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Public Service Pension Plan Retirement Planning Information Session
You and Your Pension Plan
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ObjectiveObjective
“ …to help you understandthe benefits of your
Public Service Pension Plan”
This handout is provided for information purposes only and does not constitute a legal document on your
rights and obligations. Should there be any conflict between the information in this document and that
contained in the Public Service Superannuation Act and Regulations, or other applicable laws, the Act and
Regulations apply.
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Today’s TopicsToday’s Topics
• How your pension plan works
• Service Buyback
• Supplementary Death Benefit Plan
• Retirement Benefits
– Indexing
– CPP/QPP Coordination
– Re-employment after retirement
• Survivor Benefits
• Pension Benefits Division
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www.pensionandbenefits.gc.ca
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Pension Plan Contributions for Pension Plan Contributions for 20122012
• Contribution rate is 6.2% on salaries up to yearly CPP/QPP maximum of $50,100
• Contribution rate is 8.6% on salaries above yearly CPP/QPP maximum of $50,100
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Pensionable ServicePensionable Service
• Current service
• Service Buyback
• Canadian Forces / RCMP service
• Pension Transfer Agreements
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Non-Pensionable ServiceNon-Pensionable Service
• Strike
• Suspension
• Unauthorized Leave Without Pay
• Seasonal Lay-off
• Authorized Leave Without Pay(not purchased)
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Can you buyback prior service?
Service BuybackService Buyback
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Types of Service BuybackTypes of Service Buyback
• Prior public service (PSSA) Non-Contributory Contributory Part-time Service Unpurchased periods of Leave Without Pay
• Canadian Forces / RCMP service Non-Contributory Contributory Reserve Service
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Types of Service BuybackTypes of Service Buyback
• Pensionable Employment
Subject to pension plan
Approved pension plan must be registered under the Income Tax Act
Must enter Public Service within 2 years of leaving outside employer
Pensionable Employment Questionnaire must be completed by outside employer
Double rate of contributions
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Methods of PaymentMethods of Payment
• Lump sum payment
and/or
• Monthly instalments Payment period
- under age 45 / up to age 65- age 45 and over / 20 years
• Debt cancelable by death
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Sample of a Public Service Sample of a Public Service BuybackBuyback Service: 1/1/1975 to 31/12/78 (4 years)
Born: 1952 (male)
ElectionDate
Salary LumpSum Cost
MonthlyCost
Repayment Period
TotalCost
Resultant Benefit:
0.02 x 4 years x $48,000 ÷ 12 = $ 320.00
Dec. 80 $ 20,017
Dec. 90 $ 32,128
May 11 $ 50,000
$ 10,269 $ 56.90 26 yrs $ 17,753
$ 33,029 $ 258.17 20 yrs $ 61,960
$ 6, 501 $ 30.05 36 yrs $ 12,981
Benefit Increase = $ 61.83
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The Buyback ProcessThe Buyback Process
• Estimate of cost
• Legally binding agreement
• Medical examination
• Made while employed as a plan member
• Income Tax implications
• Public Service Pension Centre 1-800-561-7930
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Advantages of Purchasing ServiceAdvantages of Purchasing Service
• More service……more pension
• Service is fully credited before it is paid in full
• Life insured
• Earlier retirement
• Reach 35 years service more quickly
• Income tax deductibility
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Supplementary Death BenefitSupplementary Death Benefit
Did you know that you have “life insurance” from your employer?
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Supplementary Death BenefitSupplementary Death Benefit
• Term life insurance
• Coverage: double your annual pensionable salary
(to next multiple of $1,000)
• Cost: 15¢ a month per $1,000 of coverage
• Coverage of $10,000 is free at age 65
• Reduced by 10% per year effective age 66
• Designation of beneficiary 1-800-561-7930
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Naming a BeneficiaryNaming a Beneficiary
• Estate
• A person age 18 and over
• Charitable / benevolent / religious or educational institution
• Estate
A beneficiary can be:
Where no beneficiary is named:
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Retirement BenefitsRetirement Benefits
What are my options when I retire?
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Retirement BenefitsRetirement Benefits
Two types of retirement benefits:
• Lump Sum Payments Return of Contributions Transfer Value
• Monthly Payments Immediate Annuity Annual Allowance Deferred Annuity
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Lump Sum BenefitLump Sum Benefit
Return of Contributions
Only option available to those with less than 2 years of pensionable service (not vested).
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Lump Sum PaymentLump Sum Payment
Transfer Value Payment• Must be less than age 50 at termination
• Must have at least 2 years of service
• Actuarial value of accrued pension benefits
• Must be transferred to a locked-in RRSP, another registered pension plan and/or purchase an annuity
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Lump Sum PaymentLump Sum Payment
Transfer Value Tax Considerations
• Amount within tax limit must be transferred to a locked-in RRSP, another registered pension plan and/or purchase an annuity.
• Amount in excess of the tax limit is paid to the member and taxed.
• Amount in excess of the tax limit paid to RRSP if you have available RRSP “room”.
