Termination of employment Understanding your pension options when leaving your job
Your pension from the CAAT Plan is valuable, and can form the foundation of your income in retirement. If your career path takes you away from employment with a CAAT Pension Plan employer, consider carefully if you re willing to take on the risks and costs of managing your pension funds on your own, or if you re ready to face your retirement with a secure lifetime pension from the Plan. Is this pamphlet for you? Read this pamphlet if your employment at a CAAT Plan employer has ended, or you are an Other Than Regular Full-Time member and your contract has expired and may not be renewed. A detailed legal description of the provisions of the Plan can be found in the Plan Text, which can be downloaded from our website. Should the information in this booklet, on our website, or any other source differ from the Plan Text, the Plan Text will govern. Effective July 1, 2016 This pamphlet explains the benefits you may be entitled to under the CAAT RCA.
YOUR TERMINATION OPTIONS All CAAT Pension Plan members are entitled to a pension at retirement. If you terminate your employment with a participating employer, but are not yet eligible, or not yet ready for a pension, the Plan s termination options provide both flexibility and security so you can make the best choice for the retirement income you have earned. Once your employment with a CAAT Plan participating employer ends, your membership in the CAAT Plan will be automatically extended for 24 months from the date you last made contributions. During this time, you do not accrue additional service in the Plan. The 24-month extension of membership is a valuable feature, allowing you the time to evaluate the choices available to you, and the opportunity to make a fully informed decision about your pension. You will have several options during the 24-month extension of membership period, and you will gain additional options at end of the 24-month period. We encourage you to review all of your options to ensure you make the best choice for your retirement income. These options are explained on the following pages and can also be found on our website. Visit www.caatpension.on.ca/en/members and click on Leaving your job. Take note If, at your termination date, you are age 55 or older (or 50 and older with 20 or more years of pensionable service) or you will reach one of these milestones prior to the end of the 24-month extension of membership and you want to start your pension immediately, contact us, or visit our website to download the Early retirement pamphlet for more information. This pamphlet does not apply to you if you are age 65 or older. To begin your pension, contact the CAAT Pension Plan, or visit our website to download the Normal retirement pamphlet for more information. 3
WHAT TO EXPECT If you would like to exercise one of the options available to you during the 24-month extension of membership period, contact the CAAT Pension Plan. These options are outlined in the first column of the chart on the next page. When your 24-month extension of membership period is over, we will send you an option document that outlines the additional options that will become available to you (as shown in the second column of the chart on the next page). You will be required to make your choice, sign and initial the document, and return it to the Plan. Be sure to keep us up-to-date if your mailing address changes during the extension of membership period so that you receive your option document in time to meet any deadlines and avoid delays. If you do not receive your option document at the end of the 24-month extension of membership period, it is important that you contact us as soon as possible. You can notify us using the Change Request form you received in your termination package. Complete the form and mail it to the CAAT Pension Plan to keep us up to date. A copy of this form can also be found on our website. Small pension payout At the end of the 24-month extension of membership period, if your annual pension benefit is calculated to be less than 4% of the Year s Maximum Pensionable Earnings (YMPE), or the commuted value of your benefit is less than 20% of the YMPE, you will not be entitled to a deferred pension. You will instead only be entitled to receive a non-locked in transfer or cash payout. (The YMPE is the maximum amount of earnings on which CPP contributions and benefits are calculated.) 4
TERMINATION OPTIONS AT A GLANCE Some of the options available to you are based on your age, and on whether or not you have completed the 24-month extension of membership period, as seen in the chart below. During the 24-month extension of membership period After the 24-month extension of membership period Under age 55 (less than 20 years of service) Transfer to another pension plan Transfer to another pension plan Secure lifetime payments with a deferred pension Commuted Value transfer Age 50 (with 20 or more years of service) Transfer to another pension plan Start reduced pension early Transfer to another pension plan Start reduced pension early Secure lifetime payments with a deferred pension Age 55 to 65 Transfer to another pension plan Start reduced pension early Transfer to another pension plan Start reduced pension early Secure lifetime payments with a deferred pension Age 65 and older Start pension. Refer to Normal Retirement pamphlet for details. Read on for further details on these options. 5
