Members > PlaNet > December 2009

Contributions to increase in 2010

Indexation

Member FAQ -
The contribution formula and indexation calculation

If there is a "positive" side to the market volatility of the past year, it is that retirement income issues have gained prominence. Both the federal and provincial governments recognize that something must be done to protect the retirement income of current and future retirees from erosion.

As reported in September's PlaNet , efforts are being made by both levels of government. Changes in legislation have been suggested, including proposed changes to the Canada Pension Plan, and pensions will be on the agenda during a highly-anticipated finance minister meeting that will take place later this month. (We will be sure to keep you abreast of any legislative reforms that may have an impact on your retirement saving.)

Funding Policy

The CAAT Pension Plan has always been focused on pensions. Our investment policies and strategies and our overall governance structure are all geared towards protecting the retirement income of our members and retirees. One of the ways in which we are achieving this goal is through our Funding Policy.

The Funding Policy was established by the Plan's governors 2006 to address the Plan's funding situation. The Policy outlined a detailed framework for maintaining the stability of the pension fund and helping meet future challenges. Two of the items outlined in the Funding Policy are:

Phased- in contribution increases- A total contribution increase of 3% is taking place over a 3 year period, with members and colleges contributing an equal amount. The final 1% increase will come into effect as of January 1, 2010 and will apply to both employees and employers.

Changes to inflation protection - Inflation protection (also known as indexation) that applies to service earned in the Plan after 2007 is contingent on the Plan's funded status. The Plan's Sponsors will determine, on an annual basis, whether or not there are sufficient funds in the Plan to offer indexation and remain fully funded. To date, inflation protection has been offered for the service earned in 2008 and 2009, and inflation protection for service earned in 2010 has been conditionally approved.
(For more on the changes to the inflation protection formula, be sure to pick up a copy of the most recent Member Newsletter, which will be available at your college and online this month.)

These measures have been effective in helping to reduce the funding deficit they were put in place to address. However the volatile markets of the past year have had a further negative impact on the funded status of the Plan. It's premature to predict what the new year will hold, but, the performance of our pension fund has been improving over the past few months. We remain optimistic that the appropriate measures are in place to continue on our upward path.

It's important to keep in mind that regardless of what the markets are doing, the pension you will receive from the Plan is not contingent on the performance of the pension fund. It will be calculated based on a formula that takes into account your membership and your earnings in the Plan. Your pension is and will remain a valuable benefit which you can count on to be the foundation of your retirement future.

December 2009