Pensionable Salary

posting date Revised: April 2016 print page Print this page Email link to page Email the link

Under the OPSEU Pension Plan, the member’s salary is used in several important calculations.

  • The Plan requires that current service contributions be deducted and remitted to OPTrust based on the member’s “pensionable salary" and the Plan’s contribution formula.
  • The member’s pensionable salary is also used in calculating the cost of contributions for the purchase of past service (“buybacks”).
  • The member's earned pension benefit is calculated based on the member's best 60 consecutive months average annual salary rate.
  • Finally, the member’s pensionable salary is used in determining the earnings ceiling for re-employed/re-engaged pensioners.

To ensure that the concept of pensionable salary is applied consistently in all cases, the OPSEU Pension Trust has clarified the definition of the term. In cases where this definition differs from employers’ past practice, the OPTrust policy clarifying the definition of pensionable salary is effective from March 1, 2002 [ref: Employer Update #4].

Definition

Under this definition, “pensionable salary” has the following attributes. It:

  1. must be paid to the member
  2. must be measured in terms of regular periods of time
  3. includes, in addition to regular pay, any periodic payments paid on a regular basis as a permanent component of pay for a position
  4. excludes fringe benefits and bonuses unless they are paid regularly and computed by reference to hours, days, weeks or other specific periods of time; these benefits cannot be ad hoc or unexpected, they must be a regularly recurring payment
  5. includes all earnings paid at regular rates for all hours up to full-time hours
  6. cannot include overtime, which is interpreted as being wages paid at a rate greater than the regular rate
  7. includes any other amount determined to be part of “salary” by the Board of Trustees of the OPSEU Pension Trust.
Application

In applying the above policy, pensionable salary is defined as including:

  • regular earnings/base wages including market value adjustments and yearly increases that may vary but regularly occur each year (e.g., merit pay)
  • payments for vacation when taken as a leave with pay
  • allowances that are paid regularly
  • retro earnings
  • compensating time
  • sick pay deemed to be regular wages
  • permanent salary notes (e.g., for specific training/certification)
  • isolation pay
  • ongoing long service pay
  • statutory holiday pay.

Although a member employed on a full-time basis may be in receipt of reduced wages under the short-term sickness plan or due to a self-funded leave, pension contributions are calculated on the full-time salary.

Payments not included in pensionable salary

Under the OPSEU Pension Plan, pensionable salary does not include:

  • overtime (paid at rates exceeding regular rates)
  • severance pay
  • one-time payments
  • reimbursement for expenses incurred
  • lump-sum vacation payments in lieu of leave with pay
  • 4% vacation pay in lieu of leave with pay
  • any payment in lieu of benefits provided by the employer
  • payments not regularly paid
  • shift premiums.
Effective Date

The effective date of this definition is March 1, 2002.

Payroll Deduction Rules

All participating employers should ensure that the deduction rules incorporated in their payroll systems are consistent with the definition of pensionable salary outlined above.

Re-employment/Re-engagement Ceiling

In addition to the use of pensionable salary for the computation of pension contributions and entitlements, the definition of pensionable salary must also be used to calculate the earnings ceiling for re-employed/re-engaged pensioners.

Employers should use the definition above when completing the Pensioner’s Quarterly Re-employed Earnings & Calculation Report (OPTrust1008).