Building Blocks – York’s Pension Plan

1. Building Blocks – York’s Pension Plan Winter 2013

2. Purpose of this Seminar • Pension plan contributions • Minimum Guarantee Pension (MGP) • Money Purchase Component (MPC) • MGP vs. MPC – how they fit together

3. Pension Plan Contributions Employee • 4.5% up to the YMPE and 6% above the YMPE Employer • 4.5% up to the YMPE and 6% above the YMPE plus an additional 3% • The 3% is to help fund the Non Reduction Reserve (NRR) – this is included in your pension statement with the employer contributions however tracked separately in the pension system.

4. YMPE (Years Maximum Pensionable Earnings) • The dollar amount set each year by the Canada Revenue Agency (CRA) which determines the maximum amount on which to base contributions to the Canada Pension Plan. The YMPE specifies the earnings amount that can be used in calculating pension contributions for each year. • The 2013 figure is $51,100. • The YMPE changes each year and CRA normally announces the new figure in November.

5. Non Reduction Reserve • When you first retire, the actuarial factors used to calculate the money purchase pension assume the Pension Fund will earn 6% annually throughout your retirement. Your retirement pension may be adjusted at the beginning of each calendar year if the moving four-year average fund return is in excess of 6% at that time. In the event the moving four-year average fund return is below 6%, no reduction will be made to your pension; however, this deficit will be tracked and future adjustments (positive or negative) will be applied to the reduced amount. You won’t receive any further increments until the deficit is paid up.

6. Minimum Guarantee Pension (MGP) 1.4% of your final average earnings at retirement up to the average YMPE for those years plus 1.9% of your final average earnings at retirement above the average YMPE for those years multiplied by Your credited service in the pension plan

7. Final Average Earnings (FAE) Your FAE is the five highest years of earnings prior to retirement. They do not have to be consecutive. We work backwards in twelve month periods.

8. FAE example (May 1, 2013 retirement)

9. Credited Service • There is a difference between credited service and continuous service: • Credited Service – The total number of years of pension plan membership. You can not earn service if contributions by you or the University are not maintained at the full rate for each month in the calendar year. • Continuous Service – Your unbroken service with the University including vacation, authorized sick leave, and authorized leaves of absence.

10. MGP and early retirement • If you elect to retire prior to your normal retirement date there is a reduction in the pension amount. • A reduction of 3% per year or part year for retirement between age 60 and 65 and a further reduction of • 6% per year for each year or part year for retirement between age 55 and 60

11. Money Purchase Component (MPC) • The mandatory contributions made by the employee along with the matching employer contributions and any accumulated rate of return are used to determine the MPC of your pension • The MPC is affected by: • amount of funds as per the above, • age at retirement, • marital status at retirement, if married, the age of your spouse at retirement, • Annuity/mortality table being used.

12. Money Purchase • Marital status and the age of your spouse can have a significant impact to the money purchase pension. For example: NRD July 2041 (joint & survivor 50% with no guarantee) Spouse 2 years younger: $996 per month Spouse 5 years younger: $985 per month Spouse 10 years younger: $968 per month Spouse 20 years younger: $941 per month

13. Annuity/mortality table • The Canadian Institute of Actuaries has a number of actuarial tables. The mortality experience of the plan helps determine which table is used in the calculation of a money purchase pension. • York uses a customized table based on 70% of mortality rates in the standard 1994 Group Annuity Mortality table (GAM 1994) plus a projection scale AA with mortality improvements limited to 1% per annum starting in 2000.

14. MGP vs. MPC – How they fit together Each time the system produces a pension estimate it actually runs three calculations at the same time: • Money Purchase Component Pension • Minimum Guarantee Pension • Canada Revenue Agency (CRA) has a maximum pension permitted under the MGP portion of the pension plan You receive the higher of one or two. If your pension is based on the Minimum Guarantee Pension then we have to ensure it is not greater than the CRA maximum.

15. CRA Maximums • The CRA maximum includes a maximum of 35 years of service. • The 2013 maximum is $2,696.67 for each year of service up to the 35 year maximum. • For example: $2,696.67 X 35 = $94,383.45 per year or $7,865.28 per month. • The CRA maximum typically applies to employees with a final average earnings of greater than approximately $155,000

16. Pension example Normal retirement date: July 1, 2013 Retirement date: July 1, 2013 Marital status: married – spouse 14 years younger Credited service: 29.7493 years Money Purchase account balance at July 1, 2013 Your contributions $199,674 University contributions $202,880 Total $402,554 Benefits from York University Pension Plan Money Purchase Component $2,389 Minimum Guarantee $2,926 Supplementary Pension $ 537 Total Monthly Pension $2,926

17. Calculating the Minimum Guarantee

18. Calculating the MGP FAE = $74,747.85 FAYMPE = $47,980 Credited Service = 29.7493 years $47,980 X 1.4% = $671.72 $74,747.85 – $47,980 = $26,767.85 X 1.9% = $508.59 $671.72 + $508.59 = $1,180.31 X 29.7493 = $35,113.40 $35,113.40 /12 = $2,926.12 per month CRA check $2,696.67 X 29.7493 = $80,224 / 12 = $6,685 per month Will therefore receive the $2,926.12 per month since below the CRA maximum.

19. Calculating the MGP together Date of Birth: June 1955 Normal Retirement Date: July 1, 2020 Actual Retirement Date: July 1, 2013 Credited Service: 14.0014 years Early retirement reduction: 27%

20. Earnings

21. MGP continued # Years Earnings YMPE • July 2012 – June 2013 $82,968.29 $50,600 • July 2011 – June 2012 $80,846.04 $49,200 • July 2010 – June 2011 $81,250.27 $47,750 • July 2009 – June 2010 $81,288.35 $46,750 • July 2003 – June 2004 $80,795.78 $40,200 Final average earnings $407,148.73 /5 = $81,429.75 Final average YMPE $234,500 / 5 = $46,900

22. Final calculations FAE: $81,429.75 FAYMPE: $46,900 Credited service: 14.0014 years Early retirement reduction: 27% $46,900 X 1.4% = $656.60 $81,429.75 - $46,900.00 = $34,529.75 X 1.9% = $656.07 $656.60 + $656.07 = $1,312.67 X 14.0014 = $18,379.15 $18,379.15 / 12 = $1,531.60 per month $1,531.60 X 73% = $1,118.06 per month

23. Need to contact Pension & Benefits? • E-mail askpb@yorku.ca • Call 416-736-2100 extension 27572 (askpb) – the phone line is open from 9:00 am to 4:00 pm Monday to Friday. For Fridays in June, July and August the phone line closes at 3:00 pm. • Please have your employee ID ready when you call us. • Any form or document that we may need from you can be completed, scanned and emailed to askpb@yorku.ca.