Pre-Retirement Session - Staff Pension Plan · 2020. 12. 8. · Unreduced BRIDGE Pension (stops at age 65) Pre-Conversion Pension Service between January 1, 2017 and December 31,

Pre-Retirement Session -Staff Pension Plan

Fall 2020 – Bonnie Carson

What’s on Today’s Agenda?

Background of Staff Pension PlanPlan AdministrationFunding the PlanAnnual Pension StatementsPension Benefits

Calculating your Pension

Survivor Benefits

Other Sources of IncomeRetirement Allowance

CPP & OAS

Next StepsQuestions

Background of Staff Pension Plan

Up to December 31, 2013

Public Service Superannuation Act (PSSA)

• up to December 31, 2013

• Administered by Vestcor, formerly Pension’s Branch of Province of NB

• Defined Benefit Plan

Starting January 1, 2014

New Brunswick Public Service Pension Plan (NBPSPP)

• Effective January 1, 2014

• Administered by Vestcor

• Changed to Shared Risk Plan

• Pre-Conversion Rules:

• Service up to December 31, 2013

• Post-Conversion Rules:

• Service after 2013

StaffPensionover the

Years

Current Plan

• Current Plan

• Called New Brunswick Public Service Pension Plan (NBPSPP)

• Conversion

• Effective January 1, 2014

• Plan was converted from a Defined Benefit plan to a Shared Risk Plan

• Service often referred to as Pre-Conversion / Post-Conversion service

• Shared Risk Plan

• Aims to provide a base benefit that reflects the defined benefit pension model that was used previously

• Similar benefit accrual rate formula

• Application of Cost of Living Adjustments (COLA)

• To adjust for 5-year average salary change

Major Changes

Pre-Conversion Service

5-Year Average salary

Post-Conversion Service

Annualized Salary

Up to Dec 31, 2013

Indexing only for retirees

From Jan 1, 2014

Indexing annually for both employees and

retirees

Conditional on status of the Plan

Funding Policy

Pre-Conversion Service

3% per year

before age 60

Post-Conversion Service

5% per year

before age 65

Salary Used COLA Reductions

Eligibility for Pension

• Vested

• 5 years continuous service; 2 Years of Pensionable Service;

or 2 Years of Plan Membership

• Pension funds are locked-in until age 55 at a minimum

• Age 55 or Older

• Can retire as early as age 55, permanent reduction applied

• Age 65 earliest age with no reductions applied

• Must be in receipt of your pension prior to the end of the year in which you turn 71

• As per Income Tax Act

• Can continue to work but must start drawing pension

• Pension contribution stop no later than November 30 of that year

Plan Administration

Board of Trustee

• The Board of Trustees

• Manages the Plan in the best interest of both active and retired members

• Follows industry best practices in terms of governance and administration of the Plan

• The NBPSPP and the New Brunswick Teachers’ Pension Plan (NBTPP) jointly own Vestcor Corporation

• NBPSPP Board of Trustee Members

https://vestcor.org/wp-content/uploads/2018/05/NBPSPP-Board-Biographies-1.pdf

Vestcor

• Plan Administration

• Pension Calculations

• Statements

MorneauShepell

• Actuarial Consulting

• Plan Valuations

• Review for awarding COLA

Vestcor

• Investment Management

• Directed by Investment Policy

Key Groups Involved

Funding the Pension Plan

Current Rates• 7.50% of earnings up to YMPE• 10.70% of earnings in excess of YMPE• Yearly Maximum Pensionable Earnings (YMPE)

• Set annually by CRA – maximum for CPP• 2020 = $58,700 / 2021 = $61,600• CPP deductions cease upon reaching the YMPE.

CPP Contribution Rates

2019 5.10%

2020 5.25%

2021 5.45%

Employee Contributions by Payroll

NBPSPP 7.50% / CPP 5.25%

NBPSPP 10.70% / CPP STOPS

Contribution rate

increases when

salary accumulation

reaches YMPE

JAN FEB MAR JUL AUG SEP OCT

Employer Contributions

• Current Employer Contribution Rules:

• From Apr 1, 2014 to Dec 31, 2018: 12.5%

• From Jan 1, 2019 to Dec 31, 2023: 12.0.%

• From Jan 1, 2024 to Dec 31, 2028: 11.25%

• Effective Jan 1, 2029: Employer and Employee contribution rates will be re-determined and will become equal

Investment of Contributions

• Vestcor, formerly NB Investment Management Corporation, manages all pension fund investments

