Members > Newsletters > Winter 2009

Questions and Answers

Contributions

The Plan's contribution rate has gone up twice in the last 2 years, and is going up again next year. Isn't 11 or 12 percent a lot to ask someone to contribute to a pension plan?

The Plan's contribution rates did go up to 11.1% and 9.3% as of January 1 this year, and will go up again to 12.1% and 10.3% next January 1. (The lower amount is the contribution rate between $3,500 of income and the Canada Pension Plan's Year's Maximum Pensionable Earnings, which are $46,300 this year.)

There's no question a deduction of that size from your pay is noticeable. Of course, your employer is also contributing an equal amount on your behalf. This certainly suggests that defined benefit pension plans are expensive. However, the goal of contributing to any kind of pension plan is to arrange for a comfortable future, and therefore it's important to evaluate the quality and usefulness of the benefit you will ultimately receive.

Defined benefit pension plans - in which your entitlement is determined based on service and earnings built up during your College career - have a number of advantages. The pension formula governs your ultimate payment. Unlike plans such as defined contribution plans, or registered retirement savings plans, investment results are not a factor in the size of your pension.

There are several other features of defined benefit plans which need to be considered. These include:

Lifetime pension - once your CAAT Plan pension starts, you will receive it every month for the rest of your life. It will never decrease, and there is some inflation protection in the Plan, to help Pensioners deal with increasing prices.

Early retirement - these provisions may allow you to leave work before reaching age 65, in some cases with an unreduced pension. All Members who start their pension before reaching age 65 will receive a Bridge Benefit, an extra payment that continues until age 65. Your pension can help give you the freedom to pursue any number of other activities.

Survivor benefits - if you have a spouse who lives on after you, he or she will receive part of your pension for life.

Security - your CAAT Plan pension will be one of the cornerstones of your retirement, and it will be worry-free.

It can be hard to reconcile making sizable payments now with the need for reliable retirement income, which may seem far in the future. But having a retirement strategy and the means of achieving it are important components of enjoying your life to the fullest.

The Plan's governors have carefully considered the best means of striking a balance between the costs of ensuring the Plan has appropriate funding, and the point at which contributions might be considered too high to be viable. To date, it has been concluded that increasing contribution rates is preferable to reducing benefits, which is the other possible choice for dealing with plan deficits.

There is a Funding Policy in place, which sets out priorities for spending surpluses, and making up deficits. Decreasing contribution rates is identified as one of the priorities for use of surplus, along with paying indexation on future service and making the assumptions used by the Plan's actuary more conservative. This means that it is possible contribution rates will be reduced at some point in the future. Until such a time, the governors will continue to monitor the situation closely.

March 2009