1. 1 Conestoga College College Presentation November 17, 2005

2. 2 Agenda nThe CAAT Pension Plan nCPP and OAS nDefinitions nData Collection nNormal Retirement Pension nEarly and Deferred Retirement Pension nPension Payments nSurvivor Benefits

3. 3 The CAAT Pension Plan Multi-employer Pension Plan Defined benefit plan-pension based on the Plan formula Established June 1, 1967 January 1, 1995 Jointly sponsored Administered by OMERS to Dec. 31, 1995 January 1, 1998 major amendments Plan funding

4. 4 CAAT Pension Formula 1.3% x HAPE up to AYMPE x Pensionable Service plus 2.0% x HAPE above AYMPE x Pensionable Service 2005 AYMPE = $39,780

5. 5 CPP nYou and your employer each contribute 4.95% nYMPE is changed annually based on the increase in Average Industrial Wage nFor 2005 YMPE is $41,100 nYBE is $3,500 nContributions to CPP= 4.95% x earnings between YBE and YMPE

6. 6 Do not contribute to CPP on this amount of Salary $41,100 & Above No CPP Benefit Contribute on earnings in this Salary Band $41,099 $3,501 CPP Benefit calculated on this amount of Salary Do not contribute to CPP on this amount of Salary $3,500 and Below CPP Benefit calculated on this amount of salary

7. 7 CPP nYour CPP pension based on your work history and earnings, maximum CPP benefit for 2005 is $9,945.00 nThe CAAT Plan takes CPP into consideration for pension contributions and benefit calculation

8. 8 CPP nPaid in full at age 65, nRoughly equal to 25% of APE up to 25% of AYMPE nPaid on a reduced basis from age 60 (6% per year) n15% dropout roughly equals 7 years over a full career of 47 years (per CPP definition) (age 18 to age 65)

9. 9 OAS 2005 nNo employee or employer contributions nPaid from age 65 nBenefit is $471.76 per month nSubject to clawback nStarts at income of $60,806 nIn full at income of $98,547 nOAS benefit is reduced by $.15 for each dollar of income over $60,806

10. 10 Definitions nHighest Average Pensionable Earnings (HAPE): sum of your earnings during the 60 consecutive months of Pensionable Service during which earnings were highest, divided by 5.

11. 11 Highest Average Pensionable Earnings Example calculation: YearEarnings Pensionable Service 2005 $34,000 6 months 2004 $65,00012 months 2003 $63,00012 months 2002 $62,00012 months 2001 $60,00012 months 2000 $30,000 6 months Totals $314,00060 months

12. 12 Highest Average Pensionable Earnings Example calculation: Highest Average Pensionable Earnings = $314,000/5 = $62,800

13. 13 Definitions nAverage YMPE(AYMPE): average of the Year’s Maximum Pensionable Earnings for the year of retirement and the 4 preceding years

14. 14 Average YMPE for 2005 Year YMPE 2005 $41,100 2004 $40,500 2003 $39,900 2002 $39,100 2001 $38,300 Total$198,900

15. 15 Average YMPE for 2005 Calculation: Average YMPE for the year 2005 = $198,900/5 = $39,780

16. 16 Definitions nBridge Benefit: an extra pension payable from the CAAT Pension Plan from early retirement date to age 65.

17. 17 Bridge Benefit 1. Retire before age 65: a) Retirement to age 65 Lifetime pension + Bridge Benefit b) From age 65 onwards: Lifetime pension 2. Retire at age 65: Lifetime pension 3. Bridge Benefit formula: 0.7% x HAPE up to AYMPE x Pensionable Service

18. 18 Bridge Benefit-Example Member retires at age 60, HAPE =$68,000.00 Pension calculated: $39,780 x 1.3% x 35 years=$18,099.90 $28,220 x 2% x 35 years=$19,754.00 Lifetime benefit=$37,853.90 Bridge ($39,780 x.7% x 35)=$ 9,746.10 Benefit to age 65$47,600.00

