Retirement
Overview
This section provides background information on the retirement process and describes the procedures and forms employers must use when an eligible OPTrust member terminates employment and chooses to receive an immediate pension from the OPSEU Pension Plan.
Depending on their age and years of credit in the Plan, members may qualify to receive an immediate OPTrust pension under one of the following retirement options:
retirement at age 65
early unreduced pension
early reduced pension
phased-in retirement
disability pension
The pension benefit accrued in the OPSEU Pension Plan:
is based on the average of the member’s best 60 consecutive months salary rate and accrued pensionable credit;
is paid for the member’s lifetime;
is adjusted for inflation on an annual basis;
may be paid earlier than age 65 if the member qualifies for an early retirement option;
contains a survivor pension component for an eligible spouse or eligible child(ren).
Under the OPSEU Pension Plan, the former member’s pension payments start in the month following the month in which the member terminates employment and retires.
OPTrust’s pension formula
The basic annual pension amount paid to OPTrust members who retire with an unreduced pension is calculated using the following formula:
2% | |
times | Best 60 consecutive months average salary rate |
times | Years of credit in the Plan |
minus | CPP integration (a reduction at age 65) |
CPP Integration
At age 65, the member’s OPTrust pension is reduced for CPP integration. This reflects the lower contributions members pay to the OPSEU Pension Plan on the portion of their salary for which they also contribute to the Canada Pension Plan (CPP). The reduction for CPP integration is calculated as follows:
0.655% | |
times | the lesser of: the member’s best 60 consecutive months salary rate and the member’s final five-year average Year’s Maximum Pensionable Earnings (YMPE) under the CPP |
times | the member’s years of credit after 1965 (to a maximum of 35 years) |
The reduction for CPP integration takes effect in the month after the member turns 65, regardless of when the member chooses to begin receiving pension benefits from CPP. Additional information on CPP Integration at Age 65 is provided later in this section.
Note! The employer should not provide pension estimates or early retirement dates to the member. For this service either direct the member to OPTrust directly or to the calculator located in the member's Online Services.
Working past age 65
Under the OPSEU Pension Plan, members may continue to work for a participating employer, past the age of 65 and continue to contribute to the Plan and earn additional pension credit. However, under the federal Income Tax Act, members cannot continue to contribute to a registered pension plan beyond the end of the year in which they reach age 71. At that time, the individual’s membership in and contributions to the Plan must end, and pension payments must begin.
Retirement at age 65
The normal retirement age under the OPSEU Pension Plan is 65. A vested member is entitled to receive an unreduced pension at age 65 based on his or her credit and best 60 consecutive months average annual salary rate at termination.
When a member retires at age 65, his or her pension is immediately integrated with CPP. During membership in the OPSEU Pension Plan, member’s and employer’s contributions to the Plan are reduced to offset their contributions to CPP on the portion of salary under the YMPE. When a member turns 65 they may be eligible to collect a pension from CPP. So, the pension they receive from the OPSEU Pension Plan is reduced at age 65 to reflect the lower contributions made to the OPSEU Pension Plan.
Early unreduced pension
Depending on their age and pension service in the OPSEU Pension Plan, OPTrust members may be eligible to retire before age 65 with an immediate unreduced pension under one of the following provisions.
Permanent early retirement options
Factor 90 – Allows members to retire with an immediate unreduced pension if their age plus pension service total at least 90 years.
60/20 – Allows members to retire with an immediate unreduced pension if they are at least 60 years old, and have at least 20 years of pension service in the Plan.
Note! In order to qualify for this unreduced pension, the retiree must attain the age of 60 and 20 years of pension service while still a member of the Plan.
Bridging to an unreduced pension – Members who receive a notice of layoff may also be able to “bridge” to an unreduced pension. This requires special provisions within their collective agreement allowing the use of leaves of absence, the surplus notice period, and the period represented by severance payments to reach the date on which the member would be eligible for an unreduced retirement option. Bridging is currently available to:
members who are declared surplus and are covered by the Central Collective Agreement between OPSEU and Management Board of Cabinet.
