Benefits
Pension options
You have a number of options to consider when you retire. Although the value of your pension will be the same in all cases, the option you select could affect the amount of the monthly benefit you receive. You should bear this important point in mind when considering your options.
The following options will be described to you in detail prior to your retirement. Other optional forms of payment (Joint & Survivor 50%, Joint & Survivor 100% and 15 year guarantee) are available upon request. Keep in mind that you can't change your selection after your retirement date.
The normal form of pension payable under the Plan is what is known as a Life Refunding pension. If you do not have a spouse when you retire, you will receive a regular monthly pension payable for the remainder of your lifetime.
Payments will cease when you die. In no case, however, will the pension payments you received from the Plan during your lifetime be less than the amount you contributed to the Plan, plus interest. The refund, if any, will be paid to your beneficiary.
If you have a legal spouse when you retire, your surviving spouse is entitled to a pension that continues at least 66.67% of the monthly payments you received from the Plan. This benefit is payable for the remainder of your spouse's life.
In addition, the pension your surviving spouse receives will be adjusted each year by two thirds of the cost of living increase you would have received through the Plan.
You should note that this survivor option will provide you with a lower monthly pension than the normal form outlined above. This reduction simply accounts for the longer anticipated payment period. The spousal pension, after all, will now be paid out for the remainder of two lifetimes, not just one.
If you and your spouse do not want this option (or you wish to reduce the size of the benefit to be continued to your spouse), both of you must sign an official waiver form. Once payments begin, this waiver cannot be reversed. As such, we recommend that both you and your spouse seek independent financial advice before making your decision.
Instead of the Life Refunding pension provided under the normal form, you can elect a form of pension that provides a guaranteed payment period of 10 years (120 monthly payments). In other words, if you die before receiving all 120 payments guaranteed under this option, the remaining monthly installments will be made to your beneficiary or estate.
If you retire prior to age 65, you may elect to integrate your Pension with the Canada Pension Plan and the Old Age Security plan.
The purpose of the integration is to provide relatively uniform income throughout retirement, considering government pensions. Integration provides an amount, or advance in addition to your Pension, until you reach age 65. At this time we reduce your pension to recover the advances given. This reduction continues for the rest of your life.
Benefit amounts
The 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
Multiplied by
Your years of Credited Service
Less
0.6% of the average YMPE (for the same five years of earnings)
Your years of 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.
An example
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
less
0.6% × $48,600 (Average YMPE) = $292 multiplied by 30 (Credited Service after December 31, 1965) × 30 = $8,760
Equals:
$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.
Retirement
You can retire as early as age 45 in some cases… or as late as the end of the year in which you turn 71. You decide. But keep in mind, your actual retirement age can have a significant impact on the pension you receive from the Plan.
The normal retirement age under the terms of the Plan is the first day of the month immediately following (or coinciding with) your 65th birthday. At this time, you will begin to receive a monthly retirement income from the Plan based on the pension formula.
You can retire as early as age 55, provided you have completed at least two years of Plan membership (this includes your membership in the CSSF).
Under a special provision, you may retire from the Plan 10 years before you qualify for an unreduced early retirement benefit – as early as age 45 in some cases. If you do retire under this special provision, however, you can expect fairly low pension payments.
You qualify for an unreduced early retirement benefit:
- At age 60, provided you have at least 10 years of Continuous Service.
- At age 55, provided your age plus Continuous Service totals 80 years.
- You could retire with an unreduced pension at age 58, for example, provided you had at least 22 years of Continuous Service at that time (58 years + 22 years = 80 years).
Continuous Service refers to how long you have worked with the Company on a continuous basis. This shouldn't be confused with Credited Service which refers to the years and months you are a member of the Plan making contributions.
If you retire before you qualify for an unreduced benefit, your pension will be reduced to account for the longer anticipated payment period. The size of that reduction will depend on your age and Continuous Service as of your retirement date. Here's how it works:
If you retire early with less than 10 years of Continuous Service, your pension will be reduced on an actuarial basis. Using a basic rule of thumb, the actuarial reduction will be about 6% for each year you retire prior to age 65. However, the actual number will vary depending on the form of pension you select, interest assumptions and other factors.
