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University of Windsor Pre-Retirement Seminar

University of Windsor Pre-Retirement Seminar. Welcome ! Tuesday, May 6, 2008. Presentation Overview. Sources of Retirement Income Types of Pension Plans Plan Definitions Faculty Pension Plan Increased MGB Limits Life as an Active Member Normal Retirement Early Retirement

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University of Windsor Pre-Retirement Seminar

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  1. University of Windsor Pre-Retirement Seminar Welcome ! Tuesday, May 6, 2008

  2. Presentation Overview • Sources of Retirement Income • Types of Pension Plans • Plan Definitions • Faculty Pension Plan • Increased MGB Limits • Life as an Active Member • Normal Retirement • Early Retirement • Postponed Retirement • Sample Pension Quotes • Survivor Options • Steps to commencing retirement • Indexing of Monthly Pensions • Net Replacement Ratio • Disability Pension • Terminating Membership • Active Faculty and Librarian Benefits • Benefits after retirement • Benefit options and premiums for faculty retirees • Group Health Care Plan for Retired Members Premium Subsidy

  3. Sources of Retirement Income • Main Government Plans • Recommend application period 6 months prior • Refer to OAS/CPP reference guide • Canada Pension Plan (CPP)  $10,614.96 2008 maximum • Must be applied for, retroactive payments can be made for a maximum of 12 months • Old Age Security (OAS)  $ 6,027.72 2008 1st Q maximum • Must be applied for, retroactive payments can be made for a maximum of 11 months • Based on years of residence in Canada. • Income based – claw back applicable from $64,718. Income limit $104,903 • Guaranteed Income Supplement (GIS) • Allowance for spouses / survivors • Company Pension Plans • Personal Savings & RRSP’s

  4. Types of Pension Plans • Defined Benefit Plans (DB) • Benefit is defined by a formula • Pension at retirement is always known • Benefit entitlement paid subject to maximums ($2,333 for 2008) • Defined Contribution Plans (DC) • Contributions are defined by a formula • Pension at retirement is unknown • Plan contributions subject to annual maximums ($21,000 for 2008) • Hybrid Plan – a combination of DB and DC • Attempts to provide the best of both worlds • Primarily a DC plan with a DB minimum guarantee (safety net)

  5. Plan Definitions • BAE = Best Average Earnings = 12 X average of Members monthly earnings in the 48 months of highest earnings, (not necessarily consecutive) prior to retirement. • Earnings = Member’s basic salary, excludes overload, allowances, bonuses or stipends, extramural etc. • YMPE = Year’s Maximum Pensionable Earnings in effect under the Canada Pension Plan. • (2008 = $44,900) (2007 = $43,700) (2006 = $42,100) (2005 = $41,100) • FYMPE = Average of YMPE during same period used to determine your BAE.

  6. Faculty Pension Plan • Hybrid Pension – Two Components comprised of a • Money Purchase (MPP) (Defined Contribution) PLUS • Minimum Guarantee (MGB) (Defined Benefit) • You will always receive at a minimum the value of the MGB benefit

  7. Faculty Pension Plan • Money Purchase Pension (Defined Contribution) • 6% Member Contribution PLUS 6% University Contribution credited to individual member accounts along with fund rate of return • Money Purchase Pension (MPP) payable monthly at retirement in the form of a variable annuity – subject to positive / negative rates of return • MPP = Total MPP Account at Retirement Actuarial Annuity Factor Actuarial assumptions include mortality, retirement age, and spousal age

  8. Faculty Pension Plan • Minimum Guarantee Benefit (Defined Benefit) • 1.5% of Best Average Earnings (BAE48) up to Final Average YMPE (FYMPE48) PLUS • 2 % of BAE48 above FYMPE48 Multiplied by • Years (and part years) of Pensionable Service in the plan

