Public Service Pension Plan
Retirement Planning
Information Session
You and Your Pension Plan
Objective
“ …to help you understand
the benefits of your
Public Service Pension Plan”
This handout is provided for information purposes only
and does not constitute a legal document on your rights
and obligations. Should there be any conflict between
the information in this document and that contained in
the Public Service Superannuation Act and Regulations,
or other applicable laws, the Act and Regulations apply.
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Today’s Topics
•
How your pension plan works
•
Service Buyback
•
Supplementary Death Benefit Plan
•
Retirement Benefits
–
Indexing
–
CPP/QPP Coordination
–
Re-employment after retirement
•
Survivor Benefits
•
Pension Benefits Division
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www.pensionandbenefits.gc.ca
Pension Plan Contributions for 2012
•
Contribution rate is 6.2%
on salaries up to yearly
CPP/QPP maximum of $50,100
•
Contribution rate is 8.6%
on salaries above yearly
CPP/QPP maximum of $50,100
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Pensionable Service
•
Current service
•
Service Buyback
•
Canadian Forces / RCMP service
•
Pension Transfer Agreements
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Non-Pensionable Service
•
Strike
•
Suspension
•
Unauthorized Leave Without Pay
•
Seasonal Lay-off
•
Authorized Leave Without Pay
(not purchased)
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Service Buyback
Can you buyback prior service?
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Types of Service Buyback
• Prior public service (PSSA)




Non-Contributory
Contributory
Part-time Service
Unpurchased periods of Leave Without Pay
• Canadian Forces / RCMP service



Non-Contributory
Contributory
Reserve Service
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Types of Service Buyback
• Pensionable Employment





Subject to pension plan
Approved pension plan must be registered
under the Income Tax Act
Must enter Public Service within 2 years of
leaving outside employer
Pensionable Employment Questionnaire
must be completed by outside employer
Double rate of contributions
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Methods of Payment
• Lump sum payment
and/or
•
Monthly instalments
Payment period
- under age 45 / up to age 65
- age 45 and over / 20 years
•
Debt cancelable by death
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Sample of a Public Service Buyback


