Members > Pensions 101: Understanding your pension > How your contributions are determined

How your contributions are determined

Understanding your pension

How we calculate your pension

What are your options and entitlements?

How the Plan is funded

Contributions

Member Handbook -
Contributions

Member FAQ -
The contribution formula and pension calculation

Currently, over 19,000 Members contribute to the pension fund with matching contributions from Ontario's Community Colleges.

In Canada, Registered Pension Plans (RPPs) can be divided into two types based on their funding method. With Defined Contribution (DC or "Money Purchase" pension plans), the member contributes a specific amount and is responsible for investing those contributions, similar to a group RRSP. The pension benefit cannot be determined until retirement, when the value of investment returns is known.

Defined Benefit (DB) pension plans, like the CAAT Pension Plan, provide a specified level of pension at retirement, either based on a promised dollar amount or percent of earnings. Plan members make contributions into a pension fund and the employer or plan sponsor is responsible for investing them. The amount of pension the member will receive is not directly linked to the contributions made, but is based on a fixed formula.

Integration with the Canada Pension Plan

Most working Canadians pay into to the Canada Pension Plan (CPP) during the course of their careers and will receive a CPP pension when they retire. CPP contributions are made on a fixed amount of income. The minimum amount of earnings under which you do not pay into to the CPP is called the Year's Basic Exemption (YBE) and is currently fixed at $3,500.00. The maximum amount of earnings over which you do not pay into CPP is called the Year's Maximum Pensionable Earnings (YMPE). For 2010, the YMPE is $47,200.00.

You contribute to the CPP on the amount between the YBE and the YMPE, which is set at $43,700.00 this year. This amount is acknowledged in the contribution formulas of many DB pension plans so that plan members do not get credited twice on the same earnings. Your contributions to the CAAT Pension Plan are lower on this portion of your income.

The CAAT Pension Plan Contribution Formula

As of January 1, 2010 your contributions are:

12.1% of pensionable earnings under the YBE, plus
10.3% of pensionable earnings between the YBE and the YMPE, plus
12.1% of pensionable earnings over the YMPE.

For example, if you earned $51,500.00 this year, your contribution would be calculated as follows:

12.1% of $3,500.00 = $ 423.50 +
10.3% of $43,700.00 = $4,501.10 +
12.1% of $4,300.00 = $ 520.30

Your contribution to the CAAT Pension Plan would be $5,444.90 this year. Since your College matches that amount, the total paid into the fund on your behalf would be $10,889.80.

The contribution formula reflects the Plan's obligation to ensure the pension fund is sufficient to pay current and future benefits. It is based on actuarial projections which include the future value of current contributions and the cost of providing future benefits.

Here are the rates:

Year	Earnings to YBE	Earnings between YBE – YMPE	Earnings above YMPE
2010	12.1%	10.3%	12.1%

Administering your contributions

You contribute through payroll deductions which are remitted to the Plan by your College each month. Only pensionable earnings are considered in the contribution formula. They include your basic income and vacation pay, but exclude pay in lieu of time and most lump sum termination payments. You contribute to the Plan up until the day you stop working. If you work past the age of 65, you can keep contributing, if you want, until you reach age 71. At that point, you must stop contributing and start a pension, even if you continue to work.

Although the Plan does not allow for additional contributions, you may have options for increasing the amount of pension you earn. If you have any periods of service during which you did not contribute, such as a maternity leave or a leave due to a work stoppage, you could buy back this service. Such a purchase allows you to make a contribution the Plan, increase your pensionable earnings and service, and possibly retire with a larger pension. Our pamphlet, Purchasing Past Service: A buyer's guide will provide you with details about buying back service.

The Canada Revenue Agency regulates RPP savings through the Income Tax Act (ITA). Your contributions into the Plan are tax-deductible and, in addition, you do not have to pay tax on the portion that comes from your College. One of the goals of such tax-sheltering is to encourage Canadians to save for retirement.

What it's all for - Your Pension

As a result of your contributions, you are entitled to the benefits that the Plan offers. As a CAAT Pension Plan retiree, you will receive a monthly pension income for life. You will be eligible to retire prior to age 65 with a reduced or unreduced pension and receive an additional Bridge Benefit payable until you reach 65. Both your lifetime pension and Bridge Benefits are subject to increases due to annual indexing. If you have a Spouse or eligible Children, they may be entitled to Spousal and Survivor benefits upon your death.

If you leave employment at a College before retirement age, you have options for managing the contributions you have made. If you are not Vested, you will receive a refund of your contributions, plus interest. If you are Vested, and are not planning to transfer your contributions to another eligible pension plan, you can receive either the Commuted Value of your benefit, or a deferred pension, depending on your age. Once you terminate your plan membership, if you have contributed more than 50% of the Commuted Value of your deferred pension, you are entitled to a refund of the difference (called Excess Contributions). Your Member Handbook provides further details about your termination options.

During your membership, you can see how much you have contributed into the Plan by consulting your Member's Annual Pension Statement. You can also keep track of your ongoing contributions on your pay stubs.

How we calculate your pension

What are your options and entitlements?

How the Plan is funded

December 2009