MTS believes that planning for your future is a shared responsibility. As such, the Company will share the cost of your MTS Pension Plan.
The money necessary to pay the benefits promised by the MTS Pension Plan comes from three sources:
- Employee contributions
- Company contributions
- Investment earnings
How much you contribute to the Plan each pay period will depend on what you earn. Employees contribute a fixed percentage of their salary each pay period to the Plan. As a regular Plan member, you are required to make contributions equal to:
5.1% of Earnings up to YMPE
7.0% of Earnings above the YMPE
Earnings means the wages you receive from a Participating Employer. It does not include overtime payments, extra allowances, bonuses or gratuities.
To put things in perspective, you will contribute $5.10 for every $100 you earn up to the YMPE each pay period, and $7.00 for every $100 you earn above the YMPE.
Your personal contribution will be calculated each pay period and deducted directly from your paycheque. The Plan’s administrator keeps track of your contributions, plus interest. The rate of interest credited to your contributions is based on an external index set by the federal government.
Your contributions to the Plan are fully tax-deductible up to Revenue Canada limits. In other words, they reduce the amount of income tax you pay each year. Let’s assume you contribute $2,000 to the Plan next year. Let’s also assume that you are in a 28% tax bracket. Based on these assumptions, your Plan contributions will actually reduce the total amount of income tax withheld from your pay for the year by $560 (28% x $2,000).
In accordance with federal pension legislation, the Company contributes the amount necessary to ensure that benefits earned can be paid when they are due. The amount of the Company’s contribution is determined by an actuarial valuation. An actuarial valuation calculates the benefits earned (which are the liabilities of the Plan) and compares those liabilities to the assets in the Plan’s trust Fund. If the assets exceed the liabilities, no Company contribution is required. But if the assets do not provide adequate funding for the Plan’s obligations, the Company is responsible for making the contributions necessary to eliminate the shortfall in accordance with pension legislation. An actuarial valuation of the Plan is performed at least once every three years.
The Company must, by law, contribute whatever remaining amounts are required to fund the pension you earn under the Plan. Before you receive any benefits from the Plan, a test is done to ensure that at least 50% of the value of the benefit you receive is provided through these Company contributions.
Any contributions you make above this 50% limit are known as Excess contributions. These excess contributions will be used to increase the benefit you (or your beneficiary) receive.
Investment earnings are typically the largest source of income for the Plan. More information on investments can be found in the investments section of this Web site.