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Presentation on theme: "Disclaimer This presentation is not complete without commentary. It is being provided for education purposes only and is not intended to give advice."— Presentation transcript:

0 Your Retirement Benefits
HRM Retirement Seminar – October 8, 2013 Angela White-Rushton, CEBS HRM Pension Plan If you have any questions throughout the presentation, please let me know.

1 Disclaimer This presentation is not complete without commentary. It is being provided for education purposes only and is not intended to give advice. If you have specific questions about your personal situation, you should not rely upon this presentation but should contact the HRM Pension Office. Pension benefits are provided in accordance with the pension plan text, the provincial pension legislation and the Income Tax Act. Your Retirement Benefits – October 8, 2013

2 Session Topics Organizational structure
How is my retirement benefit calculated? What about my Defined Contribution account? When can I start receiving my retirement benefit? What happens to my retirement benefit if I leave employment before being eligible to retire? What benefits are payable if I pass away before I retire? What benefits are payable if I pass away after I retire? This is a presentation on the new HRM pension plan (effective April 1, 1998). If you have service remaining under the provisions of one of the old plans, please contact the pension office directly for information. Your Retirement Benefits – October 8, 2013

3 Organizational Structure
Pension Committee Joint representation 12 voting members and their alternate members Union, non-union, management, retired 13 non-voting Participating Employer representatives Quarterly Pension Committee meetings Annual General Meeting held in June of each year HRM Pension Plan Office Pension Plan staff (CEO, Manager of Finance & Operations, Manager of Pension Services, Pension Consultant, Pension Assistant, Senior Investment Associates, and Executive Assistant) The pension office opened in 2006 under the direction of our CEO, Terri Troy. On the member services side, you have me and Marisa Tobin, who is a Pension Consultant, and Jeanette Huck, a Pension Assistant. We also have Matt Leonard who manages finance and operations. On the investment side, working closely with Terri, are Alex Longmire and Abbie Sui, Senior Investment Associates, who oversee the investment managers, cash flows and investments. Finally, we have Donna Bayers, our Executive Assistant who offers administrative support to Terri and the Pension Committee. Pension Committee (according to plan text): Five persons designated by the Municipality, One person designated by each of the respective unions representing Plan Members employed in the following bargaining units: transit workers, inside workers, outside workers, police service personnel, fire service personnel, One person designated by the Non-Union Municipality Employees Association and One Retired Member Your Retirement Benefits – October 8, 2013

4 How Is my retirement benefit calculated?
defined benefit pension plan promises to pay members of the Plan a specific monthly benefit at retirement that is based on a formula able to transfer commuted (lump sum) value to Locked-In Retirement Account prior to Normal Retirement Date pension benefit from the Plan is in addition to Canada Pension Plan, Old Age Security, and personal retirement savings A defined benefit plan promises to pay members a pension based on a formula. In order to make sure the plan has enough money to pay the promised pensions, employees and employers make contributions to the plan and the money is invested to earn investment income. You can think of all of the contributions and investment income being dumped into a pot. The money in the pot is used to pay out the benefits. Again, at the end of the day, your pension benefit is calculated using a formula, it’s not related to how much you contributed to the plan. This is in contrast to a defined contribution pension plan or group RRSP, where it’s the contributions that are defined rather than the benefit. In a DC plan, employee and employer contributions are invested and the administrator keeps separate balance records for each member. Those balances accumulate over time and can be used to purchase a pension at retirement. Members of defined benefit plans have much more certainty of the pension they will receive at retirement. Most people aren’t familiar with the term “commuted value”. It can go by many other names, such as the present value or actuarial value. By taking the commuted value, you give up the right to a pension from the plan. The calculation of a commuted value is very complex, but it’s purpose is simpler. The commuted value is just an actuary’s best estimate of the amount you need to invest today in order to pay your future monthly pension. If you choose to transfer CV to LIRA, there is investment risk. Also, CRA dictates how much can be transferred on a tax sheltered basis. Have $400,000, maybe 300,000 can be transferred to a LIRA, 100,000 will have to be paid in cash with tax taken at source. Paid IN ADDITION, on top of government benefits. Will explain more in future slide. Your Retirement Benefits – October 8, 2013

5 Retirement Benefit Formula
2% x Best Average Earnings (BAE) x Credited Service BAE = average of annualized earnings over the 3 highest paid, consecutive years credited service period of time employed while a member of the Plan and making contributions as required by the Plan no maximum number of years If you work full time during a year, you will make contributions on your earnings throughout the year and receive credit for 1 year of service. If you are a part time employee, your credited service will reflect the hours you worked compared to a full-time employee. Generally if you’re off work and not contributing to the plan, you’re not earning credited service, although there are some exceptions for employees in receipt of WCB or LTD benefits. Credited service can also include service that you bought back or transferred from another employer Your Retirement Benefits – October 8, 2013

