A handbook for members of the OMERS Plan

Transcription

1 A handbook for members of the OMERS Plan

2 Important! This handbook is a summary of the defined benefit provision of the OMERS Primary Pension Plan (OMERS Plan). In this booklet, we refer to the OMERS Primary Pension Plan as the OMERS Plan. The information in this booklet provides a summary of the terms of the OMERS Plan text at the time of publication. From time to time, the OMERS Plan text may be amended by the OMERS Sponsors Corporation. If there is any discrepancy between this information and the Ontario Municipal Employees Retirement System Act, 2006 (OMERS Act, 2006) and the OMERS Plan text, the OMERS Act, 2006 and OMERS Plan text will govern. OMERS Primary Pension Plan Registration Number: Additional Voluntary Contributions (AVCs) The additional voluntary contribution provision is part of the OMERS Plan and is subject to the conditions established by the OMERS Administration Corporation pursuant to Section 47 of the OMERS Plan. The OMERS Plan and such related conditions may be amended in the future in accordance with the OMERS Act, 2006 and the Pension Benefits Act (Ontario). Your Information Is Secure Personal information is collected for pension administration purposes by OMERS under the authority of Section 35 of the OMERS Act, OMERS does not share personal information with any other person other than for purposes of pension plan administration, and, the provision of personal information is considered consent to its use for those purposes. The collection, use, retention and destruction of personal information are subject to our Privacy Policy at Any questions regarding the collection of personal information should be directed to OMERS Client Services at or Printed July 2013

3 Table of Contents Contacting OMERS Client Services 3 myomers The Key to Your Pension 3 Welcome to OMERS 4 Your OMERS Plan 4 Additional Voluntary Contributions (AVCs) 5 Great Value 5 How OMERS Helps Fund Your Benefit 6 Section one Membership 7 Joining the OMERS Plan 7 When You Become Entitled to a Benefit 8 Previous Service in the OMERS Plan 8 Previous Service in a Pension Plan 8 Marriage Breakdown 8 Section two Contributions 9 How OMERS Plan Contributions Are Calculated 9 Contribution Rates 10 OMERS Plan Contributions and the CPP Year Limit 11 OMERS Plan Contributions and Income Tax 11 OMERS and Your RRSP Room 11 Table of Contents 1

4 Section three Service 12 Credited Service 12 Eligible Service 14 Increasing Your Credited Service 15 Section four Retirement 19 Preparing for Retirement 19 Early Retirement Date 20 Normal Retirement Date 20 Working Past Normal Retirement 20 Returning to Work After Retirement 21 When Your Pension Is Paid 21 OMERS and the CPP 21 The Building Blocks of an OMERS Plan Pension 22 Early Retirement Pensions 24 Inflation Protection 26 Section five Disability Benefits 27 Disability Waiver (Earn Pension While on Disability) 27 Disability Pension (Receive Pension While Permanently Disabled) 28 Section six Leaving Employment 30 Options When Leaving Your Employer 31 Locked-In Pension Benefits 33 Commuted Value During Grievance 33 Section seven Benefit Calculation Changes 34 Inflation Protection (Pre-Retirement Indexing) 34 Early Retirement Subsidies 35 Section eight Shortened Life Expectancy Benefit 36 Section nine OMERS Survivor Benefits 37 Survivor Benefits in the Event of Death Before Retirement 38 Additional Refunds 39 Survivor Benefits in the Event of Death After Retirement 40 Definitions 42 Living Separate and Apart 43 Totally Disabled Child 44 Naming a Designated Beneficiary 44 Planning Ahead 44 2 Your OMERS Pension

5 Contacting OMERS Client Services Phone Monday to Friday, 8 a.m. to 5 p.m Fax Mail One University Ave. Suite 400 Toronto, ON M5J 2P1 Web omers.com The Key to Your Pension myomers gives you convenient, secure online access to your pension information. As a registered myomers user, you can: view your OMERS information online choose to receive your annual Pension Report via e-only delivery access the Buy-back Calculator and the Retirement Income Estimator set up an Additional Voluntary Contributions (AVC) account and view your AVC annual statement online. To read more about myomers and to register, go to Scan this QR code with your smartphone to learn more about myomers. Contacting OMERS Client Services 3