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Lump Sum PaymentLump Sum Payment
Transfer Value Buyback
• Must purchase within the first year of becoming a plan member
• One-time opportunity to purchase
• No monthly instalments
• Lump sum required
• Medical
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How is your pension benefit calculated?
Pension BenefitsPension Benefits
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Benefit Formula (Full-Time)Benefit Formula (Full-Time)
2% X 35 years X $52,934 = $ 37,054 per year/ $ 3,088 per month
2% X 25 years X $52,934 = $ 26,467 per year/ $ 2,205 per month
Years and days of Average salary for 52% X pensionable service X consecutive years of highest paid service
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Benefit Formula (Part-Time)Benefit Formula (Part-Time)
2% X 5 years X $52,934 X 20.0/37.5 = $ 2,823 per year$ 235 per
month
Years and days Average salary Assigned2% X of pensionable X for 5 consecutive X Work Week service years of highest Standard
paid service Work Week
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Benefit Formula (Full-Time and Part-Benefit Formula (Full-Time and Part-Time)Time)
Full-Time Service
2% X 35 years X $ 52,934 X 37.5/37.5 = $ 37,054 annually$ 3,088 monthly
Full-Time and Part-time Service
2% X 30 years X $ 52,934 X 37.5/37.5 = $ 31,760 annually$ 2,646 monthly
2% X 5 years X $ 52,934 X 20.0/37.5 = $ 2,823 annually$ 235 monthly
Total = $ 34,583 annually $ 2,881 monthly
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Calculating your Public Service Calculating your Public Service PensionPension
Your Public Service pension is coordinated with Canada Pension / Quebec Pension PlansPension includes:
Lifetime pension (paid from date of entitlement for life)
and
Bridge benefit (if you are entitled before age 65)
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Lifetime pension and Bridge Lifetime pension and Bridge benefitbenefit
Lifetime Pension(public service pension plan)
Bridge Benefit(public service pension plan)
CPP or QPP Pension
Age 65Retirement
Pen
sion Inco
me
If you retire before age 65 and apply for CPP/QPP at age 65:
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Monthly BenefitsMonthly Benefits
What do these terms mean to you?
• Immediate Annuity
• Annual Allowance
• Deferred Annuity
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Monthly BenefitsMonthly Benefits
Immediate Annuity – (unreduced benefit)
Age PensionableService Years
Termination
Reason 60 or over At least 2 Retirement
55 or over At least 30 Retirement
Any age At least 2 Disability
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Monthly BenefitMonthly Benefit
Immediate Annuity
• Payable upon termination
• Indexed from year of termination
• Supplementary Death Benefit coverage is automatic
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Monthly BenefitMonthly Benefit
• Payable at the latest of : age 50: date of option or
: date of termination• Subject to reduction
• Immediate annuity possible in the event of permanent disability
• Supplementary Death Benefit coverage can be automatic
Annual Allowance (reduced benefit)
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Annual Allowance Reduction Annual Allowance Reduction FormulaFormula
Formula 1 5% x (60 – age)
Formula 2 5% x (55 – age) Greater reduction of: or
5% x (30 – service)
Under 50 years of age or Formula 1Under 25 years of service
50 years of age and over Formula 1 and Smaller reduction of: or25 or more years of service Formula 2
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Monthly BenefitsMonthly Benefits
• Payable on 60th birthday
• Indexed from year of termination
• Annual allowance can be requested at age 50
• Immediate annuity possible in the event of
permanent disability
• Supplementary Death Benefit coverage not
automatic
Deferred Annuity (paid in the future)
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Monthly DeductionsMonthly Deductions
Voluntary - Supplementary Death Benefit - Canada Savings Bond - Income Tax (extra) - PS Health Care / Dental
Compulsory - Income Tax - Buyback Instalments - Provincial Sales Tax
Cease - Pension contributions - Disability Insurance - EI and CPP/QPP - Union dues - Public Service Management Insurance Plan
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Public Service Health Care PlanPublic Service Health Care Plan
Individual Monthly Cost
Employee:
Pensioner:
Family Monthly Cost
Employee:Pensioner:
Level 1 Level 2 Level 3
$ 0.00 $ 1.10 $ 5.31
$ 21.78 $ 38.34 $ 67.19
Level 1 Level 2 Level 3
$ 0.00 $ 3.53 $ 10.34
$ 42.76 $ 59.32 $ 88.17
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Pensioners’ Dental Services PlanPensioners’ Dental Services Plan
Coverage Monthly Cost
Pensioner $ 16.00
Pensioner – plus one dependent
$ 31.96
Pensioner – more than one dependent
$ 47.96
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IndexingIndexing
Am I on a “fixed income” as Public Service retired member?
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• Annual cost of living increase
• Based on average of Consumer Price Index
• Increase is effective January 1
• First increase is pro-rated and based on
month of termination
IndexingIndexing
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Month of Retirement Percentage of Indexing
January 11/12
February 10/12
March 9/12
April 8/12
May 7/12
June 6/12
July 5/12
August 4/12
September 3/12
October 2/12
November 1/12
December 0/12
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Canada/Quebec Pension Plan Canada/Quebec Pension Plan CoordinationCoordination
How does the CPP/QPP coordination affect my pension benefits?
