YOUR OMERS PENSION. A handbook for members with a normal retirement age of 60

Transcription

1 YOUR OMERS PENSION A handbook for members with a normal retirement age of 60

2 Important! This handbook is a summary of the defined benefit provision of the OMERS Primary Pension Plan for members with a normal retirement age of 60. In this booklet, we refer to the OMERS Primary Pension Plan as the OMERS Plan. The information in this booklet provides a summary of the terms of the OMERS Plan text at the time of publication. From time to time, the Plan text may be amended by the OMERS Sponsors Corporation. If there is any discrepancy between this information and the Ontario Municipal Employees Retirement System Act, 2006 (OMERS Act, 2006) and the Plan text, the OMERS Act, 2006 and Plan text will govern. OMERS Primary Pension Plan Registration Number: Additional Voluntary Contributions (AVCs) The additional voluntary contribution provision is part of the OMERS Primary Pension Plan ( Primary Plan ) and is subject to the conditions established by the OMERS Administration Corporation pursuant to Section 47 of the Primary Plan. The Primary Plan and such related conditions may be amended in the future in accordance with the OMERS Act, 2006 and the Pension Benefits Act (Ontario). Your information is secure Personal information is collected for pension administration purposes by OMERS under the authority of Section 35 of the OMERS Act, OMERS does not share your personal information with any other person other than for purposes of pension plan administration, and your provision of personal information is consent to use it for those purposes. The collection, use, retention and destruction of personal information are subject to our Privacy Policy at Any questions regarding the collection of personal information should be directed to OMERS Client Services at Printed March 2011 Disponible en français

3 WELCOME TO OMERS OMERS exists for one purpose: to provide lifetime retirement income for our 409,000 members across Ontario. Your OMERS membership is backed by some of the best pension and investment professionals in Canada all working toward providing you with competitive benefits at a reasonable cost. This handbook covers the defined benefit provision of your OMERS Plan membership. For information about the AVC option, see the booklet Consider the AVC Option and the Terms of Participation.

4 Your OMERS Plan OMERS is one of Canada s largest pension plans operated by and for employees of more than 930 municipalities, school boards, libraries, police and fire departments, and other local agencies across Ontario. OMERS is a defined benefit pension plan that is funded by equal contributions from employers and members, and by OMERS investment earnings. In 2010, OMERS Sponsors Corporation approved contribution rate increases and benefit changes. Information about current contribution rates is on page 8. Further contribution rate increases are scheduled for 2012 and Information about benefit changes (effective 2013) for members who leave their employer before they are eligible for an early retirement pension is on page 42. Additional Voluntary Contributions (AVCs) As of January 1, 2011, OMERS accepts additional voluntary contributions (AVCs). The AVC option is a new retirement savings and investment opportunity, and as part of the OMERS Plan, it is exclusive to OMERS members. Information about the AVC option is in the guide, Consider the AVC Option and the Terms of Participation, available at or contact OMERS Client Services at

5 Great value An OMERS Plan pension is an important factor in helping you to enjoy a financially secure retirement. It will provide you with regular monthly payments when you retire as an OMERS Plan member. These continue for the rest of your lifetime. Together with government retirement benefits and personal savings, your OMERS Plan pension is a key source of your retirement income. Being an OMERS Plan member is great value for your money. OMERS provides: a lifetime pension benefit, based on your earnings and years of service early retirement options a bridge benefit when you retire (payable until you reach age 65) inflation protection options if you leave your employer excellent survivor benefits disability benefits. OMERS Plan contribution rates are competitive within the public sector and represent excellent value for the future. In fact, an OMERS Plan member s contributions plus interest are typically repaid in the first three to five years of retirement. OMERS Plan contributions also lower your taxable income. The contributions you make, together with matching contributions from your employer, fund about 30% of the OMERS Plan pension benefit you receive when you retire. The balance (about 70%) is paid by the investment earnings of the OMERS Fund.

6 How does OMERS help fund my benefits? OMERS is one of the largest investors in Canada. Our highly skilled investment team manages a diversified global portfolio of stocks and bonds, as well as real estate, infrastructure and private equity investments. Five investment entities operate under the OMERS Worldwide brand: Oxford Properties Group, which oversees and manages real estate for OMERS and on behalf of its co-owners and investment partners; Borealis Infrastructure, which has developed with other investors a portfolio of infrastructure assets including a nuclear power plant, marine ports, a satellite company, oil and gas pipelines and health-care diagnostic services; OMERS Private Equity, which manages global funds as well as direct interests in private companies; OMERS Capital Markets, which is responsible for a portfolio of fixed income and equity investments in financial markets around the world; and OMERS Strategic Investments, which was established to support and extend the global reach of Oxford, Borealis and OMERS Private Equity. For more information on OMERS investments, please visit

7 TABLE OF CONTENTS Section 1 At Your Service 3 There are many ways to reach us 4 Section 2 Membership 5 When do I join the OMERS Plan? 6 When do I become entitled to a benefit? 6 What happens if I previously participated in the OMERS Plan? 7 What happens if I previously participated in another pension Plan? 7 Section 3 Contributions 8 How we calculate the contributions you make 9 OMERS Plan contributions and the CPP year limit 10 Section 4 Service 11 What is credited service? 12 What is eligible service? 14 Increasing your credited service 14 TABLE OF CONTENTS 1