6 Welcome to OMERS OMERS exists for one purpose: to provide lifetime retirement income for 429,000 Plan members. Your OMERS membership is backed by some of the best pension and investment professionals in Canada all working toward providing you with competitive benefits at a reasonable cost. This handbook covers the defined benefit provision of your OMERS Plan membership. Your OMERS Plan OMERS is one of Canada s largest pension plans for employees of more than 940 municipalities, school boards, libraries, police and fire departments, and other local agencies across Ontario. OMERS is the pension leader because our team consists of experienced pension professionals. Whether you reach one of our Client Services representatives, attend one of our many presentations around the province, or sign in to our secure website, myomers, you ll be getting the information you need to fully understand and make the most of your OMERS Plan membership. And, you can take comfort in our quick service turnaround whether it s processing a benefit or answering your questions. 4 Your OMERS Pension

7 Additional Voluntary Contributions (AVCs) The AVC option is a retirement savings and investment opportunity that is part of the OMERS Plan, but separate from your defined benefit pension. The AVC option is available exclusively to OMERS Plan members. AVCs allow OMERS Plan members to invest in the OMERS Fund. Funds in an AVC account are invested using the same investment expertise, strategy and diversified fund you rely on for your OMERS pension. For full details about the AVC option, see the guide, Consider the AVC Option, and the Terms of Participation at or contact OMERS Client Services. Scan this QR code with your smartphone to learn more about AVCs. Great Value An OMERS Plan pension is an important factor in helping you to enjoy a financially secure retirement. It will provide you with regular monthly payments when you retire as an OMERS Plan member. These continue for the rest of your lifetime. Together with government retirement benefits and personal savings, your OMERS pension is a key source of your retirement income. Being an OMERS Plan member is great value for your money. OMERS provides: a lifetime pension benefit, based on your earnings and years of service early retirement options a bridge benefit when you retire (payable until you reach age 65) inflation protection options if you leave your employer excellent survivor benefits disability benefits. Welcome to OMERS 5

8 OMERS Plan contribution rates are competitive within the public sector and represent excellent value for the future. In fact, an OMERS Plan member s contributions plus interest are typically repaid in the first five years of retirement. OMERS Plan contributions also lower your taxable income. The contributions you make, together with matching contributions from your employer, fund a portion of the OMERS Plan pension benefit you receive when you retire. The balance is paid by the investment earnings of the OMERS Fund. In 2010, OMERS Sponsors Corporation approved a three-year strategy of temporary contribution rate increases and benefit calculation changes. Information about contribution rates is on page 10. Information about benefit calculation changes for members who leave their employer before they are eligible for an early retirement pension is on page 34. How OMERS Helps Fund Your Benefit OMERS is one of the largest institutional investors in Canada. Our highly skilled investment team manages a diversified global portfolio of stocks and bonds, as well as real estate, infrastructure and private equity investments. Our investment entities operate under the OMERS Worldwide brand: OMERS Capital Markets, which is responsible for a portfolio of fixed income and equity investments in financial markets around the world OMERS Private Equity, which manages global investments as well as holding direct interests in private companies Borealis Infrastructure, which has developed with other investors a portfolio of infrastructure assets including Bruce Power, marine ports, a satellite company, oil and gas pipelines and health-care diagnostic services Oxford Properties Group, which oversees and manages real estate for OMERS and on behalf of its co-owners and investment partners OMERS Strategic Investments, which was established to support and extend the global reach of Oxford, Borealis and OMERS Private Equity, and now includes OMERS Ventures, the venture capital investment arm of OMERS. For more information on OMERS investments, please visit 6 Your OMERS Pension

9 section one Membership Becoming a member is where it all begins. This section has details about our membership criteria and when members become entitled to an OMERS Plan benefit. Joining the OMERS Plan Full-time employees join the OMERS Plan immediately when they are hired by a participating employer. Non-full-time employees join immediately or when they become eligible. Full-time employees If you re a permanent, full-time employee, you join the OMERS Plan on the date you are hired or on the date you become full-time. You remain a member even if you change from full-time to part-time. Non-full-time employees You re a non-full-time employee if you work less than a full workweek, or less than a full year, or on a fixed-length, non-permanent contract basis. (This includes 10-month, contract or seasonal workers.) If you don t work full-time, you either: join the OMERS Plan when you are hired (if it is your employer s policy); or choose to join the OMERS Plan when you become eligible. Membership 7