Service: 1/1/1975 to 31/12/78 (4 years)
Born:
1952 (male)
Election
Date
Salary
Lump
Sum Cost
Monthly
Cost
Repayment
Period
Total
Cost
Dec. 80
$ 20,017
$ 6, 501
$ 30.05
36 yrs
$ 12,981
Dec. 90
$ 32,128
$ 10,269
$ 56.90
26 yrs
$ 17,753
May 11
$ 50,000
$ 33,029
$ 258.17
20 yrs
$ 61,960
Resultant Benefit:
0.02 x 4 years x $48,000 ÷ 12 = $ 320.00
Benefit Increase = $ 61.83
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The Buyback Process
•
Estimate of cost
•
Legally binding agreement
•
Medical examination
•
Made while employed as a plan member
•
Income Tax implications
•
Public Service Pension Centre 1-800-561-7930
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Advantages of Purchasing Service
•
More service……more pension
•
Service is fully credited before it is paid in full
•
Life insured
•
Earlier retirement
•
Reach 35 years service more quickly
•
Income tax deductibility
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Supplementary Death Benefit
Did you know that you have
“life insurance” from your employer?
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Supplementary Death Benefit
•
Term life insurance
•
Coverage: double your annual pensionable salary
(to next multiple of $1,000)
•
Cost: 15¢ a month per $1,000 of coverage
•
Coverage of $10,000 is free at age 65
•
Reduced by 10% per year effective age 66
•
Designation of beneficiary 1-800-561-7930
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Naming a Beneficiary
A beneficiary can be:
•
Estate
•
A person age 18 and over
•
Charitable / benevolent / religious
or educational institution
Where no beneficiary is named:
•
Estate
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Retirement Benefits
What are my options when I retire?
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Retirement Benefits
Two types of retirement benefits:
•
Lump Sum Payments
 Return
of Contributions
 Transfer Value
•
Monthly Payments
 Immediate
Annuity
 Annual Allowance
 Deferred Annuity
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Lump Sum Benefit
Return of Contributions
Only option available to those with less
than 2 years of pensionable service
(not vested).
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Lump Sum Payment
Transfer Value Payment
•
Must be less than age 50 at termination
•
Must have at least 2 years of service
•
Actuarial value of accrued pension benefits
•
Must be transferred to a locked-in RRSP,
another registered pension plan and/or
purchase an annuity
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Lump Sum Payment
Transfer Value Tax Considerations
•
Amount within tax limit must be transferred
to a locked-in RRSP, another registered
pension plan and/or purchase an annuity.
•
Amount in excess of the tax limit is paid to
the member and taxed.
•
Amount in excess of the tax limit paid to
RRSP if you have available RRSP “room”.
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Lump Sum Payment
Transfer Value Buyback
•
Must purchase within the first year of
becoming a plan member
•
One-time opportunity to purchase
•
No monthly instalments
•
Lump sum required
•
Medical
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Pension Benefits
How is your pension benefit
calculated?
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Benefit Formula (Full-Time)
2%
X
Years and days of
pensionable service
X
Average salary for 5
consecutive years of
highest paid service
2% X 35 years X $52,934 =
$ 37,054 per year/
$ 3,088 per month
2% X 25 years X $52,934 =
$ 26,467 per year/
$ 2,205 per month
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Benefit Formula (Part-Time)
2%
X
Years and days
Average salary
Assigned
of pensionable X for 5 consecutive X Work Week
service
years of highest
Standard
paid service
Work Week
2% X 5 years X $52,934 X 20.0/37.5 =
$ 2,823 per year
$ 235 per month
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Benefit Formula (Full-Time and Part-Time)
Full-Time Service
2% X 35 years X $ 52,934 X 37.5/37.5 =
$ 37,054 annually
$ 3,088 monthly
Full-Time and Part-time Service
2% X 30 years X $ 52,934 X 37.5/37.5 =
2% X
$ 31,760 annually
$ 2,646 monthly
5 years X $ 52,934 X 20.0/37.5 = $ 2,823 annually
$
235 monthly
Total = $ 34,583 annually
$ 2,881 monthly
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Calculating your Public Service Pension
Your Public Service pension is coordinated
with Canada Pension / Quebec Pension Plans
Pension includes:
 Lifetime pension (paid from date of entitlement
for life)
and
 Bridge benefit (if you are entitled before age 65)
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Lifetime pension and Bridge benefit
Pension Income
If you retire before age 65 and apply for CPP/QPP at age 65:
Bridge Benefit
(public service pension plan)
CPP or QPP Pension
Lifetime Pension
(public service pension plan)
Retirement
Age 65
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Monthly Benefits
What do these terms mean to you?
•
Immediate Annuity
•
Annual Allowance
•
Deferred Annuity
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Monthly Benefits
Immediate Annuity – (unreduced benefit)
Age
Pensionable Termination
Service Years
Reason
60 or over
At least 2
Retirement
55 or over
At least 30
Retirement
Any age
At least 2
Disability
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Monthly Benefit
Immediate Annuity
•
Payable upon termination
•
Indexed from year of termination
•
Supplementary Death Benefit
coverage is automatic
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Monthly Benefit
Annual Allowance (reduced benefit)
•
Payable at the latest of
: age 50
: date of option or
: date of termination
•
Subject to reduction
•
Immediate annuity possible in the event of
permanent disability
•
Supplementary Death Benefit coverage can be
automatic
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Annual Allowance Reduction Formula
Formula 1
5% x (60 – age)
Formula 2
5% x (55 – age)
or
5% x (30 – service)
Greater reduction of:
Under 50 years of age
or
Under 25 years of service
Formula 1
50 years of age and over
and
Smaller reduction of:
25 or more years of service
Formula 1
or
Formula 2
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Monthly Benefits
Deferred Annuity (paid in the future)
•
Payable on 60th birthday
•
Indexed from year of termination
•
Annual allowance can be requested at age 50
•
Immediate annuity possible in the event of
permanent disability
•
Supplementary Death Benefit coverage not
automatic
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Monthly Deductions
Voluntary
Compulsory