19. 19 Bridge Benefit-Example Benefit to age 65$47,600.00 At age 65 bridge drops off -$ 9,746.10 Lifetime benefit$37,853.90 Plus CPP (assumes maximum)$ 9,945.00 Total $47,798.90

20. 20 Definitions nCommuted Value: what a member’s deferred pension is worth today in a lump sum nPensionable Earnings: earnings on which you pay pension contributions

21. 21 Definitions nPensionable Service(PS): service that is used in calculating a pension benefit, earned, purchased or transferred nEligible Spouse: married and living together at time of retirement/death or living in a common law relationship at the time of retirement/death - covers same and opposite sex

22. 22 Definitions nExcess Contributions: Member’s Contributions plus interest that exceeds 50% of their Commuted Value. nNormal Retirement Date: last day of the month in which you turn 65

23. 23 Data Collection nEnrolment nAnnual data from college (DCT) nService purchase or transfer nMember’s Annual Statement nChange forms (marital status, beneficiary.) nTermination/Retirement Form nOption Document

24. 24 Normal Retirement Pension nAt age 65 nPayable for life nPayable monthly on the first business day nFormula recognizes part of retirement income comes from Canada Pension Plan (CPP) nIncorporates Highest Average Pensionable Earnings and Pensionable Service

25. 25 Normal Retirement Pension nPension Formula (Lifetime Pension): 1.3% x Highest Average Pensionable Earnings up to the Average YMPE x Pensionable Service plus 2.0% x Highest Average Pensionable Earnings over the Average YMPE x Pensionable Service

26. 26 Normal Retirement Pension Example nMember enrolled February 1, 1980 nRetired January 31, 2005 nPensionable Service (PS) = 25 years nAYMPE = $39,780 nHighest Average Pensionable Earnings = $40,000 nHighest Average Pensionable Earnings in excess of AYMPE = $220 ($40,000-$39,780)

27. 27 Normal Retirement Pension Example nCalculation: 1.3% x $39,780 x 25 years=$12,928.50 plus 2.0% x $220* x 25 years =$ 110.00 Annual pension from 65 for life$13,038.50 * $40,000-$39,780 = $220

28. 28 Normal Retirement Pension Example nTotal annual retirement income: CAAT Plan as above$13,038.50 Canada Pension Plan(CPP)$ 9,945.00 Old Age Security(OAS)$ 5,661.12 Total retirement income$28,644.62 Note: assumes entitlement to maximum benefit for CPP and OAS

29. 29 Early Unreduced Retirement Pension nConditions n85 Factor: sum of age plus Pensionable Service equals 85 or n60/20 Rule: must be age 60 or more and have 20 years of Pensionable Service

30. 30 Early Unreduced Retirement Pension (Example 60/20 Rule) nMember retires in 2005 nAge at retirement = 60 nPensionable Service at retirement = 20 nHighest Average Pensionable Earnings = $45,000 nAYMPE in 2005 = $39,780 nHighest Average Pensionable Earnings in excess of AYMPE = $5,220 ($45,000- $39,780)

31. 31 Early Unreduced Retirement Pension (Example 60/20 Rule) Pension Calculation: Annual Pension paid from age 60 for life: 1.3% x $39,780 x 20yrs PS =$ 10,342.80 plus: 2% x $5,220* x 20yrs PS =$ 2,088.00 Annual pension paid from age 60 for life:$ 12,430.80 * $45,000-$39,080 = $5,220

32. 32 Early Unreduced Retirement Pension (Example 60/20 Rule) Annual pension paid up to age 65 Annual pension paid from age 60 for life:$12,430.80 Bridge Benefit paid to 65 0.7% x $39,780 x 20yrs PS=$ 5,569.20 Annual pension to age 65 =$18,000.00 Note: Individual may be entitled to CPP of as much as $9,945.00 and OAS of $5,661.12 at age 65.