Important! Members who are receiving LTIP benefits and are considering taking an early retirement option should be advised to contact OPTrust directly to ensure that they are informed of all available options and the potential consequences associated with each alternative.
Early reduced pension
Under the OPSEU Pension Plan, vested members who do not qualify for an early unreduced pension may retire at age 55 or older with a reduced OPTrust pension.
Under the early reduced pension option, the member’s pension amount is calculated using the Plan’s basic pension formula (without the reduction for CPP integration), then permanently reduced by 5 per cent for each year the member is under 65. At age 65, the retired member’s pension will be reduced for CPP integration.
Other retirement options
Phased-in retirement
Depending on arrangements with the employer, members may be eligible for a phased-in retirement. In such cases, the member may work reduced hours, but continue to make full contributions and earn full credit in the Plan, for a period leading up to his or her termination of employment and retirement.
Important! Phased-in retirement arrangements require the employer’s approval. The employer must continue to remit contributions at the members’ regular rate.
Disability pension
Individual members may qualify for a disability pension from the OPSEU Pension Plan. To qualify, a member must:
be totally and permanently, physically and/or mentally disabled, and
have 10 or more years of credit or continuous membership in the Plan.
To receive a disability pension, the member must apply directly to OPTrust, provide the required medical documentation and terminate his or her employment. Members who do not have 10 years of credit or continuous membership and do not qualify for a disability pension may qualify for a special disability refund from the Plan.
For more information on the eligibility criteria, required documentation and procedures for a disability pension or refund, please contact OPTrust directly.
When and how pensions are paid
OPTrust pensions are paid on a monthly basis, usually on the 26th day of the month, except for December when pensions are paid approximately one week earlier. If the date of payment falls on a weekend or holiday, the actual payment will be made on the prior business day.
Pension payments commence in the month following the member’s retirement date.
Example: John Doe retires on March 18, 2016. Mr. Doe’s first pension payment will be for the month of April and will be deposited into his account on April 26, 2016.
Monthly pensions are paid by direct deposit to the pensioner’s bank account. Unless otherwise instructed by the member at this time, OPTrust will only deduct income tax based on the OPTrust pension income and applicable ITA requirements.
Annual increase for inflation protection
Currently, in January of each year, every pension in pay (including a survivor pension) is adjusted to reflect the increase in the cost of living. The adjustment is applied annually starting with the year after the retiree’s pension commences, with the first adjustment pro-rated for the length of time the pension was paid during the previous year. The annual inflation adjustment reflects the increase in the cost of living in Canada as measured by the Consumer Price Index. It is calculated by dividing the CPI average for the two 12-month periods ending the preceding September. For example, the 2016 inflation adjustment was calculated as follows:
Average CPI for October 2014 to September 2015 = 126.2 = 1.013% Average CPI for October 2013 to September 2014 124.6
The maximum increase applied in any one year is 8 per cent. Any increase over 8 per cent is carried over into the next year, to be applied when the adjustment is less than 8 per cent. A Pensioner Information Change Statement outlining the pensioners’ individual annual inflation protection adjustment is mailed mid-January each year to pensioners in pay.
Important! – Retroactive salary changes: The employer must notify OPTrust when a retroactive salary change has been implemented after the member’s retirement date. OPTrust will recalculate the pension, and make any retroactive payments necessary.
Canada Pension Plan integration at age 65
The Canada Pension Plan (CPP) was established in 1966 to provide all working Canadians with a source of retirement income. The OPSEU Pension Plan is integrated with the CPP, as are many other public and private sector plans.
Integration means that the OPSEU Pension Plan is designed to take into account CPP contributions and benefits. For instance, during the member’s employment, both the member’s and the employer’s contributions to the OPSEU Pension Plan are reduced to reflect the fact that contributions are also payable to CPP for a portion of the member’s earnings.
At age 65, the retired member’s OPTrust pension payments are adjusted based on OPTrust’s CPP integration formula, not the amount of CPP pension the pensioner receives. When a member retires before age 65, the OPSEU Pension Plan “tops up” the pension paid prior to age 65, which is when CPP payments typically begin.
