Retired Member Handbook: Page 3 of 6

Inflation protection

Inflation is the tendency of items to increase in price over time. Your pension may include inflation protection – annual increases to a pension payment that help offset the rising cost of living.

Calculating inflation protection

Before the beginning of each new year, we will inform you of the inflation protection increase
and the amount of the adjustment to your pension for the following year, if applicable. The
increase will be applied to your pension payments starting in January. Inflation protection is
based on when your service was earned in the Plan.

The inflation protection increase is calculated using changes in the Consumer Price Index
(CPI), a widely-used measure of inflation in Canada. On January 1 of each year, your pension
(and your bridge benefit if you are receiving one) may increase.

The calculation takes into consideration 75% of the change in the average CPI from one
year to the next. In years when there is no increase to the CPI, there is no increase to your
pension. Even if inflation decreases over time your pension will not be reduced.

When was your service earned?

The inflation protection that may be applied to your pension is based on when your service was earned:

Ad hoc inflation protection (Service earned before 1992)

Increases have been granted until January 1, 2014.

When the Plan started in 1967, inflation protection was not directly funded by contributions  made to the Plan but was granted on an ad hoc basis – the Plan’s Sponsors regularly  evaluated the financial situation of the Plan and authorized an inflation protection increase if the Plan could afford to do so. Ad hoc inflation protection has been granted in every year but one, and will be granted up to 2014.

Guaranteed inflation protection (Service earned between 1992 and 2007)

Increases are funded and guaranteed indefinitely.

In 1992, inflation protection on the pension in respect of service earned between 1992 and 2007 became a guaranteed feature of the Plan which was specifically funded through an increase to contribution rates.

Conditional inflation protection (Service earned after 2007)

Increases have been granted until January 1, 2019.

In 2006, as part of the Funding Policy and in keeping with the funding challenges of the day, the Plan introduced a third service period of inflation protection coverage. The granting of inflation protection increases on service earned after 2007 ceased to be guaranteed and became conditional on affordability, based on the funding status of the Plan. As outlined in the Funding Policy, restoring inflation protection for this period of service is the first priority for the use of any surplus funds and is currently granted until January 1, 2019 for pensions in payment.

Understanding service periods for inflation protection

There are three periods of service with different treatment for inflation protection. Your Retired Member Annual Statement will show how your pension is impacted by each year’s inflation protection adjustment, based on your years of service.

Read the Understanding Inflation Protection pamphlet on our website in the Retired Member section to learn more about inflation protection.

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