33. 33 Early Reduced Pension nMember can choose to retire on an immediate early reduced pension on or after reaching the earlier of: 1) age 55 with at least 2 years of PS or Plan membership, or 2) age 50 to 54 with at least 20 years of PS nIf Member does not qualify for unreduced pension then a reduction is applied

34. 34 Early Reduced Pension nReduction is permanent and is calculated as 3% multiplied by the number of years and part years retiring before the earliest point that Member would qualify for an unreduced pension: n85 Factor or n60/20 Rule or nage 65

35. 35 Early Reduced Pension nMember retires in 2005 nAge at retirement = 53 nPensionable Service at retirement = 20 yrs nHighest Average Pensionable Earnings = $65,000 nAYMPE in 2005 = $39,780 nHighest Average Pensionable Earnings in excess of AYMPE = $25,220 ($65,000- $39,780)

36. 36 Early Reduced Pension nMember’s age plus service (53+20) = 73 nDoes not qualify for 85 Factor or 60/20 Rule nReduction Factor is lowest of: age 65: 65-53 = 12yrs x 3% = 36% redn. 60/20 Rule: 60-53 = 7yrs x 3% = 21% redn. 85 Factor: (85-73)/2 = 6yrs x 3% = 18% redn.

37. 37 Early Reduced Pension Calculation: 1.3% x $39,780 x 20yrs PS =$10,342.80 plus 2.0% x $25,220* x 20yrs PS =$10,088.00 Total$20,430.80 Early Retirement Reduction (18%)$ -3,677.54 Annual pension from age 53$16,753.26 * $65,000 - $39,780 = $25,220

38. 38 Early Reduced Pension Annual pension from age 53 $16,753.26 plus Bridge Benefit to age 65 0.7% x $39,780 x 20yrs PS = $ 5,569.20 Early Retirement Reduction 18% = $-1,002.46 Bridge Benefit paid to age 65 = $ 4,566.74 Annual pension paid to age 65 =$21,320.00 Note: Individual may be entitled to CPP of as much as $9,945.00 and OAS of $5,661.12 at age 65.

39. 39 Deferred Pension nEntitled if you have at least two years of Pensionable Service nPayable at age 65 nPayable on reduced basis on or after age 55 nReduction is 5% for each full year, prorated for each part year before age 65

40. 40 Deferred Pension (Example) nMember terminates in 2005 nAge at termination = 47 nRequests pension at age 60 nPensionable Service at termination = 8 yrs. nHighest Average Pensionable Earnings = $37,000 nAYMPE in 2005 = $39,780 nEarly Retirement Reduction at age 60 = 25% (5% x (65-60))

41. 41 Deferred Pension (Example) Pension payable from 60: 1.3% x $37,000 x 8yrs. PS = $3,848.00 Early Retirement Reduction (25%) $ -962.00 Annual pension from age 60 for life = $2,886.00

42. 42 Deferred Pension (Example) Annual pension from age 60 for life = $2,886.00 plus Bridge Benefit to age 65: 0.7% x $37,000 x 8yrs. PS = $2,072.00 Early Retirement Reduction(25%) = $ -518.00 Bridge Benefit to age 65 = $1,554.00 Annual pension to age 65 = $4,440.00

43. 43 CRA Maximums nMaximum Lifetime Annual Pension: lesser of: $2,000.00 x yrs of PS and 2% x yrs of PS x HAPE over 3 years nMaximum Transfer Value: Limits on maximum amount of Commuted Value transferable to Locked-In RRSP

44. 44 Canada Revenue Agency (CRA) nNo maximum on service ( was limited to 35 years prior to 1992) nNo maximum on your earnings used in pension calculation nCRA limits Maximum Pension Benefit Payable Impacts: Those earning more than $114,385 Remedy: Pensions for earnings in excess of $114,385 provided from Retirement Compensation Arrangement (RCA)

45. 45 Canada Revenue Agency (CRA) nCRA limits Maximum Commuted Value that can be transferred to a LIRA or Locked-in RRSP Impacts: Primarily employees terminating from age 50-54 with 20 years of Pensionable Service Remedy: 1) Excess paid to you as taxable income in cash in a lump sum, or 2)Excess paid to you as taxable income as a monthly pension until excess is used up.

