Making Choices

Service and earnings

During this period of time, members of the CAAT Plan who participated in the strike did not make contributions to the Plan.

Members of the CAAT Plan who participate in a work stoppage remain active members during the strike period. However, any payments received while on strike are not considered pensionable earnings for the purposes of the pension plan. The strike period is considered a break in service, which can be purchased once the strike has ended.

Because of the “one day rule” under the pension plan, a full time member who works and contributes to the plan for at least one day in a given month will earn that full month of service. Therefore if you took part in the 2011 OPSEU CAAT Support strike, you still earned service for the full month of September because you worked and contributed to the plan in September after the strike ended. However, since you did not receive pensionable earnings for the period of time you were on strike, your pensionable earnings for September will only reflect your actual earnings when you returned to work.

How this affects your pension

The pension formula considers two factors: your pensionable service and your earnings, specifically your average pensionable earnings for the 60 consecutive months that your earnings were highest. The highest 60 months of earnings typically occur in the last 5 years before retirement, therefore if the month of September, 2011 is included in your highest 60 months of earnings, the reduced earnings in September because of the strike period could lower your average and, ultimately, your pension.

By purchasing the period of time you were on strike, you can restore your earnings for the month of September, maintaining your highest average pensionable earnings on which your pension is based.

The cost of the purchase

The cost of purchasing the strike period is 2 times member contributions based on:

• Your annual rate of pay at the beginning of the strike, and
• The contribution rates in effect at the time of the purchase

The cost is 100% payable by the member, and the payment must be made in a lump sum. You can make the purchase at any time up to termination or retirement. Note that the cost of the purchase will increase when contributions increase, as they are scheduled to do in 2012, 2013 and 2014.

If you are considering making a purchase of the strike period, contact your Human Resources department to complete the 2011 Strike Purchase form.

If you are more than 5 years away from retiring, a service purchase will likely not impact your ultimate retirement pension, as the highest years of earnings are typically the last 5. However, a purchase should still be considered if you plan to stop working at your College in the next 5 years.

We suggest you seek independent financial advice before making this, or any service purchase.

What do you get when you join the Plan?

A pension that grows the longer you work
The defined benefit pension formula uses your best five consecutive years of earnings no matter when they occurred during your career in the college system: you receive the best possible pension, whether you scale back or take on more responsibility in later years.

The formula also uses your years and months of service in the Plan - the longer you contribute to the Plan, the bigger your pension will be.

Tax effective, employer-matched contributions
The contributions you make to the Plan throughout your career are tax-deductible – meaning you pay less income tax as a result of contributing to the Plan. And your contributions are matched by your employer, dollar for dollar, tax-free.

A choice of retirement dates
The Plan offers flexibility in choosing a retirement date to meet your unique needs. You can:

• retire at age 55 once vested, or as early as age 50 if you have 20 years of pension service.
• retire with an early unreduced pension when your age + service = 85, or you are at least 60 with 20 years of service, or,
• retire before reaching these milestones on an early reduced pension with a low reduction factor.
• retire with a “normal” pension at 65, or continue to build a larger pension up to age 71.

Members who retire before age 65 receive an additional payment called a “bridge benefit”, payable until age 65.

A pension paid for your lifetime
Your pension will be paid every month from retirement, for the rest of your life. You don’t have to worry about complex investments, market downturns, or outliving your pension.

Inflation protection for increased value
The impact of inflation is partially offset through the Plan’s inflation protection provision, helping pensions retain purchasing power over time.

Survivor benefits to protect your loved ones
A lifetime pension is payable to your surviving spouse. If you die before retirement, survivor benefit options are available.

A pension that goes with you
Your pension belongs to you. Even if you leave your employment for a different job, you will have the option to take your pension with you or leave it in the Plan to collect when you reach retirement age.

Reach for your goals

The CAAT Plan is a safe, worry-free way to invest in your future retirement income as you work. With flexible retirement options and a secure lifetime pension, the Plan helps you meet your retirement goals, whatever your goals may be.

Pensions start on first of the month

In the CAAT Plan, your retirement date is always the last day of the month in which you retire. Your monthly pension payments start the first business day of the month after your retirement date.

