Multi-Sector Pension Plan

Slides:



Advertisements
Similar presentations
Lecture 22: Pension Benefit Formulas Approaches to retirement plans Defined benefit plans –Elements of defined benefit formulas –Non-pay-related formulas.
Advertisements

Civil Service Retirement System (CSRS) Eligibility Requirements: AgeYears Optional Early Optional/Discontinued Service5020 Any Age25 DisabilityAny.
The Roman Catholic Archdiocese of Boston Pension Plan Changes Pension Plan Participant Information Meetings April - May 2014.
The Minnesota State Colleges and Universities system is an Equal Opportunity employer and educator. MnSCU Retirement Plans Basic Training for Campus HR.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Retirement Savings Plan for Garda Canada Security Corporation Teena Dawson Education Advisor September 2011.
Global solution to the chronic pension issues: A Full-Scale Expansion of the CPP Bernard Dussault BSc. Math., FSA, FCIA CPP Chief Actuary
Pension Planning ONWAA 2012 Fall Assembly. The following material provides a basic understanding of pension terms, tools and benefits available. The list.
UC Benefits Teach-In April 1, South April 8, North.
Lesson 16 Investing for Retirement. Key Terms  401(k) Plan  Annuity  Defined-Benefit Plan  Defined- Contribution Plan  Employer- Sponsored Retirement.
Sample XYZ Company Employee 401(k) Retirement Plan Transamerica Insurance & Investments.
McGraw-Hill /Irwin© 2009 The McGraw-Hill Companies, Inc. PENSIONS AND OTHER POSTRETIREMENT BENEFITS Chapter 17.
Retirement Options For Machinists In British Columbia 29/04/20111IAMAW DL250 Pension Options.
An Overview: Teachers’ Retirement System of Louisiana Prepared for the Advisory Group on Civil Service and Employee Benefits August 25, 2009.
RETIREMENT PLANNING. Services Offered Pension Estimates Pension Estimates Tax Calculations Tax Calculations Benefit Costing Benefit Costing EAP referral.
Pension Calculations in the York University Pension Plan April 21, 2006.
Retirement Benefits MGMT Managing Employee Reward Systems.
What Must You Know to Determine Retirement Savings Needs? 6 key questions.
McGraw-Hill /Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved Chapter Eighteen Pension Funds.
 What vehicle will get you to your retirement goals?
Pension Basics for Local Officials Teacher Welfare Education Program 3F(n) Edmonton Catholic Teachers’ Local #54.
Chapter 15 In-Class Notes. Old Age Security and Canada Pension Plan Old Age Security (OAS) pension Guaranteed Income Supplement (GIS) Allowance and allowance.
Canada’s Retirement Income System: Issues and Options Ontario’s Public Consultations on Canada’s Retirement Income System Ottawa, Ontario May 6, 2010 Printed.
Retirement Plan for Faculty and Certain Employees Understanding your Annual Pension Statement March 29, 2007.
Helping You Plan For Your Retirement Retirement Plan for the Employees of the Christian Brothers University.
The Benefits of Defined Benefit Pension Plans From a Manitoba School Sector Perspective.
Academic & Administrative Pension and Benefit Plans Realize. It starts with you. Annual General Meeting for Members of the Academic and Administrative.
Making the Most of Your District’s 403(b) Plan. General Information Only Please be aware that this information is intended to be general in nature and.
 2004 McGraw-Hill Ryerson Ltd. Kapoor Dlabay Hughes Ahmad Prepared by Cyndi Hornby, Fanshawe College Chapter 14 Retirement Planning 14-1.
Learning Objective # 5 Determine your planned retirement income. LO#5.
Copyright  2002 by Harcourt, Inc. All rights reserved. CHAPTER 14: MEETING RETIREMENT GOALS Clip Art  2001 Microsoft Corporation. All rights reserved.
Copyright © 2008 Pearson Education Canada 6-1 Defined-contribution Pension Plans The reverse of defined-benefit plans Contribution is known up-front The.
PASA PENSION BRIEFING Tom Corbett, Governor ▪ Charles B. Zogby, Secretary of the Budgetwww.budget.state.pa.us Pennsylvania Pension System Reform March.
