The Income Tax Act (ITA) limits the amount of pension that is payable from a registered pension plan, such as the CAAT Pension Plan.
Do you work part-time or on contract?
The CAAT Pension Plan is introducing DBplus, a new defined benefit design for Other than regular full-time (OTRFT) members who work part-time or on contract. All OTRFT members will make the switch to DBplus on January 1, 2019.
Visit the DBplus page to discover how DBplus will maximize the lifetime pensions of OTRFT members. While you're there, watch the videos, and register for upcoming webinars to learn more.
A portion of a member’s pension will be paid from the CAAT Retirement Compensation Arrangement (RCA) if:
- His or her employer participates in the CAAT RCA
- His or her Highest Average Pensionable Earnings would result in a benefit under the CAAT Pension Plan that exceeds the ITA maximum pension limit.
A benefit on all pensionable earnings
The CAAT RCA ensures a member receives a pension reflecting their full pensionable earnings. Membership in the CAAT RCA is automatic for CAAT Pension Plan members whose benefits exceed the ITA limit and whose employers participate in the CAAT RCA.
A retirement compensation arrangement is a vehicle under the ITA that enables the funding of pension benefits that exceed ITA maximums. This type of arrangement is common. Without a supplementary plan like the CAAT RCA, members with pensionable earnings greater than the ITA limit would not be able to earn pension benefits reflecting their full highest average pensionable earnings on service in the college system. Therefore their retirement income replacement ratio would be lower than those members with earnings less than the ITA limit.
In 2018, pensionable earnings in excess of $166,787.00 (the threshold) could result in a benefit entitlement and a pension adjustment that exceeds the maximum allowed by the ITA, and therefore contributions to the CAAT RCA are made above this earnings threshold, which is updated annually.
Who runs the CAAT RCA?
The CAAT RCA is separate from the CAAT Pension Plan and is governed by the CAAT RCA Sponsors’ Committee, comprised of the Employer members of the CAAT Pension Plan’s Sponsors’ Committee, along with an OPSEU representative. Members are not responsible for funding shortfalls in the CAAT RCA. Employers alone carry this responsibility. The CAAT RCA Sponsors’ Committee oversees the administration of the CAAT RCA, which is carried out by staff of the CAAT Pension Plan. The CAAT RCA, as it is separate from the CAAT Pension Plan, is charged by the CAAT Pension Plan for this service.
The CAAT RCA is subject to different income tax rules than the CAAT Pension Plan (a registered pension plan), whereby 50% of the contributions and investment income goes to Canada Revenue Agency (CRA) in the form of a refundable tax credit. These credits are paid back to the CAAT RCA as benefit payments are made.
Contributions don’t change
Member contributions to the CAAT RCA are the same as for the CAAT Pension Plan. The earnings considered pensionable under the CAAT RCA are determined using the same rules as under the CAAT Pension Plan.
If a member's pensionable earnings exceed the year’s ITA threshold, contributions on earnings in excess of the ITA threshold are automatically directed to the CAAT RCA.
If a member’s salary drops below the ITA threshold, contributions will continue as normal, and will not be directed to the CAAT RCA. The CAAT Pension Plan and the employer ensure that contributions are properly directed.
In some cases a member contributes to the CAAT RCA but ultimately does not get a pension from the CAAT RCA. An example of this is a member who has pensionable earnings that exceed the ITA threshold in one year but not in other years: a portion of their contributions would be directed to the CAAT RCA, but the overall impact on their final pension calculation may not result in a pension that exceeds the ITA maximum. This is not disadvantageous to the member as the same contributions are payable regardless of whether the ultimate pension comes from the CAAT Pension Plan or the CAAT RCA. The total pension paid from the CAAT Pension Plan and CAAT RCA reflects the full value of the benefit earned by the member. The CAAT RCA provides a reliable way of ensuring that high earning members receive a pension on all pensionable earnings earned with their participating CAAT RCA employer.
Employer contributions to the CAAT RCA are at 3 times the member contribution rate on pensionable earnings above the ITA threshold. This is a funding management strategy which has been approved by all College Boards of Governors, and reflects the funding targets set out by the CAAT RCA Sponsors’ Committee.
Employer contributions to the CAAT RCA are greater than employer contributions to the CAAT Pension Plan, reflecting the effect of the 50% refundable tax credit, the funding target, and employer responsibility for any funding shortfall.
Service purchases and transfers
All basic service accrued while actively contributing to the CAAT Pension Plan is CAAT RCA eligible and is treated the same way in the CAAT RCA as in the CAAT Pension Plan. However, service purchases and transfers are handled differently. (The exception is an approved leave for which your employer is obliged to continue to match your contributions under the CAAT Pension Plan, for example Pregnancy/Parental leave).
Service purchases and transfers into the CAAT Pension Plan are capped at the maximum registered pension plan benefit allowable under the ITA. Purchases and transfers into the CAAT RCA would be transactions separate from those under the CAAT Pension Plan and are costed on a different basis than the CAAT Pension Plan.
For more details on the requirements for service purchases in respect of the CAAT RCA, refer to the CAAT RCA pamphlet on this page.
The CAAT RCA pension is based on the member’s highest average pensionable earnings and active service in the CAAT Pension Plan, plus any separate purchases of prior service or transfers made into the CAAT RCA.
If the calculated pension exceeds the ITA maximum pension limit in the year of retirement or termination of membership, any pension earned in excess of the ITA limit will be paid from the CAAT RCA. In 2018, the maximum pension payable from a registered plan is $2,944.44 per year of service (different limits exist for purchases of service accrued prior to 1992).
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A detailed legal description of the provisions of the CAAT RCA can be found in the CAAT RCA Plan Text, which is available from the CAAT Pension Plan for contributors to the CAAT RCA. Should the information in this website or any other source differ from the CAAT RCA Plan Text, the CAAT RCA Plan Text will govern.