• Investments are made based on the Investment Policy

• Investment Policy changes are approved by Board of Trustees

• Changes based on recommendations of actuary

Annual Pension Statement

Annual Pension StatementSample as at December 31, 2019


Vestcor Pension Estimate Calculator

https://apps.vestcor.org/pec/SharedRiskPlans/Default.aspx?planid=1&Culture=en-CA

Pension Benefits:

Calculating Your Pension

Pension Calculation

Basic Formula For Calculating Your Annual Pension

Salary X Years of Pensionable Service X Accrual Rate % = Annual Pension

Factors that Determine Your Pension

• 5-year average salary to December 31, 2013

• 3-year average YMPE to 2013

• Annualized salary and YMPE from January 1, 2014

Salary

• Equal to the total of:

• service to December 31, 2013

• service since January 1, 2014

• LTD service

• Purchased service

Pensionable Service

• If 65 or over, no reduction

• Pre-Conversion

• 3% per year before 60

• Post-Conversion

• 5% per year before 65

Reduction Factor for Age

• Varies based on year in which service was earned

Pension Benefit Accrual Rates

• Determined during annual valuation review

• Must meet risk management goals

Cost of Living Adjustment (COLA)

To Determine Benefits Accumulated

Pension Benefits accumulated PRIOR

to December 31, 2013

Pension Benefits accumulated AFTER

January 1, 2014

Pensionable service needs to be separated as follows:

Best 5 year Average Salary

AnnualizedPensionable Earnings

Example Details for Pension CalculationsPre-Conversion and Post-Conversion Details

Pre-conversion Pension Details:5-Year Average Salary (best consecutive 60 months): $51,000 3-Year Average YMPE (2011, 2012 and 2013): $49,833

Years of Pensionable Service to December 31, 2013: 20 years

Post-Conversion Pension Details (assume 100% FT Employee)

Annualized Salary for Example YMPE Set Annually by CRA2014 Salary $ 53,000 2014 YMPE $ 52,500 2015 Salary $ 55,000 2015 YMPE $ 53,600 2016 Salary $ 57,000 2016 YMPE $ 54,900 2017 Salary $ 58,000 2017 YMPE $ 55,300 2018 Salary $ 59,000 2018 YMPE $ 55,900 2019 Salary $ 60,000 2019 YMPE $ 57,4002020 Salary $ 61,000 2020 YMPE $ 58,700

Pension Benefit Accrual Rates

Up toYMPE

Above YMPE

Pre-Conversion Benefit Accrual Rates:

Service to December 31, 2013 1.3% 2.0%

Post-Conversion Benefit Accrual Rates:

Service from January 1, 2014 1.4% 2.0%

Unreduced LIFETIME Pension

Pre-Conversion Pension

Service between January 1, 2017 and December 31, 2017Service to December 31, 2013 1.4% x $55,300 x 1.0 $ 774

1.3% x $49,833 x 20 $12,957 2.0% x ($58,000 - $55,300) x 1.0 $ 54

2.0% x ($51,000 - $49,833) x 20 $ 467 Annual Age 65 NBPSPP Benefit $ 828

Pre-Conversion Annual Age 65 NBPSPP LIFETIME Benefit $13,424

Service between January 1, 2018 and December 31, 2018

Post-Conversion Pension 1.4% x $55,900 x 1.0 $ 783

2.0% x ($59,000 - $55,900) x 1.0 $ 62

Service between January 1, 2014 and December 31, 2014 Annual Age 65 NBPSPP Benefit $ 845

1.4% x $52,500 x 1.0 $ 735

2.0% x ($53,000 - $52,500) x 1.0 $ 10 Service between January 1, 2019 and December 31, 2019

Annual Age 65 NBPSPP Benefit $ 745 1.4% x $57,400 x 1.0 $ 804

2.0% x ($60,000 - $57,400) x 1.0 $ 52


1.4% x $53,600 x 1.0 $ 750

2.0% x ($55,000 - $53,600) x 1.0 $ 28 Service between January 1, 2020 and December 31, 2020

Annual Age 65 NBPSPP Benefit $ 778 1.4% x $58,700 x 1.0 $ 822

2.0% x ($61,000 - $58,700) x 1.0 $ 46


1.4% x $54,900 x 1.0 $ 769

2.0% x ($57,000 - $54,900) x 1.0 $ 42 Post-Conversion Annual Age 65 NBPSPP LIFETIME Benefit $ 5,731

Annual Age 65 NBPSPP Benefit $ 811

Total ANNUAL PENSION at December 31, 2020 $19,155

Total MONTHLY PENSION at December 31, 2020 $1,596

Unreduced BRIDGE Pension(stops at age 65)