10 If you don t have to join the OMERS Plan as a condition of employment, you may choose to join if you meet one of the following conditions in both the previous two calendar years with any OMERS participating employer: you worked at least 700 hours; or you earned at least 35% of the year s maximum pensionable earnings (YMPE) the Canada Pension Plan (CPP) earnings limit. Once you become a member, you remain in the OMERS Plan as long as you work for an OMERS employer. This applies even if your work hours or income fall below the eligibility requirements, or if your work status changes to or from full-time. When You Become Entitled to a Benefit You begin to earn a pension, and you become entitled to a pension benefit, immediately when you join the OMERS Plan. Previous Service in the OMERS Plan If you left your pension benefit in the OMERS Plan when you left your previous OMERS employer, your previous service will be merged with the service you are currently earning. Previous Service in a Pension Plan You may be able to transfer previous service into the OMERS Plan from another public or private sector registered pension plan. This would bring your previous service into the OMERS Plan and increase the OMERS Plan pension you re beginning to earn. (See Increasing Your Credited Service, page 15.) Marriage Breakdown Effective January 1, 2012, OMERS and other registered pension plan administrators in Ontario must comply with new rules related to the valuation and division of the pension benefit in the event of marriage breakdown. More information on the new rules is available at breakdown or on FSCO s website at 8 Your OMERS Pension

11 section two Contributions The OMERS Plan pension contributions you make are matched by your employer. How OMERS Plan Contributions Are Calculated You and your employer contribute equally to the OMERS Plan based on your earnings. We use your regular contributory earnings excluding additional amounts such as overtime pay and most one-time, lump-sum payments to calculate your contributions. In turn, we use these same contributory earnings when we calculate your OMERS Plan pension. The earnings we use may differ from what your employer reports for income tax purposes on your T4. To keep the OMERS Plan fully funded, contribution rates may be adjusted periodically according to decisions made by the OMERS Sponsors Corporation. Note: If incentive pay is a large percentage of your earnings or your total contributory earnings exceed seven times the Canada Pension Plan (CPP) earnings limit, your earnings for pension purposes could be capped. See page 23 for details. Contributions 9

12 Contribution Rates OMERS Plan contribution rates in 2013 Normal retirement age 65 members Normal retirement age 60 members On earnings up to CPP earnings limit* 9.0% On earnings over CPP earnings limit* 14.6% On earnings up to CPP earnings limit* 9.3% On earnings over CPP earnings limit* 15.9% * You contribute to the Canada Pension Plan (CPP) up to the year s maximum pensionable earnings (YMPE), which is the CPP earnings limit ($51,100 in 2013). OMERS Plan contribution examples for 2013 Normal retirement age 65 Earnings OMERS Plan contributions every two weeks* (matched by your employer) $40,000 $ $65,000 $ Normal retirement age 60 Earnings OMERS Plan contributions every two weeks* (matched by your employer) $65,000 $ $90,000 $ * This calculation uses the 2013 YMPE ($51,100). You and your employer s matching contributions help to fund your pension. Your benefit is based on a formula that takes into account your earnings and years of service. (See How we calculate your OMERS Plan pension, page 22.) 10 Your OMERS Pension

13 OMERS Plan Contributions and the CPP As the first table page 10 shows, you pay less on earnings up to the YMPE, and a higher amount on earnings above the YMPE. The YMPE is the CPP earnings limit you contribute to CPP on earnings up to this limit. The OMERS Plan contribution rate is lower up to the YMPE because OMERS is designed to work together with CPP to provide combined pension benefits. (See The Building Blocks of an OMERS Plan Pension, page 22.) 35-Year Limit If you reach 35 years of credited service the maximum service in the OMERS Plan you and your employer stop making contributions to the OMERS Plan. Your employer will continue to report your annual earnings for OMERS to take into account when calculating your best five earnings (see page 23). OMERS Plan Contributions and Income Tax Your regular contributions to the OMERS Plan lower your taxable income. Your employer reports your contributions to the Canada Revenue Agency (CRA) on your T4 slip each year. Amounts you contribute to buy a leave period or past service may also lower your taxable income. OMERS and Your RRSP Room Being an OMERS member affects your RRSP contribution room. A pension adjustment (PA) reflects the deemed value of the pension you earned as an OMERS Plan member during the preceding year. Your employer reports your PA in box 52 of your T4 slip. The CRA uses your PA in their formula to calculate your new RRSP contribution room for the current year: 18% x previous year s earned income (up to a maximum) previous year s PA (up to a maximum) (but not less than $0) After you file your tax return, the CRA sends you a Notice of Assessment that includes a statement of your RRSP contribution room for the year. You may make an RRSP contribution up to this amount, or carry the contribution room forward, within limits, for use in a future year. Contributions 11

