are required to contribute to the Canada Pension Plan. These contributions are based on your annual earnings between the basic exemption and the CPP earnings ceiling. Your contributions are matched by UNB. The CPP is intended to replace about 25% of the average industrial wage. The amount you actually receive depends on the amount you contribute during your working years. If you take a long break from employment or earn less than the CPP earnings ceiling, you may get less than the maximum pension. In 2004, the maximum monthly CPP pension is $814. You may apply for your CPP pension any time between the age of 60 and 70. Your pension will be reduced by 6% for each year you are under age 65 and increased by 6% for each year you are over age 65. Once your CPP pension begins, it is increased on the first of each year if the Consumer Price Index goes up. Information on your personal contributions and earnings history is available from your local office of Human Resources Development Canada, Income Security Programs. You should complete an application form at least six months before you wish your CPP pension to begin. 23. KEY TERMS AUNBT Association of University of New Brunswick Teachers. Best average salary The average of your five highest years' salary. Canada Pension Plan (CPP) earnings ceiling The Canada Pension Plan (CPP) earnings ceiling is the maximum annual earnings on which you make contributions to the CPP. The ceiling is set each year and is roughly equal to the average industrial wage in Canada ($40,500 in 2004). The average CPP earnings ceiling is the average of the ceiling in the year of the calculation and the two previous years. Current value The current value of your pension benefits is sometimes known as the "commuted value." The current value is the total cash value today of the pension you are entitled to at age 65 if you leave your pension in the plan. 10

14 Full-time academic employee You are a full-time academic employee if you are employed for 12 or more months and you work at least 29 hours each week. You must be a member of the AUNBT or hold academic rank. Interest rate The yearly interest rate paid on refunds from the plan is the average monthly yield on five-year fixed-term bank deposits. Locked-in RRSP A registered retirement savings plan from which no withdrawals are allowed. Money transferred to a locked-in RRSP must be used to provide an income at retirement or a death benefit if you die before retirement. Salary Your salary is your normal, full-time salary including ongoing administrative stipends. Spouse Your spouse is defined under New Brunswick pension law as a person of the opposite sex who is married to you, is married to you by a marriage that is voidable but has not been annulled, has gone through a form of marriage with you in good faith that is void and has lived with you within the last year, or is not married to you but has lived with you in a conjugal relationship continuously for at least three years in a relationship of some permanence if you are the natural parents of a child and has lived with you within the last year. If you do not have a spouse as defined above, a same-sex partner will qualify as your spouse if he or she: is married to you, is married to you by a marriage that is voidable but has not been annulled, has gone through a form of marriage with you in good faith that is void and has lived with you within the last year, or 11

15 is not married to you but has lived with you in a conjugal relationship continuously for at least three years and has lived with you within the last year. Please note that as of January 1, 2005, a same-sex partner will qualify for a survivor s pension only if you have not named any other beneficiary. Please check your beneficiary currently on file with Human Resources. 23. THE LAST WORD This document summarizes the provisions of the UNB pension plan as of July 1, The Pension Board may change the plan at any time with the approval of the Board of Governors and the AUNBT. 12