  9. Faculty Pension Plan Additional Voluntary Contributions (closed program) • Held in a separate account • Lump sum payment in cash or RRSP transfer OR • Additional monthly pension provided by the lump sum above using the Actuarial Basis in effect at time of retirement • Same indexing provision as the MPP Former employer transfers • Treated as Additional Voluntary contributions above • No impact on your MPP or MGB benefits Past Service Buybacks • Defined Benefit MGB service only – does not affect MPP pension • Certain restrictions apply • Same indexing provision as MGB benefits

  10. Faculty Plan – Increased Limits • CRA limit on amounts that can be paid from a defined benefit provision of a pension plan. • Year 2008  $2,333 per year of pension service • Year 2009  $2,444 • Year 2010  Indexed to the Average Industrial Wage • Example: $2,333 x 30 = $69,990 (BAE > $128,000) $2,444 x 30 = $73,320 (BAE > $133,500) This provision applies only to the MGB pension, not the MPP Pension. The MPP pension was limited by the contribution limits being applied to your account over your working career.

  11. Life as an Active Member Automatic membership for full time Faculty and Librarians, Limited Term Appointments and Sessional Lecturers. Optional for Sessional Instructors Once a member you may not opt out. Normally first of month after hire. Contributions – 6% of normal salary, with matching University contribution. Special rules for certain types of leaves Pensionable earnings, service and contributions recorded monthly Immediate Vesting – ownership of pension benefits Pension Adjustment – T4 - deemed value of one year plan participation – reduces personal RRSP room Annual Pension Statement – within 6 months of plan year end

  12. Faculty Pension Plan – Normal Retirement • Normal Retirement Date:age 65 to receive an unreduced pension. • Faculty, Librarians and Sessionals • Hired Sept. 1, 1970 or earlier  Sept. 1st following 65th birthday • Hired after Sept. 1, 1970  July 1st following 65thbirthday • Non faculty members 1st of the month following the 65th birthday

  13. Steps to Retiring (Normal Retirement) • Six months prior to NRD, a preliminary pension quote is prepared. • Quote uses estimated final year earnings, contributions and fund returns. • Pension quote will be provided. Member may meet with Pension Manager to review the quote. • Member should review upcoming retirement with Department Head. • Two months prior to NRD member (and spouse if applicable) will meet with the Pension Manager to choose the pension option and complete all paperwork. • Official last day is the last working day of the month. • A final pension calculation is done at plan year end with retro active adjustments paid if necessary. • Paid by direct deposit, first day of every month.

  14. Faculty Pension Plan – Early Retirement • By mutual consent of the Member and the University you may retire within 10 years of your Normal Retirement Date. There is no minimum service credit requirement. • You will receive the greater of your: • Money Purchase Account – based on account balance at early retirement, converted to a monthly pension • Minimum Guarantee Pension, reduced by an actuarial equivalent reduction before being compared to the MPP • Usually a 6% to 7% reduction per year away from your NRD • Sample reductions AgeReduction 55 70% 60 35% 62 21%

  15. Steps to Retiring (Early Retirement) • Member requests a pension quote (minimum age 55) – two months notice. • Quote uses estimated final year earnings, contributions and fund return. • Pension quote will be provided to the member. Member will meet with Pension Manager to review the quote. • Six months prior to early retirement member should review with Head, and send a formal written request for early retirement to VPA office. • IF accepted, two months prior to retirement member (and spouse if applicable) meet with Manager, Pensions and Benefits to choose the pension option and complete all paperwork. • Official last day is the last working day of the month. • A final pension calculation is done at plan year end with retro active adjustments paid if necessary. • Paid by direct deposit, first day of every month.