14 section three Service Your years of service are a key component of your OMERS Plan pension. While you work for an OMERS employer, you earn service in the OMERS Plan. You may also have other types of service that could help to increase your OMERS Plan pension or help you to retire sooner. Credited Service Credited service is the number of years and months of paid service you have in the OMERS Plan, including any service you purchased. The maximum amount of credited service a member may have is capped at 35 years. We use your credited service and your earnings to calculate your pension. Credited service includes periods of time for which: you contributed to the OMERS Plan (and have not had a refund of contributions) you earned pension during a contribution holiday (an OMERS Plan surplus period when contributions are not required) you purchased leaves or previous service you transferred funds from another pension plan you earned pension while on an OMERS-approved disability leave from your OMERS employer. Credited service does not include service for which your contributions were refunded. 12 Your OMERS Pension

15 Full-time If you work full-time, you earn one year of credited service for every full year you work. Full-time credited service example Melinda works a standard 40-hour full-time schedule. She earns $70,000. We calculate Melinda s credited service for one year as follows: 2,080 hours = 1 year (52 weeks x 40 hours) Melinda has earned one year of credited service. We record her earnings for that year as $70,000. Non-full-time If you don t work full-time, we calculate your credited service as a proportion of what a full-time member would earn. Also, when we calculate your pension, we annualize your earnings giving you the equivalent of full-time earnings. Non-full-time credited service example Mike works 20 hours a week, compared to Melinda s standard 40-hour full-time schedule. Mike earns $35,000, which is half of Melinda s annual salary rate of $70,000 for her position. We calculate Mike s credited service for one year as follows: 1,040 hours 2,080 hours = 0.5 years Mike has earned half a year of credited service. We record his annualized earnings for that year as $70,000. When we calculate Mike s pension, we use his credited service and the average of his annualized earnings to ensure that his pension is accurate and fair. Service 13

16 Eligible Service Eligible service is service with any OMERS participating employer that isn t credited service. Although this doesn t increase your normal retirement pension, it can help bring you closer to an unreduced early retirement pension. We add your eligible service to your credited service when we calculate your early retirement pension factor. (See Early Retirement Pensions, page 24.) Examples include: summer-student work with an OMERS employer service that was refunded when you left an OMERS employer unpurchased pregnancy/parental leave unpurchased waiting periods. You may be able to purchase some eligible service, converting it into credited service. (See Increasing Your Credited Service, page 15.) 14 Your OMERS Pension

17 Tell us if you have eligible service Your credited service and any eligible service is listed on your annual Pension Report. If you think you have eligible service that is not on your OMERS Plan record, please contact OMERS Client Services as soon as possible. Increasing Your Credited Service You may have some OMERS Plan service or other service that doesn t currently count as credited service. If so, you may be able to purchase this service and convert it into credited service. This would increase your pension and it may also help you to retire earlier without a reduction. Transferring service from another pension plan You may have belonged to another registered pension plan before you joined the OMERS Plan. If you still have a benefit remaining in that plan, you may be able to transfer the service into the OMERS Plan, which will increase your OMERS Plan pension. OMERS has transfer agreements with many other public sector pension plans. In addition, OMERS can accept transfers from private sector pension plans. You may also be able to purchase past periods of employment in private sector pension plans. Buying leave periods As an OMERS Plan member, you may buy the service you didn t earn during leave periods such as: pregnancy/parental leave authorized leave of absence (including compassionate and reservist leave) emergency, family medical, and organ donor leave periods self-funded leave. When you return from a leave period, you have the option of buying all, some or none of the service for that period. Your employer will provide you with your options and will calculate the cost for you. Service 15

18 Making the decision It s up to you whether you purchase a leave period. Weigh the cost of purchasing the leave period against how much it will increase your OMERS Plan pension. If you prefer, talk to your employer and/or a professional financial adviser. For an estimate of what your pension will be with and without the service purchase please contact us. Purchase deadline: You have until December 31 of the year following the year in which your leave ended. After that, you can purchase the service as a buy-back, at a cost reflecting the present-day value of the future benefit. This is typically more expensive. If you buy a leave period before the purchase deadline, your contributory earnings will count towards your best five earnings. (See Key components of your pension calculation, page 23.) Purchasing previous service Purchasing previous service also increases your credited service, which increases your pension and may help you to retire earlier without a reduction. You may be able to purchase some or all of your: shortfall in transferred service when the amount you transferred into the OMERS Plan from another registered pension plan didn t buy the same amount of OMERS Plan service leaves you didn t purchase before the purchase deadline eligible service with an OMERS employer including a waiting period or previously refunded service post-1991 waiting period post-1991 refunded service with the registered pension plan of a Canadian employer. To purchase these types of service, you pay the present-day cost reflecting the full value of your additional future pension benefit. You can buy past service any time as long as you re still working for an OMERS employer, or within 30 days after the date you leave your employer or retire. 16 Your OMERS Pension