Maintaining a steady flow of income
If your last day of work is at the end of the month, your income will not be interrupted. Your pension payments will start at the beginning of the month after your retirement date, ensuring a smooth transition from working income to retirement income.

If you stop working towards the beginning or middle of the month, your employment earnings will stop with your last pay, and your pension won’t start until the first of the following month, potentially interrupting your income flow.

Can your retirement date affect your pension?
If you stop working in the middle of the month of your retirement, that entire month of service is used in the calculation of your pension, but your earnings for the month will only reflect the earnings for the days you worked – they’ll be lower than if you had worked all month. If your Highest Average Pensionable Earnings (HAPE - the 60 consecutive months your earnings were highest) includes the last month you work, the lower earnings in that final month could result in a lower HAPE than if you had worked the entire month.

For Jennifer, who worked 24 years in the college system and whose salary in her last year of work was $75,000, retiring mid-month meant her pension was $25/month lower than if she had worked until the end of the month.

When to retire

Lump sum vacation payout or vacation?
June retirements are common in the college system. Current year vacation pay is paid in a lump sum in June. For members retiring in June, the choice to contribute on that payment means the lump sum is included in the final month’s earnings. If the final 60 months are also the highest, this will mean a higher HAPE.

By retiring in June…

You could increase your HAPE: If your final month’s earnings are among your highest, the additional vacation earnings could result in a slightly higher pension.

You can collect your pension longer: You would receive 2 more months of pension payments than if you were to retire in August.

By retiring in August…

You could increase your service: The additional 2 months of service would increase your pension. If you were to retire before age 65 on a reduced pension, the extra 2 months of service would mean a lower reduction factor.

You can collect your health benefits longer: You would receive 2 more months of employer-paid health benefits. In retirement, health benefits are 100% member paid.

Vacation pay
The vacation pay lump sum only applies for vacation pay in respect of the current year. Past year vacation payouts are not pensionable and not part of the earnings for the HAPE calculation.

And, new rules for the Canada Pension Plan (CPP) allow you to collect your CPP pension while continuing to work and give you the option to either continue or stop your CPP contributions - a decision that will affect your CAAT Pension contributions and pension benefit.

Working past 65 – Your CAAT Pension and CPP
If you decide to work past age 65, you will continue to contribute to and build your CAAT Plan pension.

Collecting CPP while working
Although you must retire to start your CAAT Plan pension, you can choose to collect your Canada Pension Plan (CPP) pension, as you continue working. If you collect CPP while working, you can choose to continue or stop your CPP contributions.  

• If you continue to contribute to CPP, you will build CPP’s Post-Retirement Benefit that will be paid in addition to your CPP pension beginning the following year for life. Your contributions to the CAAT Plan will continue at the low rate on earnings on which you contribute to CPP, and at the high rate on earnings above that. You will earn a CAAT Plan pension benefit at the low and high rates.
• If you stop contributing to CPP, beginning in the following calendar year,you will contribute to the CAAT Plan at only the high rate on all earnings and for that period build your pension at the high benefit rate.

Delaying the start of CPP
You also have the option to delay the start of your CPP pension beyond age 65. If you do, you will continue to contribute to CPP and build your regular CPP pension (which is different from the CPP Post-Retirement Benefit). Your contributions to your CAAT Plan pension will continue at the low and high rates and you will continue to build your CAAT Plan pension at the low and high benefit rates.

When you do start your CPP pension, it will be increased to reflect the delayed start.

Reaching ages 70 and 71
You must stop contributing to CPP at age 70 and at age 71 you must start collecting your CAAT Plan pension even if you keep working, as mandated by the Income Tax Act.

Making the best decisions for you
To decide what’s best for your own financial situation: 

• Obtain from Service Canada estimates of your CPP at different start dates and compare the total monthly payments you would miss by waiting to start it with the increased amount of pension you would receive by waiting. How long would you need to live to more than recoup the missed payments by collecting a larger pension later?
• Consider that both your CPP pension and employment earnings will be taxable income and may invoke the claw back of certain benefits such as Old Age Security.
• If you decide to start CPP while working, compare CPP contributions with those for the CAAT Plan and the corresponding amount of additional pension you would build in each plan to decide whether or not to continue to contribute to CPP. You can get an estimate of your CPP post-retirement benefit at Service Canada’s website.