8 Section 5 Retirement 18 What can I do to prepare for retirement? 19 When can I retire? 19 What if I continue to work past age 60? 20 What if I return to work after I retire? 20 When is my pension paid? 20 OMERS and the CPP 21 The building blocks of an OMERS plan pension 22 Early retirement pensions 24 Section 6 Inflation Protection 25 How is my pension protected against inflation? 26 How does OMERS inflation protection work over the long term? 26 Section 7 Disability Benefits 27 What if I become disabled? 28 Disability waiver (earn pension while on disability) 28 Disability pension (receive pension while permanently disabled) 29 Section 8 Leaving Employment 31 What are my options? 32 When do my pension benefits become locked in? 34 Commuted value during grievance 34 Section 9 Survivor Benefits 35 What happens if I die before retirement? 36 What happens if I die after retirement? 38 Section 10 OMERS and Income Tax 40 Contributions to OMERS 41 Does being an OMERS member affect my RRSP room? 41 Section 11 Temporary Benefit Calculation Changes 42 Benefit calculation changes 43 Inflation protection (pre-retirement indexing) 43 Early retirement subsidies 44 Section 12 Glossary 45 2 YOUR OMERS PENSION

9 Section 1 at YOUR SERVICE OMERS is the pension leader because our team consists of experienced pension professionals. Whether you reach one of our Client Services representatives, attend one of our many presentations around the province, or sign in to our secure website, myomers, you ll be getting the information you need to fully understand and make the most of your OMERS Plan membership. And, you can take comfort in our quick service turnaround whether it s processing a benefit or answering your questions. AT YOUR SERVICE 3

10 There are many ways to reach us Phone Monday to Friday, 8 a.m. to 5 p.m Fax Mail One University Ave. Suite 800 Toronto ON M5J 2P1 client@omers.com (en français ou en anglais) Web myomers the key to your pension Sign up to view your pension information online, including your annual Pension Report, and try out our online tools the Buy-back Estimator and Retirement Income Estimator. Visit and click on 4 YOUR OMERS PENSION

11 Section 2 MEMBERSHIP This is where it all begins. Here is some basic information for new members as well as people who are considering joining the OMERS Plan. In this section, you ll find details about our membership criteria and when members become entitled to an OMERS Plan benefit. MEMBERSHIP 5

12 When do I join the OMERS Plan? Full-time employees join the OMERS Plan immediately when they are hired. Non-full-time employees join immediately or when they become eligible. Full-time employees If you re a permanent, full-time employee, you join the OMERS Plan on the date you are hired or on the date you become full-time. You remain a member even if you change from full-time to part-time. Non-full-time employees You re a non-full-time employee if you work less than a full workweek, or less than a full year, or on a fixed-length, non-permanent contract basis. (This includes 10-month, contract or seasonal workers.) If you don t work full-time, you either: join the OMERS Plan when you are hired (if it is your employer s policy); or choose to join the OMERS Plan when you become eligible. If you don t have to join the OMERS Plan as a condition of employment, you may choose to join if you meet one of the following conditions in both the previous two calendar years with any OMERS participating employer: you worked at least 700 hours; or you earned at least 35% of the year s maximum pensionable earnings (YMPE) the Canada Pension Plan (CPP) earnings limit. Once you become a member, you remain in the OMERS Plan as long as you work for your current OMERS employer. This applies even if your work hours or income fall below the eligibility requirements, or if your work status changes to or from full-time. When do I become entitled to a benefit? You begin to earn a pension, and you become entitled to a pension benefit, immediately when you join the OMERS Plan. 6 YOUR OMERS PENSION

13 What happens if I previously participated in the OMERS Plan? If you left your pension benefit in the OMERS Plan when you left your previous OMERS employer, you have the option to merge your previous service with the service you are currently earning. What happens if I previously participated in another pension Plan? You may be able to transfer into the OMERS Plan from another public or private sector registered pension plan. This would bring your previous service into the OMERS Plan and increase the OMERS Plan pension you re beginning to earn. (See Increasing your credited service, page 14.) MEMBERSHIP 7

14 Section 3 CONTRIBUTIONS Your OMERS Plan pension is partially funded by the contributions you make, and by matching contributions made by your employer. The balance is paid for by OMERS investment earnings. 8 YOUR OMERS PENSION