6 Retirement Benefit Example
Best Average Earnings = $50,000 Credited Service = 25 years = $25,000 pension per year 2% x $50,000 x 25 years Figures throughout presentation show annual pensions; however, pensions are paid monthly (on the first of every month after your retirement), so you can simply divide your annual pension by 12 to get your estimated monthly pension benefit, before taxes Your Retirement Benefits – October 8, 2013

7 Maximum Pension The maximum pension that can be earned for each year of credited service is the maximum set by the Income Tax Act. (exception for pre-1990 purchased service) For retirements in 2013, the maximum pension is $2,696.67/year based on earnings of $134,834 attributable to the HRM Pension Plan pension formula ($134,834 x 2% = $2,697) required pension contributions capped at earnings which support maximum pension earnings ($134,834) Pre-1990 service, while not a contributor to a pension plan is capped at 2/3 of ITA limit Your Retirement Benefits – October 8, 2013

8 Credited Service Continuous Service
Types of Service Credited Service period of time continuously employed while a member of the Plan and contributions made as required by the Plan the service used in the pension benefit formula Continuous Service period of time during which a person is continuously employed, including leaves of absence Used to calculate Rule of 80 or 75 Throughout presentation made mention of 2 different types of service – credited and continuous and I want to touch on these again so that the differences are clear. Credited Service – Breaks in service not included. Look at service from date of plan entry. Continuous Service – We look at from date of hire not plan entry. Your Retirement Benefits – October 8, 2013

9 Service Purchases (Buybacks)
Subject to certain limits under the Income Tax Act, you can purchase credited service under the plan. Such periods of service include: approved leaves of absence with your employer during which you did not contribute to the plan; service with your employer prior to joining the plan; service with employers with whom the plan has a reciprocal transfer agreement; certain periods of employment with other employers; and prior periods of service under the HRM plan for which you have received a refund when your employment ended. Purchasing credited service will only increase your pension, it will not allow you to retire earlier. The HRM Pension Plan office can provide you with an estimate of the cost to purchase a year of service. Note there is a $750 fee for the purchase of service with a previous employer. May also be eligible for a reciprocal transfer if you’ve joined the plan less than one year ago Your Retirement Benefits – October 8, 2013

10 Defined Contribution Accounts
may elect to make contributions on overtime earnings that will be matched by the employer conversion accounts (former Dartmouth plan service) may be transferred to Locked-In Retirement Account at termination/retirement or may be used to provide additional pension which can be “purchased” with account value at retirement DB plan with a DC component. Your Retirement Benefits – October 8, 2013

11 MacLean’s article (Anne Kingston, Mar
MacLean’s article (Anne Kingston, Mar.8/11) - Poll of Canadians aged 45 to 64 conducted by Environics Research for TD Waterhouse: 32% said they expected a lottery win to support them post-retirement—versus 34% who said they had retirement savings plans with actual dollars in them. Your Retirement Benefits – October 8, 2013

12 Sources of Retirement Income
The three-legged stool is often referred to by financial planners when discussing retirement security. It shows that, in the best case retirement scenario, you have three sources of retirement income: an employer pension plan, personal savings and government benefits. These income sources are represented by the three legs of the stool. If you combine your HRM pension with some personal savings and government sponsored programs like CPP and OAS, you will be in the best place to continue with a standard of living that you are used to pre-retirement. Just as this stool is more stable and secure with all 3 legs, your retirement security will be more stable and secure with these 3 sources of income. HRM Pension Government- Sponsored Programs Personal Savings Your Retirement Benefits – October 8, 2013

13 Retirement Benefits Example
Age: 55 Credited Service: 25 years Best Average Earnings: $50,000 Unreduced Lifetime Pension $25,000 OAS $6,612 (est. max) CPP (reduced) $7,776 (est. max) Age 60 Age 65 Age 55 OAS CPP (reduced) The sum of HRM Pension Plan and government sponsored benefits in this example is $39,388. The general rule in the industry is that approximately 70% of employment income is a good standard of retirement income in order to continue on with the same standard of living you enjoyed while working. Upon retirement you don’t have to make pension contributions anymore, perhaps expenses to commute would decrease, you may be done paying for your mortgage; so you require less. In this example, the person would be receiving almost 80% of employment income once they reach age 65, so they should find that adequate upon retirement. You may note that the maximum OAS amount here is higher than in your last annual statement, and that’s because the amount is updated every 3 months for changes in the Consumer Price Index. Many of you may have heard that the government has introduced changes to the OAS program. Individuals born after March 31, 1958 will have later OAS start date (as late as age 67). The OAS pension repayment range in 2013 is from $70,954 to $114,815. The repayment amounts are normally deducted from their monthly payments before they are issued. If you take your CPP retirement pension early, (i.e. after age 60 but before 65) your pension will be reduced based on your age at the time your benefit begins. This reduction which is now 31.2% at age 60, will gradually change over the next four years to a 36% reduction in 2016. Max CPP at age 65 (for 2013) is $12,150. Reduced CPP is assuming 36% reduction. Unreduced Lifetime Pension $25,000 Your Retirement Benefits – October 8, 2013