46. 46 Pension Payments nPaid by direct deposit in equal monthly installments on 1st business day each month nPayments are made in Canadian funds nTo residents outside Canada cheques in Canadian funds are mailed.

47. 47 Pension Indexing Pension may be indexed each January: nUp to 2014 inflation protection = 75% of Consumer Price Index increase to maximum annual increase of 8% nIndexation after 2014 for pension earned prior to December 31, 1991 depends on sufficient Plan surplus being available

48. 48 Survivor Benefits Pre-Retirement Eligibility Hierarchy: 1. Eligible Spouse (see definition) 2. Eligible children under 18 3. Designated beneficiary/Estate Entitlement may be altered through a separation agreement

49. 49 Spousal Options Pre-retirement nMember’s accrued pension at time of death = $2,000/month nConverted to Commuted Value of $300,000 nSurviving Spouse options: a)Take Commuted Value of $300,000 b)Immediate pension of $1,500/month (based on Spouse’s age) c)Pension at age 65 of $1,800/month

50. 50 Eligible Children ’ s Benefit Pre-Retirement nCovers children under 18 nPayable where there is no eligible spouse n50% of Pensioner’s lifetime benefit divided among all dependent children under 18 nAs each child reaches 18, re-divided among remaining children under 18 nCommuted value of benefit less commuted value of children’s benefit paid to beneficiary or estate

51. 51 Survivor Benefits Post-Retirement Eligibility Hierarchy: 1)Eligible Spouse (see definition) 2)Eligible children under 18 3)Beneficiary/Estate (Balance of 60 month guarantee) Entitlement may be altered through a separation agreement

52. 52 Spousal Pension Post-Retirement n60% of Pensioner’s lifetime pension noptional 75% if elected at Member’s retirement (Member’s pension is reduced)

53. 53 Eligible Children ’ s Benefit Post-Retirement nCovers children under 18 nPayable where there is no eligible spouse n60% of Pensioner’s lifetime benefit divided among all dependent children under 18 nAs each child reaches 18, re-divided among remaining children under 18 nResidual paid to last child to reach 18

54. 54 POSTRETIREMENT SURVIVORBENEFITS Pensioner’s Survivor Situation* Spouse at Retirement Spouse at Death of Pensioner Survivor Pension Paid to: 1none n/a 2noneBB 3AAA 4AA deceased none n/a 5AA alive none A 6AA deceased B B 7AA alive B A** 8BA alive B A+B First Spouse = A*No eligible children in any of the situations Subsequent Spouse = B**unless A waived entitlement to Survivor Pension

55. 55 Retirement Income Sources At Retirement, the sources of income: nCAAT Pension Plan (Based on Earnings and Pensionable Service) nCPP (Maximum with CPP starting at 65 is $9,945.00) nOAS (Maximum payable at age 65 is $5,661.12) nOther sources of income

56. 56 Retirement Examples HAPE = $40,000Service = 35 years Retire in 2005 at 65, take CPP at 65. Age: 65 OAS 5,661.12 CPP Full 9,945.00 CAAT Bridge N/A CAAT Lifetime 18,253.90 TOTAL Retirement Income 33,860.02 % of HAPE 85%

57. 57 Retirement Examples HAPE = $40,000 Service = 35 years Retire in 2005 at 55, take CPP at 60. Age: 5560 65 OAS N/AN/A 5,661.12 CPP Reduced N/A 6,961.50 6,961.50 CAAT Bridge 9,746.10 9,746.10 N/A CAAT Lifetime 18,253.90 18,253.90 18,253.90 TOTAL Retirement Income 28,000.00 34,961.50 30,876.52 % of HAPE 70% 87% 77%