A member may choose to take their CPP pension as early as 60 at a reduced rate. In this case the CPP benefit will be “stacked” on top of the unintegrated OPTrust benefit until age 65. The member’s OPTrust pension is reduced for CPP integration at age 65, whether or not the member chooses to start receiving CPP benefits early.
Retirement procedures
Employers must complete the following procedures when an OPTrust member terminates employment and retires with an immediate pension from the OPSEU Pension Plan.
Important! Employers should forward all necessary documentation to OPTrust six months before the member’s planned retirement date.
1. Complete the Termination of Membership – Application for Entitlement (OPTrust 1012) form
This form does not require the member’s signature but does require an authorized employer’s signature.
Note: if the member is a divested member retiring from the successor employer, the successor employer only needs to send OPTrust a letter confirming the date of termination.
Important! Termination while on LTIP: When a member is terminating his or her plan membership while on LTIP, the employer should state “Member on LTIP” in the final salary section of OPTrust's Termination of Membership (OPTrust 1012) form, rather than entering a salary amount. The collective agreement salary for the position may be different from the final salary on LTIP.
OPTrust will contact the member for any additional documentation that is required.
Working after retirement
When a retired member who is receiving a pension from OPTrust is employed or re-employed by an employer who contributes to the OPSEU Pension Plan (the Plan) for any of its employees, there may be an impact on their pension from the Plan.
Rejoining the Plan
Depending on the retired member's age and terms of employment, membership in the Plan may be mandatory, optional, or not permitted. If the retired member rejoins the Plan, their pension stops immediately, and they will resume making contributions. When the member’s employment ends, their pension will be recalculated to include the additional pension service they have accrued. If the retired member originally retired with an early reduced pension, their recalculated pension will be actuarially adjusted to take into account any pension payments already made.
Without rejoining the Plan
If the retired member is employed by an employer who contributes to the Plan and they do not rejoin the Plan, their pension is subject to an earnings ceiling each calendar quarter. The maximum quarterly re-employment earnings, which is set by OPTrust when the member first retires, is determined by subtracting the retired member’s gross quarterly pension amount from three times their final monthly salary payable. If the earnings reported by the employer in any calendar quarter after retirement is more than their maximum, OPTrust will recover the overpayment by reducing the retired member’s pension over the next quarter by the amount of earnings that exceeds their maximum.
Reporting employment earnings for a retired member
It is the retired member’s responsibility to inform their employer that they are receiving a pension from OPTrust. The employer is then responsible for completing the Retired Member Quarterly Employment Earnings Report (OPTrust 1008) every calendar quarter and forwarding it to OPTrust. These responsibilities apply whether the retired member is newly employed, re-employed, or still employed after starting their pension due to turning 71 years of age. Please refer to Re-Employment Procedures below for more information.
Re-employment procedures
These procedures apply when an employer who contributes to the OPSEU Pension Plan (the Plan) employs or re-employs a retired member who is receiving a pension from OPTrust and does not re-join the Plan.
1. Retired member notifies employer that they are receiving a pension from OPTrust.
Upon hire or re-hire, it is the retired member’s responsibility to inform their employer that they are receiving a pension from OPTrust.
If a member commences their pension in December of the year they turn 71 and continues to work without terminating their employment, they must also notify their employer when their pension starts.
2. Employer submits a completed Retired Member Quarterly Employment Earnings Report (OPTrust 1008).
The employer must report the total gross employment earnings paid to the retired member for each calendar quarter using the OPTrust 1008 form. The earnings reported should include all payments identified in the Plan’s definition of pensionable salary. Please complete and submit the OPTrust 1008 form to OPTrust within two weeks following the end of each calendar quarter.
Note! Quarterly employment earnings: The earnings that should be reported on the OPTrust 1008 form are the post-retirement employment earnings paid to the retired member on pay dates that fall within the calendar quarter.
Note! Retroactive salary: When retroactive salary, related to post-retirement employment, is paid to a retired member, the earnings are also to be reported in the period in which the earnings were paid. However, retroactive salary related to pre-retirement employment should not be reported.