OPTIONS DURING THE 24-MONTH EXTENSION OF MEMBERSHIP PERIOD It s possible that your circumstances may change during the 24-month extension of membership period. You may be wondering what happens to your pension if You return to work at a CAAT Plan participating employer If you return to work with your former employer or any other employer that participates in the CAAT Plan, you will resume contributing to the Plan and accruing additional pension benefits. Whether you return to Full-Time, Part-Time or contract employment, you will continue to accrue pensionable service and your CAAT Plan pension will keep growing. When you retire, the pensionable service you accumulated in the Plan during all of your periods of active service with all CAAT Plan employers will be used to calculate your final pension. If you resume working for an employer that participates in the CAAT Plan be sure to contact your employer as soon as possible so that you and your employer can resume contributions, and you can continue to accrue pensionable service in the Plan. You start a new job with a non-caat Plan employer If your new employer offers a registered pension plan, and you wish to transfer the pension you earned in the CAAT Plan to your new employer s plan, you can do so at any time during the 24-month extension of membership period (or after), providing you have confirmed that your new employer s pension plan will allow the transfer (and you are under age 65). Transferring your pension to another pension plan could be of value. To learn more, read the Transferring Service pamphlet, available on our website. Note that the option to transfer to another employer s pension plan is not available once you start your pension from the CAAT Plan. 6
You reach retirement age If you reach early retirement age during your 24-month extension of membership period; that is, you turn 55 (or you turn 50 and had 20 or more years of pensionable service when you left your job), you can start to collect an early monthly pension from the CAAT Plan. You will also collect a monthly bridge benefit, payable until you turn 65. Both your pension and the bridge benefit will be reduced by only 3% for each year your early retirement date precedes your earliest unreduced retirement date. If you wish to start your early pension during the 24-month extension of membership period, contact the CAAT Pension Plan to start the process. Note that if you wait until after the 24-month extension of membership period, and decided to start your pension before the age of 65, your pension and bridge benefit will be reduced by 5% for each year your early retirement date precedes age 65. 7
ADDITIONAL OPTIONS AFTER THE 24-MONTH EXTENSION OF MEMBERSHIP PERIOD At the end of your 24-month extension of membership period, you will retain the options explained on the previous pages, and two additional options will become available to you: you can either choose to defer your pension and collect it from the Plan when you are eligible, or transfer the value of your pension out of the Plan (providing you have not reached retirement age). Deferred pension By deferring your pension, you will have the opportunity to collect a secure stream of monthly pension payments from the CAAT Pension Plan when you reach retirement age. Your deferred pension is the amount of pension you earned in the Plan during your active membership, up to the date you terminated your employment. It s called deferred because it remains in the CAAT Pension Plan so you can collect secure monthly pension payments when you re ready to retire, even if you no longer work for a CAAT Plan employer. Your normal, unreduced pension starts at age 65; however a reduced pension is available if you want to start collecting it early you can start your pension at age 55, or as early as age 50 as long as you had 20 or more years of pensionable service when you terminated. With an early pension, you ll also receive a temporary bridge benefit which will be paid to you every month until you turn 65. Your early pension and your bridge benefit will be reduced by 5% for each year your early retirement date precedes age 65. If you are interested in collecting your deferred pension early, simply contact the CAAT Pension Plan to start the process, or visit our webpage Starting your deferred pension. 8
Commuted Value transfer If you are under the age of 55 (or under the age of 50, and if you had 20 or more years of service at termination), you may opt for a commuted value (CV) transfer after the 24-month extension of membership period has ended. The CV is a lump-sum payment of the present value of a member s earned pension. In other words, it is the amount of money that would have to be invested today, based on current interest rates, to be equivalent to the expected amount of a member s future pension payments, in today s dollars. The CV is locked-in, meaning the funds must be transferred into a Locked-in Retirement Account (LIRA). In a LIRA, locked-in funds and any investment income earned on them cannot normally be withdrawn before age 55, and all funds must be withdrawn or converted to an annuity or a Life Income Fund (LIF) by age 71. The CV transfer option is only available during the six months following the end of the extension of membership period, and is not available once you become eligible to retire (meaning you reach age 55, or age 50 if you had 20 or more years of service when you terminated employment). To choose the CV transfer option, make your selection on the option document you will receive at the end of the 24-month extension of membership period. (Refer to "What to Expect" on page 4 for details.) If you prefer to receive your retirement income in the form of secure monthly payments from the CAAT Plan, the deferred pension is the option for you. 9
SHOULD YOU TAKE ADVANTAGE OF A DEFERRED PENSION? A deferred pension is the ideal option for a member who wants the security of a pension that s backed by a well-governed, professionally-managed defined benefit pension plan. It doesn t matter how far you are from retirement, your pension will be waiting for you when you re ready to collect it. Your deferred pension offers lifelong benefits before and after you retire: Retire at a time that s right for you there s no need to follow the markets or worry about the impact the economy will have on your retirement date. Your pension amount is guaranteed regardless of the markets, interest rates, or other external factors. You can retire early with a reduced pension starting at age 55, or as early as age 50 if you have more than 20 years of pensionable service at termination of employment. Your deferred pension starts receiving inflation protection increases (when they apply) to partially offset the impact of inflation even before you start your pension. You retain the flexibility to transfer your pension to another employer s pension plan in the future (if the other employer permit transfers). At retirement, you ll receive a steady and reliable stream of monthly pension payments for life. You can t outlive your pension you ll receive your monthly payments as long as you live. Survivor benefits are available to your survivors whether you die before retirement or after you start collecting your deferred pension. Refer to the Survivor Benefits pamphlet on our website for more information. 10
