The MTS Pension Plan is what is known in the industry as a Defined Benefit Plan – so called because the benefit you earn during your working years is defined by a predetermined or set pension formula. In other words, you will receive a guaranteed pension at retirement based on your age and earnings history. No guess work. No investment risk.
Your pension benefit is calculated using the average of your best five years of earnings (“Best Average Earnings”), a defined benefit formula and the number of years you have contributed to the Plan (referred to as “Credited Service”). The formula is as follows:
2.0% of your Best Average Earnings
Your Credited Service
0.6% of your Average YMPE (for the same five years of earnings)
Your Credited Service
(YMPE, or Year’s of Maximum Pensionable Earnings, is the limit set by the federal government each year to determine the maximum Canada Pension Plan contributions and benefits.)
In no case can the benefit exceed 70% of your Best Average Earnings.
Best Average Earnings refers to the average of your earnings during the five years of employment during which your earnings are highest. This important Plan provision ensures that your pension is based on your highest earnings. The higher your earnings, the larger your pension will be.
Average YMPE means the average of the YMPEs over the five-year period used to determine your Best Average Earnings. Remember, the YMPE is a level set by the federal government each year to determine maximum Canada Pension Plan contributions and benefits.
Credited Service refers to the years, months and days you have participated in the Plan. As the formula illustrates, the more Credited Service you have, the larger your pension will be.
Let’s consider an employee who retires from the Plan at age 55 with 30 years of Credited Service and Best Average Earnings of $60,000. If we assume an Average YMPE of $48,600, it’s just a matter of plugging in the numbers.
2.0% × $60,000 (Best Average Earnings) = $1,200
multiplied by 30 (Years of Credited Service) × 30 = $36,000
0.6% × $48,600 (Average YMPE) = $292
multiplied by 30 (Credited Service after December 31, 1965) × 30 = $8,760
$36,000 − $8,760 = $27,240 annually
The actual benefit you receive will be affected by a number of factors, including your earnings, your age at retirement, your years of Plan membership, and the survivor benefit option that you choose.
To help you with your retirement planning, the Company will provide you with an annual pension statement. This statement outlines, among other things, the value of the pension you have earned to date and the projected pension you can expect to receive from the Plan at retirement.