Changes to the Rules governing the Pension Benefits Act Affecting Ontario Locked-in Accounts.
Illinois SURS Member Guide –Contributions (page 2) –Disability Benefits (pages 7-9) –Disability Retirement Allowance (page 10) –Retirement Benefits (pages.
Copyright © 2008 Pearson Education Canada 6-1 Chapter 6 Retirement Income.
1 Planning for retirement Algonquin College May 22, 2012.
Increasing contributions presentation Increasing contributions in your retirement plan account.
6 -1  Developing awareness  Sources of income  Tax issues and strategies  Estate planning and powers of attorney 6. Finance, Taxes, and Estate Planning.
Module 30 Retirement Planning. Menu The need for retirement planning Tax deferral and retirement planning Qualification of pension plans Other retirement.
TACOMA EMPLOYES' RETIREMENT SYSTEM. Orientation Outline ISources of Retirement Income IIHow the Plan Is Funded and Managed IIIService Retirement Benefits.
Government Retirement Programs Presented By: Ben Reale, CFP.
CHAPTER 14: MEETING RETIREMENT GOALS 14-2 Pitfalls in Retirement Planning  Starting too late.  Putting away too little.  Investing too conservatively.
Rhode Island Federation of Teachers and Health Professionals 356 Smith Street, Providence, RI Phone: Fax: www.rifthp.org.
The Illinois Pension Problem What is Wrong with Illinois Pensions?
Investment Basics Stock & Bond Basics Mutual Fund Basics Retirement PlanningBuying a Home
Tchavdar Elenkov, BA Econ, CFP Insurance and Financial Advisor How much do you have – and how much do you need?
By identifying specific financial goals, there’s a much better chance that clients will commit to invest.
Arizona State Retirement System Presentation to the Government Finance Officers Association of Arizona January 7, 2011.
NFL Retirement Plans NFL Retirement Plans “What’s all the fuss about?” Charles Clark and Regine Rucker Thursday, November 29, 2007 Finance Employee.
PERSONAL INVESTMENTS HELPING YOUR CLIENTS REACH THEIR GOALS.
1 History in the Making – York’s Pension Plan Winter 2013.
2006 General Meeting Assemblée générale 2006 Chicago, Illinois 2006 General Meeting Assemblée générale 2006 Chicago, Illinois Canadian Institute of Actuaries.
1 EMS/Fire Department Consolidation Treatment of Pension and Service Under the Police/Fire, CSRS, and 401(a) Plans.
Retirement Planning Session
Defined Benefit Plan Defined Contribution Plan. Whoever trusts in his riches will fall... Proverbs 11:28 Be sure you know the condition of your flocks,
Saving for Retirement Personal Finance Chapter 15.2.
Introduction to Pensions
Retirement Planning Social Security Social Security is a federal program that taxes you during your working years and uses the funds to make payments.
Welcome! The PERS Update An Overview of PERS, OPSRP and the IAP Revised 11/24/09.
DEFINED BENEFITS/DEFINED CONTRIBUTIONS Defined Benefits A traditional defined benefit (DB) plan is a plan in which the benefit on retirement is determined.
Please be aware that this information is intended to be general in nature and is not intended to be legal or tax advice. Each of you should follow up.
BUDGET DAY PENSION BRIEFING Tom Corbett, Governor ▪ Charles B. Zogby, Secretary of the Budgetwww.budget.state.pa.us Pennsylvania Pension System Reform.
Welcome! The PERS Update An Overview of PERS, OPSRP and the IAP Revised 4/09/09.
CSRS Retirement NALC Branch 79 Retirement NALC Branch 79.
A STEP-BY-STEP APPROACH TO INVESTING. By identifying specific financial goals, there’s a much better chance that clients will commit to invest.
Planning Your Retirement
TRS Funding and Pension Benefits
Lithuanian pension system and reforms MISSOC Network Meeting Vilnius, October Ministry of Social protection and Labour.
Federal Civil Service Benefits 2 Systems
Presentation transcript:

Multi-Sector Pension Plan

Outline Retirement Income Sources Types of Pension Plans Outline of the MSPP – Eligibility, Benefits, etc.