19 The OMERS Plan offers several payment options. You can: pay the full cost in one lump sum by personal cheque, transfer from an RRSP or locked-in retirement account (LIRA), transfer from another registered pension plan arrange to pay over 12, 24 or 36 months through a monthly payment plan pay using a combination of a lump sum for a portion and the monthly payment plan for the balance. For the monthly payment plan, payments are made by pre-authorized debit. Service is credited as your monthly payments are received. Keep in mind... Payment options depend on the service you wish to purchase. Service 17

20 Purchase deadline: The cost of the past service you want to buy will remain in effect for six months (or up to 30 days after the date you leave your employer, if this happens first). After that, we will recalculate the cost, which increases with your age and your salary, and reflects the increasing value of the benefit. Requesting a cost to buy service OMERS will send you a package automatically if there is purchasable service on your record. To start the process yourself, there are two ways to request a cost to buy past service: 1. Buy-back Calculator: If you are a registered myomers user, you can request a cost to buy service by using the online Buy-back Calculator at The Buy-back Calculator will produce a personalized package that includes: a summary showing the cost to buy your previous service the resulting increase in your pension your payment options instructions and forms if you wish to go ahead with the service purchase. The package is saved on myomers and is valid for six months. After six months, the cost expires. If you still wish to buy the service, you can use the Buy-back Calculator to get a new cost which would again be valid for six months. 2. Call OMERS Client Services The OMERS Client Services representative will confirm your identity, and then help with your request. The package will be sent to you by mail, and if you have a myomers account, an electronic copy will be saved there for six months. Service purchases and income tax Purchasing leave periods or past service can affect your RRSP contribution room. The Income Tax Act governs the service you can buy and the methods of payment. It also determines whether a maximum purchase limit applies and whether contributions will lower your taxable income. 18 Your OMERS Pension

21 section four Retirement This is what you re working toward: your life after work. OMERS has both normal and early retirement options. Find out how we bring together your OMERS Plan service and earnings the two key components used to calculate your OMERS pension to provide you with retirement income for life. Preparing for Retirement Visit for comprehensive information about retirement planning to help you prepare for your life after work. If you are a registered myomers user, try the Retirement Income Estimator to help you predict what your retirement income will be from the OMERS Plan, government benefits, and personal savings. You can also contact OMERS Client Services directly for information. Your employer will advise OMERS of your planned retirement, and will ask you to complete the necessary forms to begin your pension. Retirement 19

22 Early Retirement Date Your early retirement date is the date when you become eligible to receive an OMERS Plan pension. You reach this date on your early retirement birthday. Your early retirement birthday is: your 55 th birthday if your normal retirement age is 65 your 50 th birthday if your normal retirement age is 60. On your early retirement birthday, you can elect and begin to receive an OMERS Plan pension regardless of how much service you have. Normal Retirement Date Most OMERS members have a normal retirement age of 65. Some police and firefighter members have a normal retirement age of 60. Your normal retirement date is the last day of the month in which you reach: age 65 if your normal retirement age is 65 age 60 if your normal retirement age is 60. Your OMERS Plan pension begins the first day of the month following the month you retire. Working Past Normal Retirement If you continue to work for an OMERS employer past your normal retirement date, your active membership in the OMERS Plan will continue. However, your OMERS pension will begin on December 1 of the year in which you reach age 71, whether or not you are still working, and you will no longer make contributions. 20 Your OMERS Pension