Pre-Conversion Pension

Service between January 1, 2017 and December 31, 2017Service to December 31, 2013 (2.0% - 1.4%) x $55,300 x 1.0 $ 332

(2.0% - 1.3%) x $49,833 x 20 $ 6,977


Pre-Conversion Annual Age 65 NBPSPP BRIDGE Benefit $ 6,977


Post-Conversion Pension (2.0% - 1.4%) x $55,900 x 1.0 $ 335


(2.0% - 1.4%) x $52,500 x 1.0 $ 315


Annual Age 65 NBPSPP Benefit $ 315 (2.0% - 1.4%) x $57,400 x 1.0 $ 344


(2.0% - 1.4%) x $53,600 x 1.0 $ 322


Annual Age 65 NBPSPP Benefit $ 322 (2.0% - 1.4%) x $58,700 x 1.0 $ 352


(2.0% - 1.4%) x $54,900 x 1.0 $ 329

Post-Conversion Annual Age 65 NBPSPP BRIDGE Benefit $ 2,329


Total ANNUAL PENSION at December 31, 2020 $9,306

Total MONTHLY PENSION at December 31, 2020 $775

Pension Calculation UNREDUCEDLifetime & Bridge Pension

UNREDUCED LIFETIME

UNREDUCED BRIDGE

Pre-Conversion PensionService to December 31, 2013 $ 13,424 $ 6,977 Total Pre-Conversion Pension $ 13,424 $ 6,977

Post-Conversion PensionService between January 1, 2014 and December 31, 2014 $ 745 $ 315 Service between January 1, 2015 and December 31, 2015 $ 778 $ 322 Service between January 1, 2016 and December 31, 2016 $ 811 $ 329 Service between January 1, 2017 and December 31, 2017 $ 828 $ 332Service between January 1, 2018 and December 31, 2018 $ 845 $ 355 Service between January 1, 2019 and December 31, 2019 $ 856 $ 344Service between January 1, 2020 and December 31, 2020 $ 868 $ 352 Total Post-Conversion Pension $ 5,731 $ 2,329

TOTAL ANNUAL PENSION $ 19,155 $ 9,306

TOTAL MONTHLY PENSION $ 1,596 $ 755

Early Retirement Reduction Factors

EXAMPLE

Service Before Jan 1, 2014

Service afterJan 1, 2014

Employee Retires at age 62

No Reduction 15% reduction(5% X 3 years to age

65)

Employee Retires at age 58

6% reduction(3% X 2 years to

age 60)

35% reduction(5% X 7 years to age

65)

3% per year (3/12% per

month)

5% per year (5/12% per

month)

Before Jan 1st

2014

After Jan 1st

2014

No Reduction if Age 60 No Reduction if Age 65

Pension Calculation REDUCED at age 62Lifetime & Bridge Pension

UNREDUCED LIFETIME

UNREDUCED BRIDGE

REDUCEDLIFETIME

REDUCEDBRIDGE

Pre-Conversion PensionService to December 31, 2013 $ 13,424 $ 6,977 Total Pre-Conversion Pension $ 13,424 $ 6,977 $ 13,424 $ 6,977

Post-Conversion PensionService for 2014 $ 745 $ 315 Service for 2015 $ 778 $ 322 Service for 2016 $ 811 $ 329 Service for 2017 $ 828 $ 332Service for 2018 $ 845 $ 355 Service for 2019 $ 856 $ 344Service for 2020 $ 868 $ 352 Total Post-Conversion Pension $ 5,731 $ 2,329 $ 4,871 $ 1,980

TOTAL ANNUAL PENSION $ 19,155 $ 9,306 $ 18,295 $ 8,957

TOTAL MONTHLY PENSION $ 1,596 $ 755 $ 1,525 $ 746

0%

15%

Monthly Pension from age 62 to age 65 $2,271

Monthly Pension at age 65 for Lifetime $1,525

Pension Calculation REDUCED at age 58Lifetime & Bridge Pension

UNREDUCED LIFETIME

UNREDUCED BRIDGE

REDUCEDLIFETIME

REDUCEDBRIDGE

Pre-Conversion PensionService to December 31, 2013 $ 13,424 $ 6,977 Total Pre-Conversion Pension $ 13,424 $ 6,977 $ 12,619 $ 6,558

Post-Conversion PensionService for 2014 $ 745 $ 315 Service for 2015 $ 778 $ 322 Service for 2016 $ 811 $ 329 Service for 2017 $ 828 $ 332Service for 2018 $ 845 $ 355 Service for 2019 $ 856 $ 344Service for 2020 $ 868 $ 352 Total Post-Conversion Pension $ 5,731 $ 2,329 $ 3,725 $ 1,514