15 How we calculate the contributions you make You and your employer contribute equally to the OMERS Plan based on your earnings. We use your regular contributory earnings excluding additional amounts such as overtime pay and most one-time, lump-sum payments to calculate your contributions. In turn, we use these same contributory earnings when we calculate your OMERS Plan pension. The earnings we use may differ from what your employer reports for income tax purposes on your T4. Periodically, contribution rates are adjusted to reflect the actual cost of the benefits you earn and to keep the OMERS Plan fully funded. OMERS Plan contribution rates in 2011 are: 8.9% on earnings up to $48,300* 14.1% on any earnings over $48,300* * You contribute to the Canada Pension Plan (CPP) up to the year s maximum pensionable earnings (YMPE) the CPP earnings limit ($48,300 in 2011). OMERS Plan contribution examples for 2011 Earnings OMERS Plan contributions every two weeks (matched by your employer) $50,000 $ $75,000 $ $100,000 $ You and your employer s matching contributions help to fund your pension. Your benefit is based on a formula that takes into account your earnings and years of service. (See How we calculate your OMERS Plan pension, page 22.) CONTRIBUTIONS 9

16 OMERS Plan contributions and the CPP As the table shows on page 9, you pay less on earnings up to the YMPE ($48,300 in 2011), and a higher amount on earnings above this limit. This is the CPP earnings limit you contribute to CPP up to this limit. The OMERS Plan contribution rate is lower up to the CPP earnings limit because OMERS and CPP are designed to work together to provide combined pension benefits at an affordable cost. (See The building blocks of an OMERS Plan pension, page 22.) 35-year limit If you reach 35 years of credited service the maximum service in the OMERS Plan you and your employer stop making contributions to the OMERS Plan. Your employer will continue to report your annual earnings for OMERS to use in the calculation of your best five earnings (see page 23). 10 YOUR OMERS PENSION

17 Section 4 SERVICE Your years of service are a key component of your OMERS Plan pension. While you work for an OMERS employer, you earn service in the OMERS Plan. You may also have other types of service that could help to increase your OMERS Plan pension or help you to retire sooner. SERVICE 11

18 What is credited service? Credited service is the number of years and months of paid service you have in the OMERS Plan. The maximum amount of credited service a member may have is capped at 35 years. We use your years of credited service and your earnings to calculate your pension. Credited service includes periods of time for which: you contributed to the OMERS Plan (and have not had a refund of contributions); you earned pension during a contribution holiday (an OMERS Plan surplus period when contributions are not required); you purchased leaves or previous service; you transferred funds from another pension plan; and you earned pension while on an OMERS-approved disability leave from your OMERS employer. Credited service does not include service for which your contributions were refunded. Full-time If you work full-time, you earn one year of credited service for every full year you work. Full-time credited service example Melinda works a standard 40-hour full-time schedule. She earns $70,000. We calculate Melinda s credited service for one year as follows: 2,080 hours = 1 year Melinda has earned one year of credited service. We record her earnings for that year as $70, YOUR OMERS PENSION

19 Non-full-time If you don t work full-time, we calculate your credited service as a proportion of what a full-time member would earn. Also, when we calculate your pension, we annualize your earnings giving you the equivalent of full-time earnings. Non-full-time credited service example Mike works 20 hours a week, compared to Melinda s standard 40-hour full-time schedule (see page 12). Mike earns $35,000, which is half of Melinda s annual salary rate of $70,000 for her position. We calculate Mike s credited service for one year as follows: 1,040 hours 2,080 hours = 0.5 years Mike has earned half a year of credited service. We record his annualized earnings for that year as $70,000. When we calculate Mike s pension, we use his credited service and the average of his annualized earnings to ensure that his pension is accurate and fair. SERVICE 13

20 What is eligible service? Eligible service is service with any OMERS participating employer that isn t credited service. Although this doesn t increase your normal retirement pension, it can help bring you closer to an unreduced early retirement pension. We add your eligible service to your credited service when we calculate your early retirement pension factor. (See Early retirement pensions, page 24.) Examples include: summer-student work with an OMERS employer; service that was refunded when you left an OMERS employer; unpurchased pregnancy/parental leave since December 1990 (not other types of unpurchased leave); and unpurchased waiting periods. You may be able to purchase some eligible service, converting it into credited service. (See Increasing your credited service, below). Tell us if you have eligible service Your credited service and any eligible service is listed on your annual Pension Report. If you think you have eligible service that is not on your OMERS Plan record, let us know as soon as possible. Increasing your credited service You may have some OMERS Plan service or other service that doesn t currently count as credited service. If so, you may be able to purchase this service and convert it into credited service. This would increase your pension and it may also help you to retire earlier without a reduction. Transferring service from another pension plan You may have belonged to another registered pension plan before you joined the OMERS Plan. If you still have a benefit remaining in that plan, you may be able to transfer the service into the OMERS Plan, which will increase your OMERS Plan pension. OMERS has transfer agreements with many other public sector pension plans. In addition, OMERS can accept transfers from private sector pension plans. 14 YOUR OMERS PENSION

