Expanding options for members
Expanding options for members
The Plan has expanded the options available to members who are leaving the Plan with excess contributions owed to them and to members who are retiring or terminating from the Plan with a small pension.
Effective January 1, 2010, these members can now choose to receive their excess contributions as either cash (less applicable taxes), or as a transfer to a non-locked-in RRSP or other permitted savings plan. The amendment brings these payment options in line with other Plan provisions, creating more consistency and more options for members.
The contributions you make during your membership can never exceed half the amount of the value of the pension you will receive. Under the 50% Rule, at least half of your pension income will come from your college's contributions and investment earnings in the pension fund. If, when you retire or terminate, we determine that your contributions have exceeded half the value of your pension benefit, you will receive a refund of the difference, called excess contributions.
Commuted values and small pensions
As a CAAT Plan member, you have several options if you leave the Plan before retirement age.
Depending on your situation, you can defer your pension by leaving it in the Plan until you retire, or you can choose to take your commuted value - what your future pension is worth today - out of the Plan, either as a transfer to a locked-in RRSP, or to another registered retirement savings vehicle.
In some cases, the calculation of a commuted value could result in an excess contributions payment (see below). Prior to January 1, 2010, excess contribution payments to members could only be made as a cash payment, less applicable taxes. While other payout provisions offered by the Plan allow for the transfer of funds to an RRSP, excess contribution payments have been limited to cash payments only.
As with excess contribution payments, small pensions have also been paid in cash only. When a member leaves the Plan or retires with a pension or commuted value that is less than 2% of the Year's Maximum Pensionable Earnings (YMPE), the member receives this payment in a lump sum. (The YMPE is the maximum earnings on which Canada Pension Plan contributions are made. For 2010, the small pension limit is $944.)
We've expanded your options
With the amendments the Plan made in January, terminating and retiring members who are entitled to either excess contribution or small pension payments now have the option to receive them as a transfer to a non-locked-in RRSP. This provides members with a more tax-effective alternative for transferring these types of payments out of the Plan. These changes reflect our ongoing commitment to helping our members meet their retirement income goals by responding to their needs, improving services and by offering more choices where possible and appropriate.
If you are in the process of terminating or retiring from the Plan, and you have excess contributions owed to you, or you will be receiving a small pension, these changes will apply to you. If you do not make your payment choices within 60 days of receiving your paperwork, or if you choose to defer your pension, your excess contributions will be paid to you in cash, less tax.