  16. Faculty Pension Plan – Postponed Retirement Effective December 2006 mandatory retirement ended. You may now elect to continue working beyond your normal retirement date. • Two options at your normal retirement date: • Continued plan participation (maximum to end of year age 71) • Cease accruing future pension benefits • You will receive the greater of your: • Money Purchase Account – based on account balance at postponed retirement commencement, converted to a monthly pension • Minimum Guarantee Benefit calculated as at date of 1 or 2 above FAE and credited service calculated as at date of 1 or 2 above MGB under option 2 is adjusted to reflect the later commencement date (age and length of payment)

  17. Steps to Retiring (Postponed Retirement) • Six months prior to NRD, HR will contact you to determine whether you intend to retire or continue working. If desired a NRD and a postponed retirement quote is prepared. • Quote uses estimated final year earnings, contributions and fund returns. • Pension quote will be provided to the member. Member may meet with Pension Manager to review the quote. • Member is encouraged to discuss his/her intentions with Department Head to allow planning for teaching purposes. • Two months prior to postponed retirement date member (and spouse if applicable) meet with the Pension Manager to choose the pension option and complete all paperwork. • Official last day is the last working day of the month. • A final pension calculation is done at plan year end with retro active adjustments paid if necessary. • Paid by direct deposit, first day of every month.

  18. NRD 2010 Pension – MGB payable Date of retirement = July 1, 2010 Pensionable Service = 34 years Best average earnings = $123,145 (highest 48 months) Final average YMPE = $45,386 MPP Account Balance = $815,199 Actuarial annuity factor = 11.136 (age, spousal age, mortality) MPP = $815,199 / 11.136 = $73,204 per year ($6,100 month) MGB = 34 x[0.015 x $45,386) + 0.02 x($123,145 - $45,386)] = $76,023 MGB payable at retirement = $76,023 per year ($6,335 month)

  19. ERD 2008 Pension – MPP payable Date of retirement = July 1, 2008 Pensionable Service = 32 years Best average earnings = $116,076 (highest 48 months) Final average YMPE = $42,400 MPP Account Balance = $738,861 Actuarial annuity factor = 11.580 (age, spousal age, mortality) MPP = $738,861 / 11.580 = $63,805 per year ($5,317 month) MGB = 32 x[0.015 x $42,400) + 0.02 x($116,076 - $42,400)] = $67,504 Early Retirement Reduction = $67,504 x 85.59% (14.41% reduction) = $57,776 MPP payable at retirement = $63,805 per year ($5,317 month)

  20. Postponed 2012 Pension with ContributionsMGB payable Date of retirement = July 1, 2012 Pensionable Service = 36 years Best average earnings = $130,645 (highest 48 months) Final average YMPE = $49,591 MPP Account Balance = $898,094 Actuarial annuity factor = 10.6792 (age, spousal age, mortality) MPP = $898,094 / 10.6792 = $84,097 per year ($7,008 month) MGB = 36 x[0.015 x $49,591) + 0.02 x($130,645 - $49,591)] = $85,138 MGB payable at retirement = $85,138 per year ($7,095 month)

  21. Postponed 2012 Pension with NO Contributions - MGB payable Date of retirement = July 1, 2012 Pensionable Service = 34 years Best average earnings = $123,145 (highest 48 months) Final average YMPE = $45,386 MPP Account Balance = $864,844 Actuarial annuity factor = 10.6792 (age, spousal age, mortality) MPP = $864,844 / 10.6792 = $80,984 per year ($6,748) MGB = 34 x[0.015 x $45,386) + 0.02 x($123,145 - $45,386)] = $76,023 Postponed Adjustment = $76,023 x 1.1524% (15.24% increase) = $87,607 MGB payable at retirement = $87,607 per year ($7,300 month)

  22. Faculty Pension Plan – Survivor Options • Death while active – Greater of MPP account or MGB value • Lump sum or Spousal Monthly Pension • Death after Retirement – based on option chosen at retirement • If single at retirement or with spousal waiver • Life Only, Life 5, Life 10 or Life 15 • If legal spouse at retirement or no spousal waiver on file • Joint and Survivor 60, 66 2/3(Guar 5), 75 or 100% • Basic pension reduced 10% - 20% to provide spousal benefit (two lives insured) • Spouse and member can waive 60% option • In ALL cases, options are permanent on 1st date of retirement. This is a legislated requirement