58. 58 Retirement Examples HAPE = $40,000 Service = 35 years Retire in 2005 at 55, take CPP at 65. Age: 55 60 65 OAS N/A N/A 5,661.12 CPP* N/A N/A 9,040.00 CAAT Bridge 9,746.10 9,746.10 N/A CAAT Lifetime 18,253.90 18,253.90 18,253.90 TOTAL Retirement Income 28,000.00 28,000.00 32,955.02 % of HAPE 70%70% 82% * 10 years of no CPP contribution reduces “full CPP” by 9.1% (35 years/ (.85 x 45 years) x 100% - 100% = 9.1%)

59. 59 Retirement Examples HAPE = $40,000 Service = 35 years Retire in 2005 at 60, take CPP at 65. Age: 60 65 OAS N/A 5,661.12 CPP Full* N/A 9,945.00 CAAT Bridge 9,746.10 N/A CAAT Lifetime 18,253.90 18,253.90 TOTAL Retirement Income28,000.00 33,860.02 % of HAPE 70% 85% * In this case, the 5 years of no CPP contributions has no effect on receiving full CPP.

60. 60 Appendix Retirement Examples: HAPE = $40,000 Service = 25 years HAPE = $70,000 Service = 35 years HAPE = $70,000 Service = 25 years Links to Finding CPP or OAS on the Internet CPP Update Process

61. 61 Retirement Examples HAPE = $40,000Service = 25 years Retire in 2005 at 65, take CPP at 65. Age: 65 OAS 5,661.12 CPP Full 9,945.00 CAAT Bridge N/A CAAT Lifetime 13,038.50 TOTAL Retirement Income28,644.62 % of HAPE 72%

62. 62 Retirement Examples HAPE = $40,000Service = 25 years Retire in 2005 at 55, take CPP at 60. Age: 5560 65 OAS N/AN/A 5,661.12 CPP Reduced N/A 6,961.50 6,961.50 CAAT Bridge 6,439.39 6,439.39 N/A CAAT Lifetime 12,060.61 12,060.61 12,060.61 TOTAL Retirement Income 19,500.00 25,461.50 24,683.23 % of HAPE 46% 64% 62%

63. 63 Retirement Examples HAPE = $40,000Service = 25 years Retire in 2005 at 55, take CPP at 65. Age: 5560 65 OAS N/AN/A 5,661.12 CPP* N/A N/A 9,040.00 CAAT Bridge 6,439.39 6,439.39 N/A CAAT Lifetime 12,060.41 12,060.41 12,060.41 TOTAL Retirement Income 18,500.00 18,500.00 26,761.53 % of HAPE 46%46% 67% * 10 years of no CPP contribution reduces “full CPP” by 9.1% (35 years/ (.85 x 45 years) x 100% - 100% = 9.1%)

64. 64 Retirement Examples HAPE = $40,000Service = 25 years Retire in 2005 at 60, take CPP at 65. Age: 60 65 OAS N/A 5,661.12 CPP Full* N/A 9,945.00 CAAT Bridge 6,961.50 N/A CAAT Lifetime 13,038.50 13,038.50 TOTAL Retirement Income20,000.00 28,644.62 % of HAPE 50% 72% * In this case, the 5 years of no CPP contributions has no effect on receiving full CPP.

65. 65 Retirement Examples HAPE = $70,000Service = 35 years Retire in 2005 at 65, take CPP at 65. Age: 65 OAS 5,661.12 CPP Full 9,945.00 CAAT Bridge N/A CAAT Lifetime 39,253.90 TOTAL Retirement Income 54,860.02 % of HAPE 78%

66. 66 Retirement Examples HAPE = $70,000Service = 35 years Retire in 2005 at 55, take CPP at 60. Age: 55 60 65 OAS N/A N/A 5,661.12 CPP Reduced N/A 6,961.50 6,961.50 CAAT Bridge 9,746.10 9,746.10 N/A CAAT Lifetime 39,253.90 39,253.90 39,253.90 TOTAL Retirement Income49,000.00 55,961.50 51,876.52 % of HAPE 70%80% 74%