21 OMERS also has provisions enabling you to purchase past periods of employment in private sector pension plans. Buying leave periods As an OMERS Plan member, you may buy the service you didn t earn during leave periods such as: pregnancy/parental leave; authorized leave of absence (including compassionate and reservist leave); emergency, family medical, and organ donor leave periods; reservist leave period of postponement; and self-funded leave. When you return from a leave period, you have the option of buying all, some or none of the service for that period. Your employer will provide you with your options and will calculate the cost for you. Should I buy a leave period? It s up to you. Weigh the cost of purchasing the leave period against how much it will increase your OMERS Plan pension. If you prefer, talk to your employer and/or a professional financial adviser. For an estimate of what your pension will be with and without the service purchase please contact us. Purchase deadline: You have until December 31 of the year following the year in which your leave ended. After that, you can purchase the service as a buy-back, at a cost reflecting the present-day value of the future benefit. This is typically more expensive. (See Purchasing previous service, page 16.) If you buy a leave period before the purchase deadline, your contributory earnings will count towards your best five earnings. (See Key components of your pension calculation, page 23.) SERVICE 15

22 Purchasing previous service Purchasing previous service (a buy-back ) also increases your credited service, which increases your pension and may help you to retire earlier without a reduction. You may be able to purchase some or all of your: shortfall in transferred service when the amount you transferred into the OMERS Plan didn t buy the same amount of OMERS Plan service; leaves you didn t purchase before the purchase deadline; eligible service with an OMERS employer including a waiting period or previously refunded service; waiting period or refunded service with the registered pension plan of another Canadian public sector employer; or post-1991 waiting period or post-1991 refunded service with the registered pension plan of a Canadian private sector employer. 16 YOUR OMERS PENSION

23 To purchase these types of service, you pay the present-day cost reflecting the full value of your additional future pension benefit. You can buy past service any time as long as you re still working for an OMERS employer, or within 30 days after the date you leave your employer or retire. The OMERS Plan offers several buy-back payment options: You can pay the full cost of the buy-back in one lump sum (by personal cheque, transfer from an RRSP/LIRA, transfer from another registered pension plan, or retiring allowance); or You can arrange to pay over 12, 24 or 36 months through a monthly payment plan; or You can pay using a combination of a lump sum for a portion of the buy-back and the monthly payment plan for the balance. OMERS monthly payment plan can make it easier to manage a buy-back than paying in one lump sum. Payments are made through monthly pre-authorized debit withdrawals from your bank account. Service is credited as your monthly payments are received. Keep in mind... Payment options depend on the service you wish to purchase. Purchase deadline: The cost of the past service you want to buy will remain in effect for six months (or up to 30 days after the date you leave your employer, if this happens first). After that, we must recalculate the cost, which increases with your age and your salary, and reflects the increasing value of the benefit. Buy-back Estimator If you are a registered myomers user, you can get a quick estimate of the cost of buying service using the online Buy-back Estimator in myomers at Service purchases and income tax Purchasing leave periods or past service can affect your RRSP room. The Income Tax Act governs the service you can buy and the methods of payment. It also determines whether a maximum purchase limit applies and whether contributions lower your taxable income. SERVICE 17

24 Section 5 RETIREMENT This is what you re working towards: your life after work. OMERS has both normal and early retirement options. Find out how we bring together your OMERS Plan service and earnings the two key components used to calculate your OMERS pension to provide you with retirement income for life. 18 YOUR OMERS PENSION

25 What can I do to prepare for retirement? Visit for comprehensive information about retirement planning to help you prepare for your life after work. If you are a registered myomers user, try the Retirement Income Estimator to help you predict what your retirement income will be from the OMERS Plan and government benefits. You can also contact OMERS Client Services directly for information. When can I retire? Most OMERS members have a normal retirement age of 65. Some police and firefighter members have a normal retirement age of 60. Many of our members choose to retire early, before their normal retirement age. Normal retirement date Your normal retirement date is the last day of the month in which you reach age 60. Your OMERS Plan pension begins the first day of the month following the month you retire. Your employer will advise OMERS of your planned retirement, and will ask you to complete the necessary forms to begin your pension. Early retirement date You can retire any time up to 10 years before your normal retirement age. This means from age 50, you can begin to receive an OMERS Plan pension regardless of how much service you have. RETIREMENT 19

26 What if I continue to work past age 60? If you continue to work for an OMERS employer past your normal retirement date, your active membership in the OMERS Plan will continue. However, you must start receiving your pension by December 1 st of the year in which you reach age 71. At that time, your monthly OMERS Plan pension will begin whether or not you are still working, and you will no longer make contributions. What if I return to work after I retire? Some members return to work after they have retired and started to receive their OMERS Plan pension. If you begin working for an OMERS employer in a position that requires that you enrol, you will be re-enrolled in the OMERS Plan (and your pension will stop) unless you specifically elect to continue receiving your pension and not re-enrol. If you re-enrol in OMERS, your status as an active member will continue until the earliest of the following dates: November 30 th of the year in which you turn 71; the day you reach 35 years of credited service; or the day you subsequently retire. When you subsequently retire, we will combine all your credited service and earnings and recalculate your pension. This is an important decision. If you return to work for an OMERS employer, we will contact you to provide more information. When is my pension paid? OMERS Plan pensions are paid in equal monthly instalments, deposited in your bank account on the first banking day of the month. OMERS is one of the few pension plans that do this; most pay pensions for a month at the end of that month. 20 YOUR OMERS PENSION

