Pension Plan Frequently Asked Questions

Transcription

1 Pension Plan Frequently Asked Questions Questions SECTION A PENSION CHANGES: A1. Why are the changes being made? A2. Why can t CFMWS continue to make up the pension funding shortfalls? A3. Why aren t current CFMWS employees being grandfathered with changes only applying to new employees who start after 8 July 2019? A4. Were employees consulted before the pension changes decisions were made? A5. If I work beyond 8 July 2019, is my entire pension affected by the changes? A6. I am retired, do the changes affect me? Persistent global economic factors have required CFMWS to contribute millions of extra dollars per year to keep the Pension Plan funded. This is no longer sustainable for the organization. CFMWS has been required to contribute millions for extra dollars to fund the Pension Plan in recent years. This added fiscal strain is no longer sustainable, and threatens to affect service provision to the CAF community if left unchecked. This option was considered, but once the impact of grandfathering was calculated it was deemed unfeasible as it would take several decades to reach our sustainability objective. CFMWS conducted a series of employee focus groups across Canada to determine members views on the pension plan and their preferred approaches for the pension changes. The focus groups included all employee categories and age groups to get the broadest perspective, and the changes that were adopted were influenced by the feedback that was received. No, the changes only affect your pensionable service accrued after 8 July Any pensionable service you accrued before that date will not be affected by the changes. No, the changes have zero affect on members who have retired before 8 July July Page 1 of 6

2 A7. If I am nearing retirement, should I retire prior to the changes coming into effect? A8. Do the changes affect my take home pay? A9. How do the changes affect my retirement income? Retirement is a personal decision, but when making that decision you need to consider that the changes only affect pensionable service you earn after 8 July You also need to consider that, in a defined benefit pension plan, as you continue to work, your pensionable service increases, your pensionable earnings increase, and you are less likely to incur early retirement penalties. No, the changes do not affect your take home pay while working because your NPF pension contributions are not increasing. It should be noted that changes to CPP will soon impact all Canadian workers take home pay, and that fact was taken into consideration by the Pension Board to avoid impacting pay twice. The affect on retirement income will depend on your years of pensionable service pre and post 8 July The online pension estimator is now available, to estimate your retirement income please go to: A10. Why is it beneficial to keep a defined benefit pension plan? A11. How are CPP and QPP factoring into the changes? A defined benefit pension (as opposed to a defined contribution pension) provides stable and reliable income in retirement for the duration of a member s life and often a spouse s life. Retirement income in a defined contribution plan is limited to the total amount contributed to the plan and individual investment returns on those contributions throughout your career. The pension changes do not affect CFMWS defined benefit plan structure. The Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) are the government managed pensions that all Canadian workers must pay into. The government has announced an increase in contributions to CPP that will also increase Canadian s benefits in retirement. This enhancement was considered in the Pension Plan changes, as it will affect both take home pay and retirement benefits, and will largely offset the changes to the plan formula. Changes to QPP, which only affect Quebec residents, will closely follow a similar model as the CPP enhancements. 16 July Page 2 of 6

3 A12. Will the changes to the Pension Plan affect NPF retirees? The pension changes will have no impact on existing retirees or any employee who retires prior to July 8, A13. Bridge Benefit Explained There is no change in bridge benefit for an employee who retires at or after age 55. There is only one change to the bridge benefit and the only employees affected are those who retire under age 55 on or after July 8, For more information on the bridge benefit, please refer to the handout inserted at the end of this document or click HERE. A14. Split Service Explained Split service describes the split between the pension earned before 8 July, 2019 and the service that is earned on and after 8 July, The service that is earned before that date is not affected by the changes in any way. The pension benefit earned for those two service periods are then combined to obtain the actual pension amount. To obtain an estimate of your split service combined pension, please visit the Pension Estimator at: SECTION B PENSIONABLE SERVICE: B1. Can temporary employees purchase their pension waiting period after joining the pension plan? B2. How is pensionable service for Part time employees calculated? The pension waiting period is not eligible for purchase after enrolment in the plan. Pensionable service for part time employees is prorated to the minimum hours required to reach the equivalent of full time employment. For example, if the minimum hours for Full time employment are 27 hours/week, a Part time employee working 22.5 hours /week would accrue 0.83 yr. of pensionable service each year. 16 July Page 3 of 6

4 SECTION C RETIREMENT IN GENERAL: C1. When can I get my maximum pension? You have earned your maximum or full pension when you have accrued 35 years of pensionable service. You cannot accrue more than 35 years of pensionable service. C2. How are my average pensionable earnings determined for calculating my monthly pension? C3. When I decide to retire, when do I receive my first pension payment? SECTION D TERMINATION/DEATH: D1. What does Transfer Value mean? Your average pensionable earnings are your average earnings as a plan Member during the three highest paid consecutive years in the ten years before your pensionable service ends. Your pensionable service stops when you retire, terminate, die, or accumulate 35 years of pensionable service. If you have less than three years of pensionable earnings, then the actual average of pensionable earnings received will be used. When registered prior to your retirement date, your monthly pension is payable on the first of the month following your termination of employment. If you return your signed retirement forms late, you will receive your monthly pension payment as soon as the paperwork can be processed and you will be paid retroactive to your retirement date. When you terminate, you are given options for the Transfer Value of your accrued pension benefit. Transfer Value refers to the amount of money that would need to be invested today to provide sufficient funds to pay your accrued pension benefit when you retire. In short, it is how much your future pension benefits are worth today. Transfer value takes into account: benefit payable (how much pension you have accrued), mortality rates (how long that benefit would likely be paid to your and your spouse), bond interest rate (how much your could earn on the invested money), and, age (how long you have to earn investment returns on the money before the benefit becomes payable). 16 July Page 4 of 6