- Supplementary Death
Benefit
- Canada Savings Bond
- Income Tax (extra)
- PS Health Care / Dental
- Income Tax
- Buyback Instalments
- Provincial Sales Tax
Cease
-
Pension contributions
Disability Insurance
EI and CPP/QPP
Union dues
Public Service Management
Insurance Plan
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Public Service Health Care Plan
Individual Monthly Cost
Level 1
Level 2
Employee:
$
$
Pensioner:
$ 21.78
0.00
1.10
$ 38.34
Level 3
$
5.31
$ 67.19
Family Monthly Cost
Employee:
Pensioner:
Level 1
Level 2
Level 3
$
$
3.53
$ 10.34
$ 59.32
$ 88.17
0.00
$ 42.76
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Pensioners’ Dental Services Plan
Coverage
Monthly Cost
Pensioner
$ 16.00
Pensioner –
plus one dependent
$ 31.96
Pensioner –
more than one dependent
$ 47.96
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Indexing
Am I on a “fixed income” as Public
Service retired member?
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Indexing
•
Annual cost of living increase
•
Based on average of Consumer Price Index
•
Increase is effective January 1
•
First increase is pro-rated and based on
month of termination
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Month of Retirement
Percentage of Indexing
January
11/12
February
10/12
March
9/12
April
8/12
May
7/12
June
6/12
July
5/12
August
4/12
September
3/12
October
2/12
November
1/12
December
0/12
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Canada/Quebec Pension Plan Coordination
How does the CPP/QPP coordination
affect my pension benefits?
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CPP/QPP Coordination
2012
SALARY
First $3,500
PSSA
CPP/QPP
6.2 %
0.000 %
6.200 %
4.950 %
11.150 %
5.025 %
11.225 %
0.000 %
8.600 %
CPP
$3,501 to $50,100
QPP
6.2 %
Over $50,100
8.6 %
TOTAL
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Bridge Benefit Formula for 2012
Bridge
Benefit
Factor
X
Years and days
of pensionable
service
X
Lesser of the average
salary or CPP/QPP
average maximum
pensionable earnings
0.00625 x 35 years x $ 47,360.00 = $ 10,360.00 / annually
$
863.33 / monthly
0.00625 x 25 years x $ 47,360.00 = $
$
7,400.00 / annually
616.66 / monthly
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Bridge Benefit Factor
Year Member will
reach age 65
Year of birth
Bridging
Factor
2007 or earlier
1942 or earlier
.00700
2008
1943
.00685
2009
1944
.00670
2010
1945
.00655
2011
1946
.00640
2012 or later
1947 or later
.00625
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Pension Formula (Full-Time)
2%
Bridge
ends at
age 65
.00625
Years and days of
X pensionable service
X
Average salary for 5
consecutive years of
highest paid service
LESS
Years and days of
X pensionable service
X
Lesser of the average
salary or CPP/QPP
average maximum
pensionable earnings
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Bridge Benefit Considerations
•
Bridge benefit ends effective:
First of the month following 65th birthday
or
Entitlement to CPP/QPP disability benefits
•
Application must be made for CPP/QPP benefits
•
Early retirement benefits available with CPP/QPP
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Lifetime pension and Bridge benefit
If you retire before age 65 and apply for early CPP/QPP
benefits between age 60 to 64:
Pension Income
Early CPP / QPP Pension
Bridge Benefit
(public service pension plan)
Retirement
Lifetime Pension
(public service pension plan)
Age 60
Age 65
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Effect of Bridge Benefit on Indexing
$ 3,088.00 Monthly pension (retirement age 55)
x 22 % Indexing rate 10 years later (age 65)
$ 679.36 Monthly indexing increase
$ 3,088.00 + $ 679.36 = $ 3,767.36
$ 3,088.00
- 863.33
$ 2,224.67
x 22 %
$ 489.43
Monthly pension
Bridge benefit ends at age 65
New monthly pension (age 65)
Indexing rate
New monthly indexing increase (age 65)
$ 2,224.67 + $ 489.43 = $ 2,714.10
Total effect
- $ 1,053.26
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Re-employment after Retirement
•
Pension Benefits
•
Indexing
•
Public Service Health Care Plan
•
Pensioners’ Dental Services Plan
•
Supplementary Death Benefit
•
Contact the Public Service Pension Centre
at 1-800-561-7930.
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Survivor Benefits
What benefits are available for
my survivors?
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Survivor Benefits
• Surviving Partner
50% of the member’s basic pension
(1% x years/days of service x average salary)
• Dependants
10% of member’s basic pension to each
child or student (maximum 40%)
• Orphans
20% of member’s basic pension to each
child or student (maximum 80%)
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Survivor Entitlements
•
Divorced
- Partner is not entitled
•
Separated
- Partner is entitled
•
Common Law
- Must provide proof that relationship
started prior to retirement
- Pension Centre must approve
documentation submitted
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Optional Survivor Benefits
•
Marriage occurs after retirement
•
Option to reduce your own pension to provide a
benefit for your spouse
•
Different levels of coverage available
•
Original pension can be re-instated
•
Estimate provided by the Public Service
Pension Centre
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Five Year Minimum Benefit
How and when is a minimum
benefit paid?
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Five Year Minimum Benefit
•
Issued when no further benefits payable
to any survivors
• Minimum benefit payable is the greater of:
Return of Contributions plus interest
or
Five years of basic pension benefits
(less any amount already paid)
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Pension Benefits Division Act
Can my pension be divided?
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Pension Division
Maximum benefit available to the ex-partner is
50% of the value of the member’s pension.
Requirements:

an agreement or court order must exist

living apart for at least one year
(when based on a separation agreement)

normally cohabitation benefits only are available for
division (court can order a different period)
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Pension Division continued…
Requirements:

Lump sum payment transferred to a locked-in
registered retirement vehicle

Member’s pension is reduced accordingly

Either party can request a division estimate

Non-applicant partner has a 90-day objection period
For information, contact Public Service Pension Centre
at 1-800-561-7930.
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