27 OMERS and the CPP Your OMERS Plan pension is designed to work with the Canada Pension Plan (CPP) to help provide stable, combined retirement income at a reasonable cost. Here s how: While you work, you pay a lower OMERS Plan contribution rate on the portion of your earnings on which you also contribute to CPP (up to $48,300 in 2011). This reduces the combined cost of your OMERS Plan and CPP contributions. Here are OMERS Plan contribution rates for 2011: 8.9% on earnings up to $48,300* 14.1% on any earnings over $48,300* * You contribute to CPP up to the year s maximum pensionable earnings (YMPE) the CPP earnings limit ($48,300 in 2011). When you retire, your OMERS Plan and CPP pensions provide you with retirement income. For example, if you retire with 35 years of OMERS Plan credited service, your combined OMERS Plan and CPP pensions could be 70% or more of your best five years of earnings. After tax, this percentage would be even higher. RETIREMENT 21

28 The building blocks of an OMERS plan pension Your OMERS Plan pension has two components: a lifetime pension, plus a bridge benefit that is paid if you retire early and is paid until you reach age 65. How the OMERS Plan lifetime pension works All OMERS Plan members are entitled to receive a lifetime pension, regardless of when they retire. This is paid for life, OMERS and indexed to increase with inflation lifetime pension every year. Members who retire before age 65 will also receive an OMERS Plan bridge benefit until they reach age 65. How the OMERS Plan bridge AGE 65 benefit works This temporary benefit supplements your OMERS Plan lifetime pension until age 65, when it is expected your CPP pension will take over. The bridge benefit: will not necessarily be the same amount as your CPP pension; and continues to be paid to age 65 even if you start your CPP pension early (from age 60). How we calculate your OMERS Plan pension Your OMERS Plan lifetime pension + bridge benefit to age 65 2% x credited service (years) x best five earnings Less OMERS Plan bridge benefit at age 65 CPP (unreduced) INCOME $ retirement OMERS bridge benefit OMERS lifetime pension CPP (unreduced) INCOME $ retirement AGE 60 AGE % x credited service (years) x lesser of best five earnings or AYMPE (see page 23) Equals your OMERS Plan lifetime pension from age YOUR OMERS PENSION

29 Key components of your pension calculation Best five earnings this is the annual average of the 60 consecutive months during which your earnings were at their highest. It does not include any overtime pay or most lump-sum payments. It may, however, include earnings from a period of service that was transferred in from another registered pension plan. If you have less than five years of credited service, we use your actual service to calculate your average earnings. We may include partial years at the beginning and end of the 60 consecutive months so your best five earnings could span more than five calendar years. Note that your employer reports your contributory earnings annually. We calculate your earnings for a single month by dividing your reported annual earnings by your total months of credited service reported for that year. Credited service this is the number of years you have earned in the OMERS Plan (including any service you purchased). AYMPE this is the five-year average of the year s maximum pensionable earnings (YMPE). You contribute to the CPP up to this earnings limit. Keep in mind... There are factors that can affect your OMERS Plan pension amount. For example: Maximum pension The Income Tax Act limits how much pension we can pay from the OMERS Plan. In 2011, this limit is $2, per year of post-1991 credited service (reached only if your annual earnings exceed $143,163.00). We pay any pension amount in excess of this limit through a Retirement Compensation Arrangement a special fund for this purpose. Cap on incentive pay (starting in 2011) If incentive pay is a large percentage of your earnings, for pension purposes your earnings will be capped at 150% of contributory earnings calculated before incentive pay. Incentive payments made in 2011 but attributed to a previous calendar year would not be affected. Incentive pay means earnings related to performance-based bonus payments and similar pay arrangements. Bonus payments for service retention (common in the police/fire sectors) are not considered incentive pay. RETIREMENT 23

30 Early retirement pensions You can retire early if you are within 10 years of your normal retirement age: at least age 50. There are two types of OMERS Plan early retirement pension: unreduced and reduced. Unreduced early retirement pension You qualify for an unreduced pension if you are at least age 50 and: you have 30 years or more of service; or your age + service = 85 or more (the 85 Factor ). An unreduced pension means that your early retirement pension is calculated without a reduction. To determine whether you are eligible for an unreduced early retirement pension, we look at the total of your credited service plus any eligible service. Reduced early retirement pension (with maximizer provision) If you don t qualify for an unreduced pension, you may still retire early (from age 50 on) with an early reduced pension. In this case, OMERS looks at how close you are to your normal retirement age, early retirement factor (85 Factor), or 30 years of service. This three-point test maximizes your benefit. We use a 5% reduction factor, per year, because you are receiving your pension for a longer period of time. Your OMERS Plan pension is reduced by 5% per year multiplied by the least of: 60 minus your age when you retire; 85 Factor minus your current age plus service factor; or 30 years minus your actual years of service. The 5% per year reduction is pro-rated for part years. Note: Starting January 1, 2013, benefit calculation changes will affect you if your employment ends and you are not yet eligible for an early retirement pension (i.e., not within 10 years of your normal retirement age). Please see Temporary benefit calculation changes, on page 42, and Leaving employment/what are my options? on page YOUR OMERS PENSION

