Teachers' Superannuation Commission. Pension Adjustment Calculation Guide

Transcription

1 January 8, 2008 From: Teachers' Superannuation Commission To: All School Divisions, STF, SSTA, Regional Colleges and S.I.A.S.T. RE: Pension Adjustment Calculation Guide Enclosed is an updated guide and PA Table for the 2007 taxation year. This information will assist you to calculate pension adjustments for teachers contributing to the Teachers Superannuation Plan. As employers you will be required to calculate the pension adjustment (PA) for teachers in your division and report the PA to Canada Revenue Agency on the employee's T4. The attached guidelines are to assist you with the calculations as they apply to the Teachers Superannuation Plan. There are different rules for teachers who are exempt from CPP. Sincerely, Yvonne Anderson, PPAC Sr. Manager, Pension Programs (306) Toll free YA/ Enclosure

2 Table of Contents Responsibilities of the Employer... 1 Responsibilities of the Plan Administrator... 1 Introductory Information... 1 Abbreviations and Definitions... 2 Calculation of PA's for Defined Benefit Plan (Teachers' Superannuation Fund)... 3 Formulas for Calculating PA's... 3 Special Situations... 3 Information required when contacting Canada Revenue Agency for assistance... 4

3 Responsibilities of the Employer The employer is responsible for the calculation of the PA and for reporting it on the Canada Revenue Agency T4 no later than the last day of February of the following year. The PA calculation is based on 2007 pensionable income and must be reported to Canada Customs and Revenue Agency by February 28, Responsibilities of the Plan Administrator The plan administrator is responsible for the calculation and reporting to Canada Revenue Agency of PA's for teachers who: Purchase service for a period of time during the current taxation year. Receive benefits under the Saskatchewan Teachers' Federation, Income Continuance Plan while disabled from teaching. As plan administrator Teachers Superannuation Commission will be responsible for calculating and reporting Past Service Pension Adjustments (PSPA's) for teachers who: Purchase post 1989 service outside the current taxation year. Certification must first be obtained from Canada Revenue Agency determining if the teacher has sufficient unused R.R.S.P. room to be allowed to participate in the purchase option. The calculation of the PSPA is the same as that for the PA and is based on the pensionable salary used in the purchase calculation. Introductory Information The Registered Pension Plans for Saskatchewan teachers have been defined as Multi-employer Plans (MEP). Multi-employer plans may have several participating employers and large memberships. Therefore, it is not reasonable to expect an employer to obtain all the information necessary to calculate pension credits, especially when an employee works for more than one employer in a given taxation year. The calculation formulas for a MEP allow for the proration of the PA calculation by each individual division based on the service rendered with that division. The rules for a MEP state that the $ offset is to be prorated for employees that are not full time, whether or not they are employed elsewhere. 1

4 Abbreviations and Definitions Pension Adjustment (PA) The PA equals the value of the benefits accruing to the teacher during a given year, and can be deducted from his/her RRSP limit. Past Service Pension Adjustment (PSPA) The PSPA equals the value of accrued benefits for post 1989 past service. It must be deducted from the participant's RRSP contribution limit. Multi-Employer Plan (MEP) A multi-employer plan is a Registered Pension Plan in which not more than 95% of the active members are employed by a single employer. Credited Service (C.S.) This is the service that a teacher is credited with for superannuation purposes during a specified taxation year. If the teacher receives full credit for a year of service, one (1) is the value used where C.S. appears in the formula. For teachers with less than a full year of service, a percentage of the service rendered is used in the calculation. Credited service is calculated by dividing the number of days worked by 197. Annualized Salary To determine the benefit entitlement portion of the PA calculation always use an annualized salary. If the teacher is not a full time employee the salary and $ offset are prorated later in the calculation. Rule of Nine (9) Rule of nine is used to translate pension benefits earned in the year in contribution terms by using a standard contribution-to-pension ratio of 9 to 1. $ Offset The $ deduction used in calculating the PA means that an employee may contribute $ more to an RRSP than would other wise be the case. 2

5 Calculation of PA's for Defined Benefit Plan (Teachers' Superannuation Fund) Under a defined benefit provision a specified level of pension is promised to members upon retirement. There are several types of defined benefit provisions: The teachers' plan is based on the five highest years or best thousand days salary. The PA calculation is based on the salary earned for superannuation purposes, not actual earnings. Formulas for Calculating PA's A B C Salaries less than the YMPE. (.013 x annualized salary) x 9 x C.S. - ($ x C.S.) Salaries in excess of YMPE [(.013 x YMPE) +.02 x (annualized salary - YMPE)] x 9 x C.S. - ($ x C.S.) Salaries exempt from CPP deductions. (.02 x annualized salary) x 9 x C.S. - ($ x C.S.) 3

6 Special Situations Sabbatical Leave For purposes of calculating and reporting PA's, the PA is based on the salary reported to Teachers Superannuation Commission for superannuation purposes. If the teacher elects not to have contributions deducted from salaries received while on sabbatical leave, there will be no PA entitlement for that year. Should the teacher purchase this service at a later date, then a PSPA calculation will be calculated by Teachers Superannuation Commission. Teachers Exempt from CPP For teachers who are exempt from contributing to Canada Pension Plan (CPP), there is no CPP integration in calculating the PA. PA's are based on two (2) percent of annualized salary, except on exempt earnings as per examples, to determine benefit entitlement. Disability Benefits paid to a teacher while receiving a disability allowance from Teachers Superannuation Commission are taken from accumulated benefits in the plan. Therefore, Teachers Superannuation Commission is not required to report PA's to Canada Revenue Agency on this income. Superannuate If a teacher is in receipt of an age and service superannuation allowance from Teachers Superannuation Commission and returns to teach, there is no PA calculation required. Death No PA reporting is required for the period of time between January 1, in the year of death, and the date of death. Special settlements (Redundancy pay, etc.) When a teacher terminates employment with a school division there is often a special salary settlement. These settlements are not subject to superannuation deductions and no PA calculation is required. 4

7 Information required when contacting Revenue Canada for assistance. Toll free number Registered Plan Number Remember you are MEP employer (Multi-employer Plan employer).