14 When can I start receiving my retirement benefit?
Early Retirement Date Age 55 (50 for Public Safety Occupation (“PSO”) members) Subject to a reduction if member has not reached optional retirement date Optional Retirement Date Rule of 80/Rule of 75 (for some PSO members) Continuous employment service + age = 80 (or 75) Age 60 No reduction in pension Normal Retirement Date Age 65 (age 60 for PSO) Postponed Retirement Date Retirement after Normal Retirement Date If member is still employed at age 71 he/she is considered to have retired on his postponed retirement date (member’s pension must commence in the year the member attains age 71) Rule of 75. Why we say for “SOME” PSO members. If hired after April 1, 1998 into a public safety occupation, you automatically are eligible for the Rule of 75. PSO member contribute slightly more in order to have this benefit. If you were a PSO member prior to that date, you had the option to elect Rule of 75 and contribute at a higher rate or to only be eligible for Rule of 80. Normal Retirement date is a date required to be in a Plan under Pension Legislation in order to set the early retirement date. You are supposed to be able to retire 10 years prior to your Normal Retirement Date so you can see that our early retirement dates do correspond to being 10 years earlier than the normal retirement dates. Members are required to start their pension at age 71 because of rules under the Income Tax Act. You do not need to stop working to start your pension, but you will stop making pension contributions. Your Retirement Benefits – October 8, 2013

15 Unreduced pension Reduced pension
Retirement Dates Unreduced pension Rule of 80 (Rule of 75 for some PSO Members) with no minimum age; or age 60 Reduced pension must be at least age 55 (50 for PSO Members) Reduction of 6% per year measured from date of retirement to earliest unreduced retirement date No minimum age for the Rule Ofs. If you start at 18 years old and work 31 years, you can retire unreduced at age 49 under the Rule of 80. Your Retirement Benefits – October 8, 2013

16 Indexing of Pensions After Retirement
Subject to Committee approval Benefit increase would be subject to a cap equal to the lesser of Consumer Price Index or 6% per year Indexing is when your pension is increased as the cost of living increases. Cost of living increases are measured by the Consumer Price Index. When talking to your financial planner, assume 0 indexing. There is no guaranteed indexing in this Plan. Your Retirement Benefits – October 8, 2013

17 What happens to my retirement benefit if I leave employment before I am eligible to retire? (for vested members – more than 2 years of Plan membership) Members who are not eligible to retire may elect a: Deferred pension starting at age 65 (60 for PSO members), or as early as age 55 (50 for PSO members) but with a 6% per year reduction that the pension starts before age 65 (60 for PSO members); or Transfer of the commuted (lump sum) value of deferred pension to: Locked-in retirement account An insurance company to purchase an annuity Another registered pension plan, if accepted by plan If asked about amendment that changed unreduced deferral date to 65: Way to mitigate potential increases to contributions for those still working, while not affecting those who are retiring from the Plan. Your Retirement Benefits – October 8, 2013

18 Death Prior to Retirement
Member with a Spouse or Common Law Partner (CLP) If member was eligible for a pension 66.67% survivor pension payable for life to spouse or CLP; Additional lump sum may be paid If member was not eligible for a pension Commuted value of member’s deferred pension payable to spouse or CLP in lump sum (same amount as if member terminated employment at date of death) Member without a Spouse or CLP Designated beneficiary or estate receives the commuted value of the member’s deferred pension (same amount as if member terminated employment at date of death) CV of survivors pension compared to CV of deceased members pension had he/she terminated prior to passing. If CV of member’s pension is more, survivor would receive the difference in a lump sum (in addition to pension). Want to ensure spouse is getting full value of member’s pension. Your Retirement Benefits – October 8, 2013