31 Section 6 INFLATION PROTECTION Inflation protection is a feature of the OMERS Plan pension. A pension that is indexed to inflation, like OMERS, helps retired members keep pace with the rising cost of living, and adds to your retirement income security. inflation protection 25

32 How is my pension protected against inflation? Each year, OMERS increases pensions by 100% of the increase in the Canadian Consumer Price Index (CPI) up to a maximum increase of 6%. This is measured by taking the monthly average of the CPI for the 12-month period ending in October of the year before the increase date. This figure is compared to the monthly average of the CPI for the 12-month period ending in October of the previous year. OMERS increases pensions by the percentage difference. The maximum increase in any year is 6%. If the CPI is greater than 6%, we carry the excess forward. This can be used in later years when the CPI increase isn t as high. OMERS pensions are increased each year on January 1. The increase is pro-rated for pensions that began within the previous year. How does OMERS inflation PROTECTION WORK over the long term? An OMERS Plan pension of $15,000 today, with an inflation assumption of 2% per year, would be worth the following in the future, to keep pace with rising prices: Today $15, years $18, years $20, years $22, years $24, years $27,170 A pension that didn t offer inflation increases would still be $15,000. Note: Starting January 1, 2013, benefit calculation changes will affect you if your employment ends and you are not yet eligible for an early retirement pension (i.e., not within 10 years of your normal retirement age). Please see Temporary benefit calculation changes, on page 42, and Leaving employment/what are my options? on page YOUR OMERS PENSION

33 Section 7 DISABILITY BENEFITS OMERS isn t just about your life after work it s also about protecting your pension when you can t work. We have disability options to help your pension continue to grow free of charge or to help provide you with income. Disability benefits 27

34 What if I become disabled? If you are totally disabled: you may continue to earn OMERS Plan credited service while you remain disabled, without paying OMERS contributions (this benefit is called a disability waiver of contribution ); or you may be eligible to receive a disability pension, if you are totally and permanently disabled. Disability waiver (earn pension while on disability) A disability waiver enables you to continue to earn credited service without contributing to the OMERS Plan. The OMERS Plan covers the cost of the contributions both you and your employer would normally make. As well, we will increase the earnings used to calculate your pension, by the lower of the annual increase in the Average Industrial Wage (AIW) or the Consumer Price Index (CPI). The waiver begins on the later of: the first day of the fifth month after you become totally disabled; or the day after you cease to make contributions. The waiver continues until: you are no longer considered to be totally disabled; you elect to receive a termination benefit; you begin to receive a disability pension; you return to work other than on an OMERS-approved rehabilitation program; you reach your normal retirement date; you retire; or you die. Qualifying for the disability waiver To be eligible for the disability waiver, you must meet the definition of totally disabled in the OMERS Plan, which means that: you are incapable of doing your own job during the first 24 months of physical or mental disability; and, thereafter, incapable of doing any work for which you are, or may reasonably become, qualified by education, training, or experience. 28 YOUR OMERS PENSION

35 At any time after your disability waiver benefit begins, you may elect a disability pension, provided you meet the eligibility requirements. If you are not eligible for a disability pension, you may be eligible for an early retirement pension. (See Early retirement pensions, page 24.) Disability pension (receive pension while permanently disabled) If you become totally and permanently disabled, you may be eligible for a disability pension instead of a disability waiver. The disability pension can begin on the later of: the first day of the fifth month after you become totally and permanently disabled (normally the end of your disability qualifying period); or the first of the month following the month you elect a disability pension, if you have been on the disability waiver. The disability pension continues until: you reach your normal retirement date, and your disability pension becomes an OMERS Plan normal retirement pension; or you no longer meet the definition of totally and permanently disabled (you may, at that time, be eligible for an early retirement pension); or you return to work, other than on an OMERS-approved rehabilitation program. Qualifying for the disability pension To be eligible for the disability pension, you must meet the definition of totally and permanently disabled in the OMERS Plan, which means that: you are suffering from a physical or mental impairment; this prevents you from engaging in any occupation or performing any work for compensation or profit for which you are, or may reasonably become, qualified by education, training, or experience; and which can be expected to last the rest of your lifetime. How is the disability pension calculated? We use your best five earnings and credited service in the standard OMERS Plan retirement pension formula to calculate the disability pension (see page 22). Your disability pension is an unreduced early retirement pension, and it includes the OMERS Plan bridge benefit until you reach age 65. Disability benefits 29

36 OMERS and WSIB limit There is a limit to the combined disability benefits you can receive from the Workplace Safety and Insurance Board (WSIB) and the OMERS Plan. The limit is 85% of your regular contributory earnings immediately before you were disabled. If you exceed the limit, we must reduce your OMERS Plan disability pension until you reach your normal retirement date, or until your WSIB benefit stops. If you become entitled to a WSIB benefit after your pension begins, or if the amount you are receiving changes (except for cost of living increases), please notify OMERS immediately. OMERS and CPP disability pension The OMERS Plan disability pension is not affected by any amount that you may receive from the CPP. 30 YOUR OMERS PENSION