  23. Faculty Pension Plan – 8 Survivor Options Single Life Pension (L0) Payable for your lifetime. Ceases upon your death. No beneficiary. Single Life Pension – Guaranteed Five Years (L5) Payable for your lifetime. If you should die prior to receipt of 60 months of pension, the balance of the remaining period paid to your beneficiary at 100% Single Life Pension – Guaranteed Ten Years (L10) Payable for your lifetime. If you should die prior to receipt of 120 months of pension, the balance of the remaining period paid to your beneficiary at 100% Single Life Pension – Guaranteed Fifteen Years (L15) Payable for your lifetime. If you should die prior to receipt of 180 months of pension, the balance of the remaining period paid to your beneficiary at 100% Monthly pension paid to spousal and all other beneficiaries. If Estate is designated any balance owing is paid via lump sum (taxable) to the Estate.

  24. Faculty Pension Plan – 8 Survivor Options Example: Single Life Pension – Guaranteed Ten Years (L10) Bob retires on July 1, 2005 - passes away on June 15, 2008 - 36 months of pension paid at date of death - 84 months of pension paid at 100% continue to spouse. - spousal pension ceases June 30, 2015 * If no spouse or other named beneficiary, Estate receives 100% of the monthly pension X 84 months as a lump sum cash payment (taxable)

  25. Faculty Pension Plan – 8 Survivor Options For Members with a Spouse All Joint and Survivor Pensions paid for your lifetime. Upon your death, your spouse – if living – receives a monthly pension for his/her lifetime based on the option chosen as outlined below. If spouse pre-deceases you the pension is NOT restored. Joint and Survivor Pension reducing to 60% (J&S 60%) • Payable for your lifetime. After your death, your spouse if living receives 60% of the monthly pension in pay at the time of your death for his/her lifetime. Joint and Survivor Pension reducing to 66.67 (J&S 66.67% - G5) • Payable for your lifetime. If you die prior to receipt of 60 months of pension, the balance of the guarantee period paid at 100% to your spouse. Then the pension reduces to 66.67% for his/her lifetime. Joint and Survivor Pension reducing to 75% (J&S 75%) • Payable for your lifetime. After your death, your spouse if living receives 75% of the monthly pension in pay at the time of your death for his/her lifetime. Joint and Survivor Pension reducing to 100% (J&S 100%) • Payable for your lifetime. After your death, your spouse if living receives 100% of the monthly pension in pay at the time of your death for his/her lifetime.

  26. Faculty Pension Plan – 8 Survivor Options Example: J&S 66.67 Guarantee 5 years (60 months) Bob retires on July 1, 2005 - passes away on June 15, 2008 (36 months pension paid) - 100% monthly pension paid to spouse until June 30, 2010 (24 months) - then 66.67% monthly pension paid to spouse until her death Bob retires on July 1, 2005 - passes away on June 15, 2011 (72 months pension paid) - 66.67% monthly pension paid to spouse until her death Bob retires on July 1, 2005 - spouse passes away on August 1, 2005 - Bob passes away on June 15, 2008 (36 months pension paid) - 24 months remaining pension paid in a lump sum to his estate

  27. Faculty Pension Plan – Indexing Monthly Pension Both the MPP and MGB adjusted for the October 1st pension deposit, retroactive to July 1st MPP adjusted by the fund rate of return less 6% with an additional adjustment for mortality experience – can increase or decrease. July 2007 adjustment was 8.28% MGB increase based on the increase in the Consumer Price Index. July 2007 adjustment was 1.76% After the MPP and MGB have been adjusted (plus or minus), we compare the two, if MPP is lower, a supplement is added to bring the pension up to the MGB amount. This becomes the new pension payable starting at July 1st Indexing rights pass on to those with a Survivor pension or during a guarantee period

  28. Net Replacement Ratios (NRR) Valuable tool used to forecast retirement income NRR compares pre-retirement income to post- retirement income Highlights often forgotten taxes, deductions from gross pay General rule – retirement income should equal 70% of pre-retirement income to maintain similar living standards