CONSIDER THE RISKS OF TAKING THE CV If you choose to take your CV out of the Plan, you will have no further entitlement from the Plan, and no option to change your mind if you later decide a deferred pension is the better option. By choosing a CV, you will be required to invest the funds yourself, or with the assistance (and fees) of a financial advisor. Note that many financial advisors are paid indirectly from the investments they recommend. You will be responsible for the costs and risks associated with managing your retirement funds. If your investments do not perform well, you may end up starting you retirement with less money than you expected. You might outlive your retirement savings. Some Life Income Funds are designed so that payments stop at age 90 if you withdraw the maximum annual amount. Depending on where you invest, you may not have the flexibility to start collecting your retirement income early. If you want a secure lifetime pension, converting to an annuity at retirement can be costly, given the expenses and profits required by insurance companies. The annuity amount will also be impacted by interest rates at your retirement date, creating another risk to you. Remember, by choosing the CV option you will give up: the right to a guaranteed pension from the CAAT Plan payable for your lifetime an automatic pension paid to your eligible surviving spouse upon your death periodic cost of living increases to help offset the effects of inflation 11
THE VALUE AND SECURITY OF A DEFERRED PENSION On the surface, taking a lump sum payout today may seem like the better option, but it s important to bear in mind that there is no guarantee or certainty that the lumpsum CV payment will yield a monthly pension for your lifetime that is equal to what would be paid under the deferred pension option. Example Josh Josh worked for a CAAT Plan employer for 10 years until he went into business for himself at the age of 45. After his 24-month membership extension period, Josh received an option document from the Plan, showing the following: A CAAT Plan pension of $970 per month starting at age 65 and payable for the rest of his life. OR A CV of $147,200 transferred into a locked-in vehicle. Initially the lump sum amount seems like the ideal option. However, Josh determined that if he lived to age 89 (the average life expectancy for a member of the CAAT Plan) he would be assured of collecting more during his lifetime with the deferred pension option. The chart on the next page shows the lump sum CV Josh would transfer into a Locked-in Retirement Account to use for his retirement income, compared to the value of his deferred pension over time. If Josh retires at 65 and lives to age 89, he would receive over 280 monthly pension payments from the CAAT Plan totalling well in excess of the one-time CV payment. When further factoring in the value of periodic increases due to inflation protection, and the survivor benefits available to his spouse if he were to predecease her, Josh concludes that the deferred pension can yield even higher value for him than the CV option. Josh also considers the alternative can he invest $147,200 in order to produce a similar yield and provide himself with retirement income for life? 12
Josh's options: Deferred pension versus CV $300,000 $279,360 $250,000 $200,000 $150,000 $147,200 $100,000 $50,000 $0 Deferred pension from age 65 to 89 One-time CV payout He factors in the fees, responsibility, and risk of managing and investing $147,200 in a locked-in retirement vehicle before retirement. He then considers the cost of converting a lump-sum into an annuity at retirement, including the additional fees charged by annuity providers. When he also considers that the CAAT Plan does not charge members anything for managing their pensions, he decides the deferred pension is the right choice for him. Josh decides to defer his pension and retire at the age of 65. When the time comes to retire, Josh is pleasantly surprised his pension had actually increased, having received periodic inflation protection increases during the deferral period. 13
DEFERRED PENSION VERSUS CV IT S YOUR CHOICE Before making the choice between a lifetime of pension payments and a one-time commuted value payment, it s important to take into consideration all the factors that affect your retirement, not just the numbers you will see on the option document you will receive at the end of your 24-month extension of membership period. Commuted Value option Deferring your pension You invest the CV yourself, or with the assistance of a financial advisor. You are responsible for all investment and fund management fees. Investment risk and cost is pooled and expertly managed by the Plan s team of investment professionals. There are no fees to pay. Simply contact us to start your pension when you reach retirement age. If your investments do not perform well, you risk starting retirement with less money than expected, or having to delay your retirement. You can start your pension from the Plan at age 65 or earlier, regardless of where you are employed when you reach retirement age. You might outlive your retirement savings: you could opt to purchase an annuity from an insurance company, the cost of which includes the annuity provider s fees and profits. You can t outlive your CAAT Plan pension: it s paid for life, and your monthly payments will go up with annual inflation protection increases when they apply. You forfeit the option to change your mind once you are paid out. You retain the flexibility to transfer your pension to another employer s pension plan if that option becomes available to you. 14
QUESTIONS? CONTACT US During the 24-month extension of membership period, if your contact information changes, you must notify the Plan as soon as possible to ensure you receive your option document in time to meet any deadlines, and avoid any delays. Email: member@caatpension.on.ca Phone: 416.673.9000 Tollfree: 1.866.350.2228 Fax: 416.673.9028 www.caatpension.on.ca
250 Yonge Street, Suite 2900 P.O. Box 40 Toronto ON M5B 2L7 Tel 416.673.9000 Toll Free 1.866.350.2228 www.caatpension.on.ca P-TER-2016-5-E