Retirement Income in Canada

Canada’s 3 sources of Retirement Income Public Pension Plans Canada Pension Plan (CPP) Old Age Security (OAS) Guaranteed Income Supplement (GIS) Workplace Pension Plans Defined Benefit Defined Contribution Personal Savings (RRSP) CPP: Depends on the amount of contributions you’ve made. Benefits are up to a maximum of $908 per month. (taxable) OAS: Maximum of $517/month – provided you’ve been a resident of Canada for 40 years after 18th birthday. (taxable) GIS: For seniors who have low incomes – provides up to ~$650 per month, if you have no other income aside from OAS (not taxable)

Why a Workplace Pension Plan? Average monthly benefits paid from public plans: Canada/Quebec Pension = $501.82 Old Age Security = $489.57 Total = $991.39 (Jan. 2009) Many, especially women will not receive maximum benefit from public pension plans. Women will, on average receive much less than men from CPP. This is due to a number of factors, including lower paying jobs and less time in the paid workforce. CPP is like a workplace pension – you receive benefits based on how much and how long you contribute to the plan.

Workplace Pension Plans

Defined Contribution (DC) Group RRSP Defined Benefit (DB) Defined Contribution (DC) Group RRSP Contributions Set by the terms of the plan As per the collective agreement. Employer contributions are considered taxable income Benefits Pension wage is based on a formula Pension wage depends on the amount of money in individual’s account. Based on amount contributed, gains/losses on market and fees to purchase pension Same as DC

Defined Benefit (DB) Defined Contribution (DC) Group RRSP Risk Shared between the employer and plan members The employee faces the risk alone, through potentially poor investment returns, or retiring at the wrong time (i.e. after the market drops or when interest rates are low) This is not a pension plan, it is individual savings. The individual faces market risk alone.

Problems with DC Plans Employees must face risk alone Market fluctuations on investments Interest rates on annuities No guarantee of retirement benefits Members are not professional investors Must pay fees on investments

The Multi-Sector Pension Plan

Multi-Sector Pension Plan (MSPP) Defined Benefit Plan – with hybrid features Collective Approach Retirement wages based on set formula 100% union-run (CUPE and SEIU)

The Proposal This proposal is only for members who are on the DC Plan, not for members who are on the DB Plan (i.e. those hired before July 1, 1992)

The Proposal Current DC Plan: Contributions Proposed MSPP + DC: Contributions 6% Employee Contribution 6% Employer Contribution Total: 12% contribution Current DC Plan Proposed MSPP + DC 10.5% to the MSPP 12% to the DC Plan 1.5% to the DC Plan

The Proposal All of the benefits from the MSPP will be in addition to what you have already accrued in the DC plan and with your own RRSPs There is no change to what you have saved under your current pension plan CPP is not affected by participation in the MSPP: i.e. CPP benefits are in addition to the MSPP

MSPP – Eligibility Everyone in the bargaining unit must be covered after 500 hours of employment Some exceptions can be made (e.g. if some are on superannuation, they can stay there)

MSPP – Benefits: Future Service Credit $100 of contributions = $1.55 monthly retirement wage at age 65 Roughly equivalent to 1.95% of salary per year of service Contribution Monthly Retirement Wage $20,000 $310.00 $40,000 $602.00 $100,000 $1,550.00 Explain that it is 1.95% of THAT YEAR’s salary each year. It’s not a fund that takes the average of your best years.