If you retire early with 10 or more years of Continuous Service, the Plan will subsidize the benefit you receive. Instead of the actuarial reduction outlined above, your post-1991 pension will be reduced by 0.25% for each full month between your actual retirement date and the date you would have first qualified for an unreduced early retirement benefit based on your years of Continuous Service at your actual retirement date (reduction of 0.0625% for each full month before age 60 for pre-1992 credited service). To compensate for the larger reduction for post-1991 credited service, if any, you may be eligible to a temporary bridge benefit payable up to age 65.
You may postpone your retirement up until the first day of December in the calendar year in which your turn 71. You will continue to earn Credited Service during your postponed retirement period.
Survivor protection
No amount of money will ever replace you. That said, your pension can provide your survivors with an important source of financial security. The size of the benefit your survivors receive will depend on your service and the nature of your relationship. Here's how it works…
If you die before completing 10 full years of Continuous Service:
If you have a spouse at the time of your death, he or she will receive a lifetime pension benefit equal to the value of the pension you earned. If your spouse, in turn, dies before receiving 120 monthly payments, the remaining installments will be paid in equal amounts to your other eligible survivors.
If you don't have a spouse at the time of your death, your eligible survivor(s) will receive a lump-sum cash settlement that equals, in total, the value of the pension you earned.
If you die after completing 10 full years of Continuous Service, your surviving spouse will receive a lifetime pension equal to 60% of the pension benefit you would have been entitled to if you had retired on the day you died (and we assumed you were at least 65 at the time). Again, this benefit is guaranteed for 120 months. If your spouse dies before receiving 120 monthly payments, the remaining installments will be paid in equal amounts to your other eligible survivors. However, in any case, the value of the pension payable to the surviving spouse should not be less than the actuarial value of the pension you earned.
If you don't have a spouse at the time of your death, your eligible survivor(s) will receive a lump-sum cash settlement that equals, in total, the value of the pension you earned.
Survivor pensions will be adjusted each year by two thirds of the cost of living increase you would have received through the Plan.
Following your second full year of retirement, your pension will be increased each year by an amount equal to two thirds of the Consumer Price Index (CPI) to a maximum CPI increase of 4.0%.
Let's look at an example. If the CPI increase is 4.0% in a year, your pension will increase by 2.67% (two thirds of 4.0%). If we use the same example as we used earlier, your actual increase totals $472.59 (2.67% x $17,700).
The actual size of the increase will depend on:
- the amount of your pension (including previous increases),
- the actual increase in the CPI for the year,
- the Plan's funded status, and
- how long you have been retired.
- If you retire after May in a given year, for example, you will not receive any increase for that year. If you retire in May or earlier, you will receive a portion of that year's increase.
In your second year of retirement, you will receive a larger portion of that year's increase – again, depending on the month in which you retired.
After your second year of retirement, you'll get the full increase payable each year, in July.
Disabled
For many of us, the only thing more painful than a severe disability is the thought of the financial hardship one might cause. With that in mind, your Plan provides you with some important disability provisions.
You will continue to earn Credited Service while on a disability leave, provided you are receiving Long Term Disability benefits from the Company. You will receive a pension based on your:
- total Credited Service, including your disability leave; and
- Best average earnings.
If you become totally and permanently disabled after completing 10 years of continuous service, you can elect to retire immediately and receive an unreduced disability pension under the Plan. The pension will be calculated using the benefit formula, and based on your Best Average Earnings and Credited Service as of your disability date.
If you become partially but permanently disabled, you may retire immediately with a reduced pension. Before receiving any payments in either case, you will have to file a certified medical report with the Plan administrator.
Disability, whether total or partial, refers to any impairment certified by a qualified medical doctor that prevents you from performing the duties of the job you were doing prior to the illness or injury. In some cases, the Plan will even provide disability pensions to former employees. If you leave the Company for any reason other than retirement, and you subsequently become disabled, you qualify for a disability pension provided you:
- completed at least 10 years of Continuous Service while at the Company,
- elected to leave your benefit in the Plan and to receive a deferred pension, and
- file a certified medical report with the Plan administrator.
In this case, the actual benefit you receive will be based on your Best Average Earnings and Credited Service as of your termination date.