23 Returning to Work After Retirement Some members return to work after they have retired and have started to receive their OMERS Plan pension. If you begin working for an OMERS employer in a position that requires that you enrol, you will be re-enrolled in the OMERS Plan (and your pension will stop) unless you specifically elect to continue receiving your pension and not re-enrol. If you re-enrol in OMERS, your status as an active member will continue until the earliest of the following dates: November 30 of the year in which you reach age 71; or the day you subsequently retire. When you subsequently retire, we will combine all your credited service and earnings and recalculate your pension. When Your Pension Is Paid OMERS Plan pensions are paid in equal monthly instalments, deposited in your bank account on the first banking day of the month. OMERS is one of the few pension plans that do this; most pay pensions for a month at the end of that month. OMERS and the CPP Your OMERS Plan pension is designed to work with the Canada Pension Plan (CPP) to help provide stable, combined retirement income at a reasonable cost. Here s how: While you work, you pay a lower OMERS Plan contribution rate on the portion of your earnings on which you also contribute to CPP. This reduces the combined cost of your OMERS Plan and CPP contributions. Please see page 10 for OMERS Plan contribution rates. When you retire, your OMERS Plan and CPP pensions provide you with retirement income. For example, if you retire with 35 years of OMERS Plan credited service, your combined OMERS Plan and CPP pensions could be 70% or more of your best five years of earnings. After tax, this percentage would be even higher. Retirement 21

24 The Building Blocks of an OMERS Plan Pension Your OMERS Plan pension has two components: a lifetime pension, plus a bridge benefit that stops when you reach age 65. OMERS Plan lifetime pension All OMERS Plan members are entitled to receive a lifetime pension, regardless of when they retire. This is paid for life, and indexed to increase with inflation every year. Members who retire before age 65 will also receive an OMERS Plan bridge benefit until they reach age 65. OMERS lifetime pension CPP (unreduced) Income $ retirement OMERS Plan bridge benefit This temporary benefit supplements your OMERS Plan lifetime pension until age 65, when it is expected your CPP pension will begin. The bridge benefit: will not necessarily be the same amount as your CPP pension; and continues to be paid to age 65 even if you start your CPP pension early (from age 60). OMERS lifetime pension OMERS bridge benefit CPP (unreduced) Income $ retirement How we calculate your OMERS Plan pension Your OMERS Plan lifetime pension + bridge benefit to age 65 2% x credited service (years) x best five earnings Less OMERS Plan bridge benefit at age % x credited service (years) x lesser of best five earnings or AYMPE (see page 23) Equals your OMERS Plan lifetime pension from age Your OMERS Pension

25 Key components of your pension calculation Best five earnings this is the annual average of the 60 consecutive months during which your earnings were at their highest. It does not include any overtime pay or most lump-sum payments. It may, however, include earnings from a period of service that was transferred in from another registered pension plan. Note that your employer reports your contributory earnings annually. We calculate your earnings for a single month by dividing your reported annual earnings by your total months of credited service reported for that year. Cap on incentive pay If incentive pay is a large percentage of your earnings, your post-2010 earnings for pension purposes will be capped at 150% of contributory earnings calculated before incentive pay. Incentive pay means earnings related to performance-based bonus payments and similar pay arrangements. Bonus payments for service retention (common in the police/fire sectors) are not considered incentive pay. Additional cap on contributory earnings An additional cap on contributory earnings comes into effect on January 1, This cap limits total contributory earnings to seven times the CPP earnings limit and is effective: January 1, 2014 for members enrolled on/after January 1, 2014; and January 1, 2016 for members enrolled before January 1, Credited service this is the number of years you have earned in the OMERS Plan, including any service you purchased. If you have less than five years of credited service, we use your actual credited service to calculate your average earnings. We may include partial years at the beginning and end of the 60 consecutive months so your best five earnings could span more than five calendar years. AYMPE this is the five-year average of the year s maximum pensionable earnings (YMPE). You contribute to the CPP up to this earnings limit. Keep in mind... There are factors that can affect your OMERS Plan pension amount. For example the Income Tax Act sets a maximum amount of pension we can pay from the OMERS Plan. An OMERS pension earned in excess of the maximum is paid through the OMERS retirement compensation arrangement (RCA) a special fund for this purpose. Retirement 23

26 Early Retirement Pensions You can retire early as soon as you reach: age 55, if your normal retirement age is 65 age 50, if your normal retirement age is 60. There are two types of OMERS Plan early retirement pensions: unreduced and reduced. 24 Your OMERS Pension