MSPP - Benefits Accruing Contributions: assuming full contribution level (10.5%) and wage increase of 3% per year Annual Wage Annual Contribution 5 years of contributions 10 years of contributions 25 years of contributions $40,000 $4,200 $22,298 $48,148 $153,129 $50,000 $5,250 $27,873 $60,185 $191,411 $60,000 $6,300 $33,448 $72,222 $229,693 $70,000 $7,350 $39,022 $84,260 $267,976

MSPP – Benefits: Past Service Credit A unique feature of the plan may increase your retirement wage by as much as $186.20 per month at age 65. Based on years of service with your employer at the time the employer commences participation in the MSPP.

MSPP – Benefits: Past Service Credit $26.60 per year of service to a maximum of 7 years ($186.20) at age 65

MSPP - Benefits Some Examples: Total Contributions Future Service Past Service Retirement Wage $20,000 $310.00 $186.20 $496.20 $40,000 $620.00 $806.20 $100,000 $1,550.00 $1,736.20 **These examples are in addition to CPP and to any RRSP coverage

MSPP - Benefits Retirement rates: comparison between annuity rates and MSPP benefits, assuming $100,000 contribution Data as of May 29, 2009 Company Guarantee? Age 55 Age 60 Age 65 Sun Life None $568 $613 $678 BMO Insurance $576 $642 $701 Standard Life $527 $577 $646 MSPP 5 years $835 $1,158 $1,550 Annuities are currently at historic lows. MSPP rates – 6% deducted for each year that you retire before age 65.

MSPP – Retirement Options Must be “vested” to retire (24 months of contributions or Age 65) “Normal” retirement is Age 65 Can retire as early as Age 55 (6%/year reduction) Several guarantee options available: Joint and survivor benefits (50%, 60%, 75%, 100%) 5-year, 10-year or 15-year guarantee The standard option is survivor benefits at 60% or a 5 year guarantee for singles

MSPP – Leaving before Retirement If you have 24 months of “vesting service”, you can: Collect pension at a later date Move value to locked-in pension vehicle Move value to new employer’s plan if the new plan accepts the pension transfer

MSPP – Leaving before Retirement With less than 24 months of “vesting service”, your contributions are refunded with interest accrued.

MSPP – Plan Statistics As of May 2009: 80+ participating employers 5,600+ plan members ~60 pensioners $26 million in fund assets

MSPP – Plan Statistics Issue of under-funding Young pension plans all face under-funding issues MSPP based on Nursing Home plan: 20 years – never cut benefits Plan profile is excellent for the current downturn – growing plan with low retiree numbers Pooled risk vs. individual risk The employer has been putting out information about the fact that the plan is insufficiently funded. There are a few issues with this: first, as you all know, and as I’m sure you know by looking at your RRSP statements, everyone has felt the hit all plans have felt some degree of pinch, but this plan is actually very well suited to weather the storm. It has a very low number of retirees, which means that it doesn’t have to pay out very much – something that hurts pension plans during a market downturn. As you see on the screen, the plan is modelled on the nursing home plan – it is almost exactly the same plan. And that plan has been in operation for 20 years. There have never been any cuts to benefits – in fact, even in these economic circumstances, their board of trustees is considering an improvement to benefits. The MSPP, though, is a young plan. All new pension plans face under-funding issues related to their liabilities. And this plan, because of the past service credit especially, faces them like all of the others. The past service credit introduces liability to the plan (think of giving people money without the contributions) – and since the plan is registered in Ontario, the plan has 15 years to amortize that liability. This makes the plan look more underfunded than it really is. The plan is growing in membership. There are no guarantees. However, going with a plan that helps people to pool their risk is better than going it alone. This way takes out the individual bearing all of the risk, and it gets rid of the uncertainty that you’d have based on the time that you retire.

MSPP – Additional Information www.mspp.ca Questions/comments: Email Seth Sazant – sazants@psac-afpc.com