67. 67 Retirement Examples HAPE = $70,000Service = 35 years Retire in 2005 at 55, take CPP at 65. Age: 55 60 65 OAS N/A N/A 5,661.12 CPP* N/A N/A 9,040.00 CAAT Bridge 9,746.10 9,746.10 N/A CAAT Lifetime 39,253.90 39,253.90 39,253.90 TOTAL Retirement Income 49,000.00 49,000.00 53,955.02 % of HAPE 70% 70% 77% * 10 years of no CPP contribution reduces “full CPP” by 9.1% (35 years/ (.85 x 45 years) x 100% - 100% = 9.1%)

68. 68 Retirement Examples HAPE = $70,000Service = 35 years Retire in 2005 at 60, take CPP at 65. Age: 60 65 OAS N/A 5,661.12 CPP Full* N/A 9,945.00 CAAT Bridge 9,746.10 N/A CAAT Lifetime 39,253.90 39,253.90 TOTAL Retirement Income49,000.00 54,860.02 % of HAPE 70% 78% * In this case, the 5 years of no CPP contributions has no effect on receiving full CPP.

69. 69 Retirement Examples HAPE = $70,000 Service = 25 years Retire in 2005 at 65, take CPP at 65. Age: 65 OAS 5,661.12 CPP Full 9,945.00 CAAT Bridge N/A CAAT Lifetime 28,038.50 TOTAL Retirement Income43,644.62 % of HAPE 62%

70. 70 Retirement Examples HAPE = $70,000Service = 25 years Retire in 2005 at 55, take CPP at 60. Age: 5560 65 OAS N/A N/A 5,661.12 CPP Reduced N/A 6,961.50 6,961.50 CAAT Bridge 6,439.39 6,439.39 N/A CAAT Lifetime25,935.61 25,935.61 25,935.61 TOTAL Retirement Income32,375.00 39,336.50 38,558.23 % of HAPE 46% 56% 55%

71. 71 Retirement Examples HAPE = $70,000Service = 25 years Retire in 2005 at 55, take CPP at 65. Age: 55 60 65 OAS N/AN/A 5,661.12 CPP* N/A N/A 9,040.00 CAAT Bridge 6,439.39 6,439.39 N/A CAAT Lifetime25,935.61 25,935.61 25,935.61 TOTAL Retirement Income32,375.00 32,375.00 40,636.73 % of HAPE 46% 46% 58% * 10 years of no CPP contribution reduces “full CPP” by 9.1% (35 years/ (.85 x 45 years) x 100% - 100% = 9.1%)

72. 72 Retirement Examples HAPE = $70,000Service = 25 years Retire in 2005 at 60, take CPP at 65. Age: 60 65 OAS N/A 5,661.12 CPP Full* N/A 9,945.00 CAAT Bridge 6,961.50 N/A CAAT Lifetime28,038.50 28,038.50 TOTAL Retirement Income35,000.00 43,644.62 % of HAPE 50% 62% * In this case, the 5 years of no CPP contributions has no effect on receiving full CPP.

73. 73 Links to Finding CPP or OAS on the Internet From the web site www.caatpension.on.ca click onwww.caatpension.on.ca 1.Members 2.Tools 3.Links 4.Government 5.Human Resources and Skills Development Canada 6.English/French 7.Financial Benefits 8.Public Pension and Retirement 9.Choose Canada Pension Plan(CPP) or Old Age Security(OAS)

74. 74 CPP Update Process 1.File tax return 2.Tax return is processed by CRA 3.Year end master file created including CPP contributions 4.CPP contributions are transferred to CPP contribution master file 5.CPP master file used to produce statement of CPP contributions 6.Master file will not include current year and may not include immediately preceding year. 2005 file should include record up to 2003