TOTAL ANNUAL PENSION $ 19,155 $ 9,306 $ 16,344 $ 8,072

TOTAL MONTHLY PENSION $ 1,596 $ 755 $ 1,362 $ 673

6%

35%

Monthly Pension from age 58 to age 65 $2,035

Monthly Pension at age 65 for Lifetime $1,362

Cost of Living Adjustment (COLA)

• COLA is often referred to as indexing

• Conditional based on the funded status of the Plan

• Applied to benefits for both active employees as well retirees

• Awarded January 1st of each year

Pension Survivor Benefits (Optional Forms)Vestcor Sample

Monthly Pension Payments

• NBPSPP

• Calculated by Vestcor

• Paid by Vestcor

• Paid Monthly on the 24th of each month

• Direct Deposit

• Deductions

• Income Tax

• Benefits

Pension Benefits:

Survivor Benefits

Beneficiary(ies)

• At time of members death Survivor Benefits are paid in the following order:

Surviving Spouse (married or common-law)

Dependent Children MUST be named as beneficiary

Named Beneficiary(ies)

Estate

NOTE: A surviving spouse supersedes any other beneficiary

Under 19or 25

If no spouse, then

If no dependents, then

If no beneficiary, then

SpouseDependent

ChildrenBeneficiary Estate

• Not Vested

• Lump sum payment of members contributions plus interest

• Vested

Death Before Retirement

SpouseDependent


50% MonthlyFor Lifetime

OR Lump SumLump Sum Lump Sum

LUMP SUM WHEN VESTED:

Greater of: Member’s contributions plus interest or Termination Value

NOTE: Dependent child under 19 years of age; under 25 years of age and is in full-time attendance at an educational institution, or dependent on the member because of mental or physical infirmity. Dependents MUST be named as a beneficiary.

Must be NamedCan get monthly

• Payments effective 1st of month following death of member

• Residual Value

• Members contribution plus interest LESS

• Any funds paid to Member

• Any funds paid to Spouse

• Any funds paid to Dependents

• If amount is greater than $0, the amount will be paid

• Normally no Residual Value after 6-8 years after retirement

• Vestcor Naming a Beneficiary Document

SpouseDependent


Death After Retirement

Monthly Monthly Any Residual $ Any Residual $

https://vestcor.org/wp-content/uploads/2017/12/Naming-a-Beneficiary-under-the-PSPP.pdf

Other Sources of Income:

Retirement Allowance

• Eligibility

• Employed continuously for 5-years or more

• Eligible to retire (over the age of 55)

• Death of active employee, payable to spouse or estate

• Calculation

• 5 days pay for each full year of service while continuously employed

• Maximum of 25 years of service (125 days)

• Salary at time of retirement

• Payment Options

• Cash (less taxes) and/or

• Direct RRSP Transfer (no tax deduction at source)

• Option to defer all or part into next tax year


• For Service Prior to 1989

• $1,500 per year of service prior to 1989

• Transfer to “Eligible” RRSP without requiring room

• For Service Prior to 1996

• $2,000 per year of service prior to 1996

• Transfer to “Eligible” RRSP without requiring room

• Any Other RRSP Transfer Amount

• Can only be transferred if you, the recipient, has available RRSP room

• Transfer to your RRSP or a spousal RRSP

Retirement Allowance and RRSP Transfers

• If an Employee retirees earlier than their NRD

• Employee will receive 100% of Retirement Allowance

Collective Agreements/Policy

Retiring BEFORE Normal Retirement Date (NRD)

• If an Employee retirees later than their NRD

• Based on rules within collective agreements / policy

• Dependent on which employee group

• APT

• UNIFOR (GLTA or SALAC)

• PTSU

Retiring AFTER Normal Retirement Date (NRD)

Retirement Allowance CalculationExamples on or Before NRD

RETIREMENT ALLOWANCE

20 Years$50,000

Normal Retirement DateJune 30, 2021

$50,000 salary / 26 pay periods /

10 days = $192.31 per day

20 years of service

x 5 days pay =120 days

$23,077.20

$192.31 x 120

20 years


25 Years (maximum)$50,000




25 years of service


$24,038.75

$192.31 x 125

30 years

Retirement Allowance CalculationExamples After NRD (if reduced by 50%)


20 Years$50,000




20 years of service


$11,538.60

$192.31 x 120 x 50%

20 years


25 Years (maximum)$50,000




25 years of service


$12,019.38

$192.31 x 125 x 50%

30 years

Other Sources of Income:

CPP & OAS

• Overview

• A monthly, taxable benefit that replaces part of your income when you retire

• If you qualify, you’ll receive the CPP retirement pension for the rest of your life.

