Retirement Plan for Faculty and Certain Employees Understanding your Annual Pension Statement March 29, 2007

2 Background – Types of Plan Design Defined Benefit (DB) –Pension benefit at retirement based on a formula –Typically, a function of service and earnings Defined Contribution (DC) (or Money Purchase MPP) –Fixed contributions to an investment account –Account balance used to provide retirement benefits Hybrid –Combination of a DB and DC –Can be either i) DB plus DC or ii) greater of a DB and DC

3 Basic Features - Faculty Plan Design HYBRID PLAN DESIGN – University of Windsor Faculty Plan –Member receives “the greater of DB and DC” –Pension from DC with a supplemental top up to meet the DB minimum guarantee pension amount, if needed

4 Basic Features – Faculty Plan Design DC or Money Purchase Provision (MPP) Employees and University each contribute 6% of pensionable earnings to MPP account University directs investments At retirement, MPP balance is annuitized within pension plan based on a fund return assumption of 6% Post-retirement indexing based on investment earnings relative to 6% (+/-) less retiree mortality experience DB or Minimum Guarantee Benefit (MGB) 1.5% & 2% of best 48 months (BAE) multiplied by years of credited service Early retirement – age 55, subject to actuarial adjustment to reflect the longer payout period Normal retirement – age 65 Postponed retirement – to age 69 Post-retirement indexing based on inflation (50% - 100% of CPI)

5 Background – Types of Plan Funding Fixed Employee Contributions, Fixed University Contributions –Typically defined contribution Fixed Employee Contributions, Variable University Contributions –Most common type of defined benefit Variable Employee AND University Contributions –Referred to as a “Cost-sharing” or “Risk-sharing” arrangement

6 Basic Features – Faculty Plan Funding Fixed Employee Contributions, Variable University Contributions DC – MPP (Money Purchase) –University and member each contribute a fixed 6% of earnings DB – MGB (Minimum Guaranteed Benefit) –University responsible for the cost of the difference between the DB pension and the MPP pension

7 Your Pension Statement An annual pension statement must provide the following information: –Name of the plan and registration number –Plan statement period –Member name, birth date, hire date, plan entry date –Name of spouse and beneficiary –Credited service to date –Earnings used in the calculation of normal retirement pension –Estimated pension at normal retirement date »Employer and government pensions –Statement of Account including current year interest rate –Early retirement eligibility provisions –Normal Form of Pension –Vesting –Termination options –Pre-retirement death benefit –Financial Position of the Plan –Discontinuance of the Plan

8 Your Pension Statement Must be issued once per year, within six months of plan year end –Plan year July 1 st through June 30 th Personal Member Information Section –Member name, date of birth, date of hire, date of plan entry –Pensionable Service to the June 30 th of applicable plan year Can be affected by part years of service, unpaid leaves, sabbaticals –Normal Retirement Date (Faculty and Librarians) Faculty and librarians –July 1 st following age 65 –September 1 st following age 65 if employed on or before September 1, 1970 Non faculty and librarians –First day of the month following attainment of age 65 –Spouse, Beneficiary Per Ontario Pension regulations, spouse automatic beneficiary

9 Your Pension Statement Normal Retirement Income Section Defines the pension benefit formula at retirement (both MPP & MGB) ►Credited service to date plus projected credited service to NRD ►Highest average earnings uses: Nominal Salary if NRD greater than 48 months away –Most current salary within the plan year »i.e. salary at July 1, 2005 or later to June 30, 2006 Highest 48 months earnings if NRD within 48 months –Can be combination »i.e. NRD July 1, 2008 »Salary at July 1, 2005 x 3 years plus last highest »Various calculations to determine highest average

10 Your Pension Statement Section 1 – University Plan Identifies a projected monthly retirement income at your NRD (a) MPP basis –Current MPP account balance plus –Future contributions using highest average earns x 6% x 2 –Fund growth assumption of 3% per annum –Age, spousal age at retirement –Unisex assumption 80% male; 20% female –Post retirement fund return assumption 6% –Mortality assumption UP 1994 Generational –$4, OR (b) MGB basis –July 1, 2005 salary of $96, (21 years more to NRD) –YMPE at June 30, 2006 $42,100 (CPP maximum pensionable earns) –YOS x [0.015 x $42, x ($96,724 - $42,100)] / 12 months –( ) x [0.015 x $42, x (54,624)] / 12 –35 x ( ,092.48) / 12 = $5, (c) Estimated monthly pension (greater of (a) and (b)) is: $5,028.27