5 D2. What happens if I am the spouse of a Military member who is being posted to another location? D3. Is my pension payable to anyone else if I die? D4. Who processes my pension when I leave the pension plan? SECTION E GENERAL: E1. How can I get a pension estimate? E2. Do I need to name a pension beneficiary? As a military spouse, you have the option to request a relocation leave which allows you to look for work at the new base without having to terminate employment and plan membership. You can continue to pay pension contributions while on relocation leave in order to continue accruing pensionable service. If you do not request relocation leave, then your employment and plan membership would terminate. If you die prior to retirement, whether the pension benefit is payable and to whom it is paid will depend on your age, years of pensionable service and marital status at time of death. If you die after retirement, pension benefits are paid to your spouse/partner or beneficiary according to the form of pension you chose at retirement. Your local HR Office notifies the Pension and Benefits Group at HQ, who notifies the Pension Administrator (Coughlin). Coughlin will send you pension options within thirty (30) days of termination. Completed option forms must be returned to Coughlin within 90 days. The pension estimator is available online at any time to get an estimate for your Normal (Life with 15 Year Guarantee) and Spousal pension options.. If you are within six (6) months of your confirmed retirement date, a request can be made by completing the Retirement Form and submit to Pension & Benefit Office. The Pension Administrator will send you a pension estimate which will assume continued earnings and pensionable service up to the date of retirement. You should. However, your legal spouse has pension entitlements under law, regardless of whether or not you name them as a pension beneficiary. Spousal entitlements may be modified by provincial property law in cases of divorce, annulment or separation. Please refer to the definition of spouse found in your pension booklet. If you do not have a spouse, then any pension benefits at time of death would be payable to your named Beneficiary or Estate. E3. Do I need to prove my marital relationship when I retire? Spousal pension entitlements are determined at time of retirement depending on your marital status and the form of pension you choose. You will be required to complete a marital status declaration form at time of retirement. 16 July Page 5 of 6

6 E4. What is an indexed pension? E5. Can I contribute more than 4.5% of my earnings to the plan? E6. Why are my pension statements mailed to both me and my spouse? An indexed pension provides the retiree with a monthly income which is increased by some portion of the Consumer Price Index (CPI) to account for increases in the cost of living. The NPF pension plan does not have an automatic indexation provision, other than partial indexation applied to deferred pensions. Historically, indexing has been applied to NPF pensions on an ad hoc basis when the cost of doing so will not drive the plan into a deficit funding position. You are required to contribute 4.5% of your pensionable earnings, up to the Quebec/Canada Pension Plan Yearly Maximum Pension Earnings (YMPE), and 6% of Pensionable Earnings that are in excess of the YMPE. You are not able to contribute more to the NPF pension plan; however, you can invest money in personal RRSPs and TFSAs, including the SISIP Group RSP, up to the limits allowed by the Canada Revenue Agency. Your Employer is legislatively required to do so under section 28.1 B) of the federal Pension Benefits Standards Act. 16 July Page 6 of 6

7 Bridge Benefit Changes Explanation There is no change in bridge benefit for an employee who retires at or after age 55. There is only one change to the bridge benefit and the only employees affected are those who retire under age 55 on or after July 8, Employee retires before July 8, 2019 and, Is age 55 or over at retirement with at least 5 years of pensionable service, then They may be eligible for a bridge benefit if they meet the age and pensionable service criteria (see pg. 19 of the pension booklet) at retirement. If eligible, their bridge benefit is calculated as $15/month per year of pensionable service to a maximum of $300/month. The bridge benefit is payable from retirement date to age 65. Is under age 55 at retirement, then They are not eligible for a bridge benefit regardless of the amount of pensionable service. Employee retires after July 8, 2019 and, Is age 55 or over at retirement with at least 5 years of pensionable service, then They may be eligible for a bridge benefit if they meet the age and pensionable service criteria (see pg. 19 of the pension booklet) at retirement. If eligible, their bridge benefit is calculated as $15/month per year of pensionable service to a maximum of $300/month. The bridge benefit is payable from retirement date to age 65. Is under age 55 at retirement with at least 10 years of pensionable service earned before and after July 8, 2019, then They are eligible for a bridge benefit. Their bridge benefit is calculated as $15/month per year of pensionable service earned prior to July 8, 2019 to a maximum of $300/month. Service after July 8, 2019 is not included in the bridge benefit calculation. The bridge payment does not start immediately. The bridge benefit is paid from age 60 to age 65. Is under age 55 at retirement with no pensionable service earned prior to July 8, 2019, then They are not eligible for a bridge benefit regardless of the amount of pensionable service. For example, a plan member, who has 7 years of pensionable service on July 7, 2019, retires on July 8, 2022 at age 50 with 10 years of pensionable service. The plan member is eligible for a bridge benefit but the bridge is calculated using only the 7 years of pre July 8, 2019 service, resulting in a bridge payment of $105 per month. The bridge payment of $105 per month would commence at age 60 and be paid for a total of 5 years (to age 65), unless the person dies before age 65.