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CPP/QPP CoordinationCPP/QPP Coordination
20122012
SALARY PSSA CPP/QPP TOTAL
First $3,500 6.2 % 0.000 % 6.200 %
CPP$3,501 to $50,100QPP
6.2 %4.950 %
5.025 %
11.150 %
11.225 %
Over $50,100 8.6 % 0.000 % 8.600 %
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Bridge Benefit Formula for Bridge Benefit Formula for 20122012
Bridge Years and days Lesser of the averageBenefit X of pensionable X salary or CPP/QPPFactor service average maximum pensionable earnings
0.00625 x 35 years x $ 47,360.00 = $ 10,360.00 / annually $ 863.33 / monthly
0.00625 x 25 years x $ 47,360.00 = $ 7,400.00 / annually $ 616.66 / monthly
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Bridge Benefit FactorBridge Benefit Factor
Year Member will reach age 65
Year of birth Bridging Factor
2007 or earlier 1942 or earlier .00700
2008 1943 .00685
2009 1944 .00670
2010 1945 .00655
2011 1946 .00640
2012 or later 1947 or later .00625
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Pension Formula (Full-Time)Pension Formula (Full-Time)
LESS
Years and days of Lesser of the average .00625 X pensionable service X salary or CPP/QPP average maximum
pensionable earnings
Years and days of Average salary for 5 2% X pensionable service X consecutive years of
highest paid service Bridge
ends at age 65
Bridgeends at age 65
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Bridge Benefit Bridge Benefit ConsiderationsConsiderations
• Bridge benefit ends effective:
First of the month following 65th birthday or
Entitlement to CPP/QPP disability benefits
• Application must be made for CPP/QPP benefits
• Early retirement benefits available with CPP/QPP
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Lifetime pension and Bridge benefitLifetime pension and Bridge benefit
Lifetime Pension(public service pension plan)
Bridge Benefit (public service pension plan)
Early CPP / QPP Pension
Age 65Retirement
Pen
sion Inco
me
Age 60
If you retire before age 65 and apply for early CPP/QPP benefits between age 60 to 64:
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Effect of Bridge Benefit on Effect of Bridge Benefit on IndexingIndexing$ 3,088.00 Monthly pension (retirement age 55) x 22 % Indexing rate 10 years later (age 65)$ 679.36 Monthly indexing increase $ 3,088.00 + $ 679.36 = $ 3,767.36
$ 3,088.00 Monthly pension - 863.33 Bridge benefit ends at age 65
$ 2,224.67 New monthly pension (age 65) x 22 % Indexing rate $ 489.43 New monthly indexing increase (age 65)
$ 2,224.67 + $ 489.43 = $ 2,714.10 Total effect - $ 1,053.26
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Re-employment after RetirementRe-employment after Retirement
• Pension Benefits
• Indexing
• Public Service Health Care Plan
• Pensioners’ Dental Services Plan
• Supplementary Death Benefit
• Contact the Public Service Pension Centre
at 1-800-561-7930.
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Survivor BenefitsSurvivor Benefits
What benefits are available for my survivors?
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Survivor BenefitsSurvivor Benefits
• Surviving Partner50% of the member’s basic pension(1% x years/days of service x average salary)
• Dependants 10% of member’s basic pension to each child or student (maximum 40%)
• Orphans20% of member’s basic pension to each
child or student (maximum 80%)
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Survivor EntitlementsSurvivor Entitlements
• Divorced- Partner is not entitled
• Separated- Partner is entitled
• Common Law - Must provide proof that relationship started prior to retirement- Pension Centre must approve documentation submitted
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Optional Survivor BenefitsOptional Survivor Benefits
• Marriage occurs after retirement
• Option to reduce your own pension to provide a
benefit for your spouse
• Different levels of coverage available
• Original pension can be re-instated
• Estimate provided by the Public Service
Pension Centre
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Five Year Minimum BenefitFive Year Minimum Benefit
How and when is a minimum benefit paid?
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Five Year Minimum BenefitFive Year Minimum Benefit
• Issued when no further benefits payable to any survivors
• Minimum benefit payable is the greater of:
Return of Contributions plus interest
or
Five years of basic pension benefits (less any amount already paid)
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Pension Benefits Division Act
Can my pension be divided?
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Pension DivisionPension Division
Requirements:
an agreement or court order must exist
living apart for at least one year
(when based on a separation agreement)
normally cohabitation benefits only are available for
division (court can order a different period)
Maximum benefit available to the ex-partner is 50% of the value of the member’s pension.
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Pension Division continued…Pension Division continued…Requirements:
Lump sum payment transferred to a locked-in
registered retirement vehicle
Member’s pension is reduced accordingly
Either party can request a division estimate
Non-applicant partner has a 90-day objection period
For information, contact Public Service Pension Centre
at 1-800-561-7930.