19 Death After Retirement
Member with a Spouse or Common Law Partner (CLP) 66.67% of the member’s pension continues to the surviving Spouse/CLP for life after the member’s death (has to be the Spouse/CLP that was named at date of retirement) Minimum guaranteed payments of at least the member contributions with interest to date of retirement Member without a Spouse or CLP payments guaranteed for 10 years, with balance of guarantee period after death payable to designated beneficiary or estate For example, if single at retirement would receive pension in Guarantee 10 form. If you got married 5 years later, spouse would not be entitled to a survivor pension in the event of your death. If on file as named beneficiary, would receive lump sum payment for remaining guarantee period or 5 years of payments. If married to person A at retirement and you get a divorce in 5 years and remarry person B, person B will not be entitled to a Survivor pension. Person A will as it is the spouse at the date of retirement who is entitled to a pension. This serves as a reminder to get things in order so that what you want to happen with your money is what is going to happen. Keep the office informed of any changes. Your Retirement Benefits – October 8, 2013

20 Spouse / CLP / Beneficiary Designation
Spouse means either of a man and woman who, are married to each other, are married to each other by a marriage that is voidable and has not been annulled by a declaration of nullity, or have gone through a form of marriage with each other, in good faith, that is void and are cohabiting, or if they have ceased to cohabit, have cohabited within the 12-month period immediately preceding the date of entitlement. Where applicable, Spouse shall also include registered domestic partners within the meaning of the Vital Statistics Act. Common Law Partner of an individual means another individual who has cohabited with the individual in a conjugal relationship for a period of at least one year, neither of them being a Spouse. For purposes of the Plan, an individual may have only one Common Law Partner at any given time. All of this talk about spouse and CLP, there are specific definitions defined in our Plan text for both of these terms and they’re here on this slide. Able to declare yourself living separate and apart from former spouse but can’t name another spouse. Read through when you get a chance but one thing I do want to draw your attention to is the underlined part in the definition for CLP. “NEITHER OF THEM BEING A SPOUSE”. If you are actively working and perhaps have been separated from your spouse for awhile, maybe even 10 years, and now you are living with someone else, maybe for the last 9 years. You may assume that if something happens to you that he or she will be treated as your CLP for benefit purposes. This is not the case as you technically still have a spouse. Your Retirement Benefits – October 8, 2013

21 Spouse / CLP / Beneficiary Designation
designated beneficiary can be changed always ensure administrator is informed of changes entitlement can be contentious Your Retirement Benefits – October 8, 2013

22 Retirement Information
Retirement estimate Estimates for certain possible retirement dates can be found on your annual pension statement Estimates can be calculated by members using the “Retirement Calculator” tool on the HRM Pension Plan website Pension Office staff can calculate estimates, on a request basis (gross and net of taxes benefit information provided) Earnings and service estimates are used in calculations Your Retirement Benefits – October 8, 2013

23 Retirement Information
Other retirement considerations: Do you have any pension benefits in a former employer’s pension plan? Have you talked to a financial advisor? For example, do you know what options you have for other retirement savings? How much can you expect to receive from government plans (ex. CPP, OAS)? Are you eligible for any lump sum payments (ex. pre-retirement leave, severance pay, accrued vacation) from your employer? If so, what are your options? How much tax will you pay on your retirement income? Will your benefits coverage (medical, dental, life) continue? Do you have a will? Are you mentally prepared for retirement? Employer-sponsored EAP may provide pre-retirement counselling Your Retirement Benefits – October 8, 2013

24 Retirement Information
Annual pension statement HRM Pension Office phone: / fax: Website: Your Retirement Benefits – October 8, 2013

25 Annual Pension Statement
Your Retirement Benefits – October 8, 2013

26 Annual Pension Statement
Your Retirement Benefits – October 8, 2013

27 Annual Pension Statement
Your Retirement Benefits – October 8, 2013

28 Website –
Your Retirement Benefits – October 8, 2013

29 HRM Pension Plan Website
Your Retirement Benefits – October 8, 2013

30 Retirement Calculator Website
Your Retirement Benefits – October 8, 2013

31 When you decide to retire…
Advise your “supervisor” and Human Resources department Send written notice of intent to retire to HRM Pension Office (3-6 months before effective date) Receive retirement statement and forms approximately 45 days prior to actual retirement date Copies of documents you will require: birth certificates - you and spouse (if applicable) void cheque for direct deposit Northern Trust Canada Ltd. will commence pension on 1st of month following date of retirement (most members choose to retire at the end of the month to avoid a break in income) Contact information: Reach Northern Trust directly at or Jeanette Huck at the HRM Pension Plan Office at or The majority of retiring members chose to retire at the end of the month to ensure there is no interruption in pay Your Retirement Benefits – October 8, 2013

32 The information in this presentation illustrates the current provisions of the Plan, and is subject to change where allowed by the rules of the plan text and pension law. Questions? Your Retirement Benefits – October 8, 2013

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