11 Your Pension Statement Section 2 – Additional Pension Benefits (AVC) Identifies an additional monthly pension at NRD on: (d) MPP basis –Comprised of additional voluntary member contributions (no longer permitted) or locked in transfers from other employer plans –Calculated on the same basis as (a), always kept separate Could also show a monthly pension from a period of past service. Past service pensions calculated on a DB basis per pension regulations Your Total Pension Income from the Plan (c+d) = $5,028.27

12 Your Pension Statement Section 3 – Government Pension Benefits –Required to show the current maximum CPP and OAS –You may or may not qualify for the maximums –CPP is a universal DB plan for all working Canadians –QPP if employed / residing in Quebec –CPP based on credited service periods and pensionable earnings –You WILL draw if you have contributed. Not income tested –OAS subject to residency requirements –Non contributory flat benefit plan –Funded from general tax revenues –Subject to net income test & 15% claw back ($63,511 min / $102,865 max)

13 Your Pension Statement Statement of Accounts Section –Member MPC Account balance at first day of statement plan year –Employer MPC Account balance at first day of statement plan year PLUS –Member and employer current year contributions Could include contributions on retroactive pays PLUS –Fund gains (+) or loss (-) applied to member and employer accounts Full return rate applied on opening balances and one-half the return applied on current year contributions EQUALS –Member MPC Account balance at last day of statement plan year –Employer MPC Account balance at last day of statement plan year Fund return for statement plan year is 4.91% (2005 / 2006)

14 Your Pension Statement Early Retirement Section Provides details on first date of eligibility for early retirement MPP pension based on account balance at ERD subject to the actuarial basis used to calculate your MPP pension MGB pension based on credited service and highest average earnings at ERD, reduced to reflect longer payout period. MGB reduction approximately 6 – 7% for each year away from NRD.

15 Your Pension Statement Normal Form of Pension Section Initial result of the MPP and MGB pension formula calculations Faculty Plan Normal Form is a Lifetime pension, guaranteed for a minimum of 60 months payment (5 years) Per Ontario Pension regulations, faculty with a legal spouse on the date of retirement MUST choose at a minimum, a J&S 60% unless the member and the spouse sign a spousal waiver. Optional forms of Pension (Faculty Plan) –Lifetime pension guaranteed for 0, 10, or 15 years –Joint & Survivor pension 60%, 66.67% Guar 5, 75% or 100% –Since these optional forms are expected to payout for differing lengths of time, the amount of the starting pension at retirement is adjusted so there is no impact on the plan’s financial position (referred to as an Actuarial Equivalent) –Optional forms for married members may be subject to spousal waiver requirements –Not required to be included on the annual pension statement

16 Your Pension Statement Vesting Section Vesting means ownership Faculty Plan provides immediate vesting (ownership) of all member AND employer contributions Identifies the amount of pension you have earned from date of plan entry to the June 30 th of the statement plan year, that will be payable to you at NRD Pension amount is calculated on MGB basis using credited service, and actual pensionable earnings to statement plan year end date Actual monthly pension at NRD may be higher when MPP calculation basis used

17 Your Pension Statement Termination of Employment Section Outlines the options for disbursement of your pension (and any additional voluntary contributions) in accordance with the plan provisions Cash refund option is available to members with less than 24 months of pension membership, or for AVC’s, only

18 Your Pension Statement Pre-Retirement Death Benefit Outlines the options for disbursement of your pension (and any additional voluntary contributions) in accordance with the plan provisions Spouse may elect immediate monthly pension or deferred monthly pension Spouse may elect transfer to RPP, RRSP, RRIF on a tax deferred basis, not locked in Spouse may elect cash less tax All other beneficiaries have cash option only (taxable)

19 Your Pension Statement Financial Position of the Plan Section Provides details of the plan funding status as of the most recent actuarial valuation. Discontinuance of Plan Section Provides details of what happens to the fund assets in the unlikely event of Plan discontinuance Errors and Omissions Pension statement in itself is not legally binding The University reserves the right to correct any errors in your statement

20 Questions? Your Pension & Benefits Administration Team: Ms. Cheryl Paglione Associate Director - Pensions, Benefits & HR Systems Contact: Mr. Tom Puskas Manager of Pensions, Benefits & HR Systems Contact: Ms. Melissa Simas Pension, Benefits & Records Administrator – Faculty Plan Contact: Thank you for attending this session