27 Unreduced early retirement pension If your normal retirement age is 65, you qualify for an unreduced pension if you are at least age 55 and: you have 30 years or more of service; or your age + service = 90 or more (the 90 Factor ). If your normal retirement age is 60, you qualify for an unreduced pension if you are at least age 50 and: you have 30 years or more of service; or your age + service = 85 or more (the 85 Factor ). An unreduced pension means that your early retirement pension is calculated without a reduction. To determine whether you are eligible for an unreduced early retirement pension, we look at the total of your credited service plus any eligible service. Reduced early retirement pension If you don t qualify for an unreduced pension, you may still retire early with a reduced pension when you reach age 55, if your normal retirement is age 65, or age 50, if your normal retirement is age 60. In this case, OMERS looks at how close you are to your normal retirement age, early retirement factor*, or 30 years of service. This three-point test maximizes your benefit. We use a 5% reduction factor, per year, because you are receiving your pension for a longer period of time. The 5% per year reduction is pro-rated for part years. Your OMERS Plan pension is reduced by 5% per year multiplied by the least of: 65 or 60** minus your age when you retire; 90 Factor or 85 Factor* minus your current age-plus-service factor; or 30 years minus your actual years of credited service, plus any eligible service. Note: Starting January 1, 2013, benefit calculation changes will affect you if your employment ends and you are not yet eligible for an early retirement pension (i.e., not within 10 years of your normal retirement age). Please see Benefit Calculation Changes on page 34, and Leaving Employment on page 30. * 90 Factor, if your normal retirement age is Factor, if your normal retirement age is 60. ** 65, if your normal retirement age is , if your normal retirement age is 60. Retirement 25

28 Inflation Protection Inflation protection is a feature of the OMERS Plan pension. A pension that is indexed to inflation, like OMERS, helps retired members keep pace with the rising cost of living, and adds to your retirement income security. How your pension is protected against inflation Each year, OMERS increases pensions by 100% of the increase in the Canadian Consumer Price Index (CPI) up to a maximum increase of 6%. This is measured by taking the monthly average of the CPI for the 12-month period ending in October of the year before the increase date. This figure is compared to the monthly average of the CPI for the 12-month period ending in October of the previous year. OMERS increases pensions by the percentage difference. The maximum increase in any year is 6%. If the increase in the CPI is greater than 6%, we carry the excess forward so it can be used in later years when the CPI increase is less than 6%. OMERS pensions are increased each year on January 1. The increase is pro-rated for pensions that began within the previous year. OMERS inflation protection over the long term An OMERS Plan pension of $15,000 today, with an inflation assumption of 2% per year, would be worth the following in the future: Today $15, years $18, years $20, years $22, years $24, years $27,170 A pension that didn t offer inflation increases would still be $15,000. Note: Starting January 1, 2013, benefit calculation changes affect you if your employment ends and you are not yet eligible for an early retirement pension (i.e., not within 10 years of your normal retirement age). Please see Benefit Calculation Changes on page 34, and Leaving employment on page Your OMERS Pension

29 section five Disability Benefits OMERS provides disability options to help your pension continue to grow or to help provide you with income, if you cannot work because of a disability. If you are totally disabled: you may continue to earn OMERS Plan credited service while you remain disabled, without paying OMERS contributions (this benefit is called a disability waiver of contributions or disability waiver ); or you may be eligible to receive a disability pension, if you are totally and permanently disabled. Disability Waiver (Earn Pension While on Disability) A disability waiver enables you to continue to earn credited service without contributing to the OMERS Plan. The OMERS Plan covers the cost of the contributions both you and your employer would normally make. As well, we will increase the earnings used to calculate your pension by the lower of the annual increase in the Average Industrial Wage (AIW) or the Consumer Price Index (CPI). The disability waiver begins on the later of: the first day of the fifth month after you become totally disabled; or the day after you cease to make regular contributions. Disability Benefits 27

30 The disability waiver benefit continues until one of these events occurs: You are no longer totally disabled. You begin receiving an OMERS disability pension. You return to work other than on an OMERS-approved rehabilitation program. You leave your employer and elect a termination benefit from OMERS. You elect to receive an OMERS early retirement pension. You reach your normal retirement age and become eligible for a retirement pension. Qualifying for the disability waiver To be eligible for the disability waiver, you must meet the definition of totally disabled in the OMERS Plan, which means that: you are incapable of doing your own job during the first 24 months of physical or mental disability; and after 24 months, you are incapable of doing any work for which you are qualified or may reasonably become qualified, by education, training, or experience. At any time after your disability waiver begins, you may elect a disability pension, provided you meet the eligibility requirements. If you are not eligible for a disability pension, you may be eligible for an early retirement pension. (See Early Retirement Pensions, page 24.) Disability Pension (Receive Pension While Permanently Disabled) If you become totally and permanently disabled, you may be eligible for a disability pension instead of a disability waiver. The disability pension can begin on the later of: the first day of the fifth month after you become totally and permanently disabled (normally the end of your disability qualifying period); or the first of the month following the month you elect a disability pension, if you have been on a disability waiver. 28 Your OMERS Pension