• To qualify you must:

• Be at least 60 years old

• Have made contributions to CPP

• You must apply

• CPP payments are not automatic

• You should apply in advance of when you wish to start

Canada Pension Plan - Overview - Canada.ca

Canada Pension Plan (CPP)

https://www.canada.ca/en/services/benefits/publicpensions/cpp.html

• Your age affects your pension amount:

• If you start before age 65, payments will decrease by 0.6% each month (7.2% per year), maximum reduction of 36% if you start at age 60

• If you start after age 65, payments will increase by 0.7% each month (8.4% per year), maximum increase of 42% if you start at age 70 (or after)

• Consider your personal circumstances

• Your health

• Your financial situation

• Your plans for retirement

• How much could I receive

• For 2020, the maximum monthly amount at age 65 is $1,175.83

• June 2020, the average monthly amount $710.41

• Your personal situation will determine how much you will receive

• Estimates available on your “My Service Canada Account”

Should you Wait to Start Collecting CPP

• Overview

• A monthly payment you can get if you are 65 and older

• Eligibility is dependent on how many years you’ve lived in Canada

• You may have to apply• In most cases, you do not have to apply

• Service Canada will inform you if you have been automatically enrolled

• You may have to apply if they do not have enough information

• When to payments start• You can receive your 1st payment the month after you turn 65

• You can request to delay your payment for up to 60 months

• You will receive a higher OAS amount

• 0.6% per month or 7.2% per year, up to age 70

Old Age Security: Overview - Canada.ca

Old Age Security (OAS)

https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security.html

• How much could I receive• For Oct to Dec 2020, the maximum monthly amount at age 65 is

$614.14

• If your income is higher than the minimum threshold ($77,580 in 2019), a portion will need to be repaid (OAS clawback )

• In order to receive OAS your income must be less than $128,419 (2019)

• Income levels are adjusted annually for inflation

Example:

• The threshold for 2019 is $77,580.

• If your income in 2019 was $90,000, then your repayment would be 15% of the difference between $90,000 and $77,580:

• $90,000 - $77,580 = $12,420

• $12,420 x 0.15 = $1,863

You would have to repay $1,863.

Old Age Security (OAS)

Next Steps

• Make an appointment with HR

• Discuss requirements for retirement

application process

• Get your paperwork in order

• Proof of Birthdate (birth certificate, passport, driver’s license)

• Void cheque for Direct Deposit

• If married or common-law

• Proof of spouse’s Birthdate

• Marriage Certificate or Declaration Common-Law Status form

• Spouse’s Social Insurance Number

Timeline to Retirement

year prior 1

Common-Law Statuscohabited with the Member for a continuous period of not less than two years in a conjugal relationship

• Notification of Retirement

• Submit your official notice to retire

• Supervisor / Dean or Director

• Copy to HR

• Set up a meeting with HR to initiate paperwork

• Pension Request Form

• Benefit Authorization Form

• Retirement Allowance Distribution Form / RRSP Transfer Form

• UNBREA Application Form

Timeline to Retirement

months prior 6

Submit Request

Submit Pension Request Form(s)

• Meet with HR at least 6 months prior to pension start date

• Backup documents required

• Official Request

Receive Package(s)

Receive Pension Document Package(s)

• Official monthly pension figures

• Review documents

• NBPSPP – by mail

Signed Options

Returned Signed Documents

• Must sign ‘Option Election’ form

• Submit before start of pension

• NBPSPP – multiple options

PensionRequest

Benefits

Complete Benefit Forms

• Authorization for premium deductions

• Dental transfer form

• One month before retirement

• No delay in benefits


Complete Retirement Allowance Forms

• Payment Distribution Form

• RRSP Transfer Form, if applicable

• Cash / RRSP Transfer

• Tax Year Allocation

• Preferably one month before retirement

UNBREA

Complete UNBREA Forms

• Application Form

• 1st year fee waived

• Option to deduct from pension

• Can be submitted any time

OtherDocuments

Contact Information

UNBF

Sherri RobichaudBenefits & Pensions (Staff)

(506) 458-7678 [email protected]

Bonnie CarsonBenefits & Pensions (Staff & Faculty)

(506) 458-7679 [email protected]

UNBSJ

Drew MacLeod (506) 648-5582 [email protected]

• The information in this presentation is a high level summary of various provisions from pension plans, Collective Bargaining Agreement and administrative procedures. Every effort has been made to ensure the accuracy of the information. However, the information in this presentation should not replace official documents and procedures.

Disclaimer