37 Section 8 LEAVING EMPLOYMENT The reality is that many people change jobs during their work life. If you leave your OMERS employer, OMERS offers you a wide range of choices for what to do with your future pension benefit. Leaving employment 31

38 What are my options? If you leave your employer and you are not yet eligible for an early retirement pension (i.e., not within 10 years of your normal retirement age), your employer will advise OMERS. We ll send you a Benefit application form with details of your benefit options. These may include some or all of the five choices outlined below. Important! Starting in 2013, if you leave your employer and are not eligible for early retirement, your benefit will be calculated in two parts: The benefit based on pre-2013 credited service includes pre-retirement indexing and early retirement subsidies. The benefit based on post-2012 credited service does not include pre-retirement indexing or early retirement subsidies. Please read Temporary benefit calculation changes on page 42, for more details about the changes to the calculation, pre-retirement indexing, and early retirement subsidies. 1. Transfer your benefit to another OMERS employer If you go to work for another OMERS employer anywhere in Ontario, you may elect to combine your OMERS memberships from your former and current employers. 2. Transfer your benefit to another registered pension plan If your new employer is another Canadian employer with a registered pension plan, you may be able to transfer all, or part, of your OMERS Plan credited service to your new employer s plan. OMERS has specific transfer agreements with a number of Canadian public sector employers pension plans. We also have the general ability to transfer pensions to other registered pension plans in Canada that agree to accept the transfer. For a current listing of our transfer agreements, and for more information, please visit 3. Keep your pension with OMERS You can elect to keep your pension with OMERS as a deferred pension. This gives you a future stream of OMERS Plan retirement income for life. Your OMERS Plan pension is inflation-protected, and it includes early retirement options and excellent survivor benefits. 32 YOUR OMERS PENSION

39 4. transfer your commuted value to a locked-in retirement account The commuted value of your OMERS Plan pension is the estimated amount of money you would have to put aside today, to grow with tax-sheltered investment earnings, to provide you with a future benefit similar to the OMERS pension you ve earned. You may choose to transfer your commuted value to: a locked-in retirement account (LIRA) this is done as a lump-sum payment to your financial institution; or an insurance company to purchase an annuity (providing regular income payments to you upon retirement); or another registered pension plan in Canada that can accept the transfer. 5. Elect a cash refund (if your benefit is not locked in) If any portion of your contributions plus interest to your termination date is not locked-in, you may elect a cash refund of that portion. You may also be able to transfer the cash refund to your RRSP. Leaving employment 33

40 When DO my pension benefits become locked in? Under Ontario law, when your OMERS Plan pension is locked in, you must use it as future retirement income. You cannot cash it out, except in very rare cases. Locking-in rule Your pension benefit earned after December 31, 1986, becomes locked in when you have two years (24 months) of OMERS Plan membership (including any service you purchased or transferred into the OMERS Plan). Any portion of your OMERS Plan pension benefit that is locked in cannot be cashed out. If you leave your employer, you will have several options: keep your pension in the OMERS Plan as a deferred pension; transfer your commuted value to a locked-in retirement account (LIRA); transfer your commuted value to another registered pension plan; or use your commuted value to buy an annuity (available through an insurance company it provides regular income payments to you upon retirement). Commuted value during grievance As of September 1, 2010: If you file a grievance/legal proceeding for termination of employment, with the intention of being reinstated, you will have the option of taking a commuted value (CV) benefit. This is in addition to the options of transferring out your benefit, or starting your OMERS retirement pension. 34 YOUR OMERS PENSION

41 Section 9 SURVIVOR BENEFITS Excellent survivor benefits are a key feature of the OMERS Plan. In the event of your death, OMERS offers a range of benefits to your spouse, children, or beneficiaries. This section outlines survivor benefits that apply before and after retirement. Survivor benefits 35

42 When an OMERS Plan member dies, survivor benefits are paid according to a specified order of entitlement that follows the provisions of the Ontario Pension Benefits Act. Your will cannot change this order, but it does help us to direct any benefit entitlement to your beneficiary or estate, if you do not have an eligible spouse or children. For definitions and more detailed explanations of terms used throughout this section, please see the Glossary, page 45. What happens if I die before retirement? Relationship to you 1. Your eligible spouse is first in line for survivor benefits. Type of benefit Your eligible spouse s options are: Spousal pension equal to: 66 2 /3% of the lifetime pension (after the bridge benefit ends) you earned to the date of death or the date you left your OMERS employer; plus a further 10% for each eligible child up to a total of 100% of your lifetime pension. This pension: is indexed to inflation; is guaranteed for life; it does not stop if your surviving spouse remarries; does not include the OMERS Plan bridge benefit; and does not include any pension for a period of credited service covered by both another plan of your employer and OMERS. OR Cash refund or transfer The cash refund (minus income tax) or transfer to a non-locked-in registered retirement savings plan is paid in a lump sum and equals: the commuted (present-day) value of the pension you earned since January 1, 1987; plus any contributions you made before 1987, plus interest to the date of death; minus any benefits we previously paid to you, or on behalf of you. Note: If your spouse is also your beneficiary, the cash refund may include any 50% Rule refund payable. 36 YOUR OMERS PENSION