  29. Faculty Pension Plan – Disability Retirement • Available to members who: • Have attained age 50 with • A minimum of 15 completed years of continuous service who • Are not eligible or expected to be eligible in the future to receive salary continuance benefits under any insured plan sponsored by the University • Medical evidence of disability required • Benefit is calculated with actuarial reductions in entitlement

  30. Faculty Pension Plan – Terminating before Retirement • Termination Benefit is the Greater of: • Money Purchase Component Account balance to-date • Commuted value of Minimum Guaranteed Pension earned to-date • Transfer Options: • Transfer termination benefit to a locked-in vehicle • Leave benefit in plan for deferred pension at a future retirement date • In Lieu of Pension, Members MAY transfer entitlements from plan • Considered a termination, not a retirement • May have preferable survivorship options • Forfeit Minimum Guarantee Benefit and lifetime pension indexing rights • Higher investment fees, potentially greater investment risk to member • Forfeit future Pension Surplus sharing • Forfeit rights to Green Shield benefits (both University paid and retiree paid) • Forfeit rights to Faculty Retiree Group Health Care Plan Subsidy

  31. Faculty Plan – Pensions 101 Thank You! Questions?

  32. Faculty Plan – Benefits 101

  33. Active Faculty, Librarians University Paid Health / Dental / Out of Country coverage Short / Long Term Disability Life Insurance - 3 X Annual Salary – Maximum $350,000 Employee Assistance Program Health Care Spending Account for qualifying sessional instructors, in lieu of regular faculty health benefits

  34. Benefits while active Health & Dental benefits • Extended Health University Paid • Semi Private University Paid • Dental University Paid • Vision University Paid • Out of Province University Paid • Drug University Paid • Employee Assistance University Paid Insurances • LTD Employee Paid • Life Insurance University Paid • Accidental Death University Paid and Dismemberment

  35. Optional Benefits while active • Optional Life Insurance Employee Paid • Optional Accidental Employee Paid Death and Dismemberment • Pension Matched Payments • Tuition Waiver (taxable benefit) University Paid • St Denis Centre University Paid • University Club Membership WUFA sponsored At retirement these benefits continue • Library, Email and Internet University Paid • Pre Paid Parking Coupons Retiree Paid • Tuition Waiver (taxable benefit to dependant) University Paid • Optional Life Ins to age 70 Retiree Paid • St. Denis Centre (excludes the Forge facility) University Paid • Lifetime University Club Membership WUFA sponsored (Faculty & Librarians only)

  36. Retired Faculty, Librarians, Others Short / Long Term Disability Insurance ceases Life Insurance ceases – can exercise conversion University Paid Health and EAP Coverage ends Normal or Postponed Retirement Dental coverage – premium shared equally by University/Retiree Retirees Eligible to enroll in Green Shield Benefits Plan Survivors Eligible to enroll in Green Shield Benefits Plan Choice of Five packages – Can opt in and up, cannot opt down No opting in and out – opt out is permanent If enrolled in Green Shield Health benefits, eligible for Health Care Subsidy

  37. Faculty Retiree Option 1- all benefits

  38. Faculty Retiree Option 2- no dental

  39. Faculty Retiree Option 3 – no drugs

  40. Faculty Retiree Option 4 - dental only

  41. Faculty Retiree Option 5 – U.S. residents

  42. Health Care Subsidy July 1, 2001 – June 30, 2004 Collective Agreement Premium subsidies for Faculty Retirees enrolled in the Group Health Care Plan for Retired Members Funded by the University Assets invested consistent with Endowments Investment Policy 3 year rolling Average Net Income to be allocated Participant subsidy equals one year investment return allocation times participant pension service years over total participant pension service years Non cash subsidy, can only be used to reduce existing monthly retiree health benefit premium (Division 5231) Non taxable to the participant

  43. Health Care Subsidy Historical Information

  44. Thank You! Questions?

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