43 Relationship to you 2. If you do not have an eligible spouse, we will pay a survivor pension to any eligible dependent children for as long as they qualify. 3. If you do not have an eligible spouse or children, your beneficiary on file with OMERS may be entitled to a refund of the commuted value of your pension. 4. If you have no beneficiary on file with OMERS, we will pay the refund of the commuted value of your pension to your estate. Type of benefit Children s pension equal to: 66 2 /3% of the lifetime pension you earned to the date of death or the date you left your OMERS employer. This pension: is divided equally among your eligible children and is paid to each child (or to whoever has Guardianship of Property for the children). When a child is no longer eligible, we redistribute the pension among your remaining eligible children; is indexed to inflation; does not include the OMERS Plan bridge benefit; and does not include any pension for a period of credited service covered by both another plan of your employer and OMERS. Note: In addition to the children s pension, there may be a 50% Rule refund payable to your beneficiary. The commuted value refund is paid in a lump sum (minus income tax) and equals: the commuted (present-day) value of the pension you earned since January 1, 1987; plus any contributions you made before 1987, plus interest to the date of your death; minus any benefits previously paid to you, or on your behalf. There may also be a 50% Rule refund payable. OMERS needs to have your beneficiary s name on file. A person with Continuing Power of Attorney for Property cannot change your designated beneficiary. See description in 3 (above). Benefits for a minor child: benefits of $10,000 or less can be paid to the adult who has custody of the child; benefits over $10,000 are subject to Guardianship of Property rules. 37 YOUR OMERS PENSION Survivor benefits 37

44 What happens if I die after retirement? Relationship to you 1. Your eligible spouse is first in line for a survivor pension. Type of benefit Spousal pension equal to: 66 2 /3% of the lifetime pension (after the bridge benefit ends) you were receiving at the date of death; plus a further 10% for each eligible child up to a total of 100% of your lifetime pension. This pension: is indexed to inflation; is guaranteed for life; it does not stop if your surviving spouse remarries; does not include the OMERS Plan bridge benefit; and does not include any pension for a period of credited service covered by both another plan of your employer and OMERS. 2. If you do not have an eligible spouse, we will pay a survivor pension to any eligible dependent children for as long as they qualify. Children s pension equal to the greater of: 66 2 /3% of the lifetime pension you were receiving at the date of death; or the survivor pension your spouse was receiving at their date of death, less any additional amount that was being paid for the eligible children. This pension: is divided equally among your eligible children and is paid to each child (or to whoever has Guardianship of Property for the children). When a child is no longer eligible, we redistribute the pension among the remaining eligible children; is indexed to inflation; does not include the OMERS Plan bridge benefit; and does not include any pension for a period of credited service covered by both another plan of your employer and OMERS. 38 YOUR OMERS PENSION Survivor benefits 38

45 Relationship to you 3. If you do not have an eligible spouse or children, your beneficiary on file with OMERS may be entitled to a residual refund. 4. If you have no beneficiary on file with OMERS, we will pay any residual refund to your estate. Type of benefit The residual refund (minus income tax) is the total of your OMERS contributions with interest, minus any pension paid to you and/or your survivors. OMERS needs to have your beneficiary s name on file. A person with Continuing Power of Attorney for Property cannot change your designated beneficiary. Note: After five years of retirement, most members have received pension payments equal to their contributions plus interest, so there may not be a residual refund. See description in 3 (above). Benefits for a minor child: benefits of $10,000 or less can be paid to the adult who has custody of the child; benefits over $10,000 are subject to Guardianship of Property rules. Survivor benefits 39

46 Section 10 OMERS AND INCOME TAX Being an OMERS member brings with it some tax implications. For instance, the contributions you make to the OMERS Plan lower your taxable income, and the benefit you earn reduces your RRSP room. 40 YOUR OMERS PENSION

47 Contributions to OMERS Your regular contributions to the OMERS Plan lower your taxable income. Your employer reports your contributions to the Canada Revenue Agency (CRA) on a T4 slip each year. Amounts you contribute to buy a leave period or past service may also be used to lower your taxable income. Does being an OMERS member affect my RRSP room? Yes. A pension adjustment (PA) reflects the deemed value of the pension you earned as an OMERS Plan member during the preceding year. Your employer reports your PA in box 52 of your T4 slip. The Canada Revenue Agency uses your PA in their formula to calculate your new RRSP contribution room for the current year: 18% x previous year s earned income (up to a maximum) previous year s PA (up to a maximum) (but not less than $0) After you file your tax return, the Canada Revenue Agency sends you a Notice of Assessment, which includes a statement of your RRSP contribution room for the year. You may make an RRSP contribution up to this amount, or carry it forward, within limits, for use in a future year. OMERS and income tax 41

48 Section 11 Temporary benefit calculation changes Important information: Starting January 1, 2013, if your employment ends and you are not yet eligible for an early retirement pension, i.e., not within 10 years of your normal retirement age, changes in how benefits are calculated will affect you. 42 YOUR OMERS PENSION