31 The disability pension continues until: you reach your normal retirement date, and your disability pension becomes an OMERS Plan normal retirement pension; or you no longer meet the definition of totally and permanently disabled (you may, at that time, be eligible for an early retirement pension); or you return to work, other than on an OMERS-approved rehabilitation program. Qualifying for the disability pension To be eligible for the disability pension, you must meet the definition of totally and permanently disabled in the OMERS Plan, which means: you are suffering from a physical or mental impairment; which prevents you from engaging in any occupation or performing any work for compensation or profit for which you are qualified or may reasonably become qualified, by education, training, or experience; and which can be expected to last the rest of your lifetime. How the disability pension is calculated We use your best five earnings and credited service in the OMERS Plan retirement pension formula to calculate the disability pension (see page 22). Your disability pension is an unreduced early retirement pension, and it includes the OMERS Plan bridge benefit until you reach age 65. OMERS and WSIB limit There is a limit to the combined disability benefits you can receive from the Workplace Safety and Insurance Board (WSIB) and the OMERS Plan. The limit is 85% of your regular contributory earnings immediately before you were disabled. If you exceed the limit, we must reduce your OMERS Plan disability pension until you reach your normal retirement date, or until your WSIB benefit stops. If you become entitled to a WSIB benefit after your disability pension begins, or if the amount you are receiving changes (except for cost-of-living increases), please notify OMERS immediately. OMERS and CPP disability pension The OMERS Plan disability pension is not affected by any amount that you may receive from CPP. Disability Benefits 29

32 section six Leaving Employment The reality is that many people change jobs during their work life. If you leave your OMERS employer, OMERS offers you a wide range of options for your future pension benefit. Important! Starting in 2013, if you leave your employer before your early retirement birthday (55 th birthday for normal retirement age 65, or 50 th birthday for normal retirement age 60), your benefit will be calculated in two parts: The benefit based on pre-2013 credited service includes pre-retirement indexing and early retirement subsidies. The benefit based on post-2012 credited service does not include pre-retirement indexing or early retirement subsidies. Please read Benefit Calculation Changes, on page 34, for more details about the changes to the calculation, pre-retirement indexing, and early retirement subsidies. In 2012 the pension law was changed to require most defined benefit plans to calculate grow-in rights for certain terminating members. Effective July 1, 2012, as permitted by the law, OMERS elected to be excluded from the grow-in provisions. 30 Your OMERS Pension

33 Options When Leaving Your Employer Depending on your age and the amount of your pension, your options when you leave your OMERS employer will include some of the six options that follow: 1. Keep your pension with OMERS Keeping your pension with OMERS (known as a deferred pension) gives you a future stream of OMERS Plan retirement income for life. 2. Transfer your benefit to another OMERS employer If you go to work for another OMERS employer anywhere in Ontario, you may be able to combine your OMERS memberships from your former and current employers. 3. Begin to receive your OMERS pension On/after your early retirement birthday*, you can elect and begin to receive your OMERS retirement pension. 4. Transfer your benefit to another registered pension If you go to work for another Canadian employer with a registered pension plan, you may be able to transfer all or part of your OMERS credited service to the new employer s plan. 5. Transfer the commuted value (CV) of your OMERS Plan pension You may be able to transfer the commuted value of your OMERS pension to a locked-in retirement savings vehicle, such as a locked-in retirement account (LIRA). The commuted value is the estimated amount of money you would have to put aside today, to grow with tax-sheltered investment earnings, to provide you with a future benefit similar to the OMERS pension you ve earned. Note: This option is not available on/after your early retirement birthday*. 6. Commuted value cash refund or transfer (for pensions less than 4% of the YMPE) You may be eligible for a cash refund (or a tax-deferred transfer to your RRSP) of the commuted value of your OMERS benefit, if the annual pension you ve earned is less than 4% of the current YMPE (year s maximum pensionable earnings). The YMPE for 2013 is $51,100. * 55 th birthday for normal retirement age 65, or 50 th birthday for normal retirement age 60. Leaving Employment 31

34 Early retirement birthday Options available when you leave your OMERS employer change on your early retirement birthday. Your early retirement birthday is your 55 th birthday for normal retirement age 65, or your 50 th birthday for normal retirement age 60. If you leave your OMERS employer before your early retirement birthday, you are eligible for termination options. This means the CV option (option #5 on the previous page) is available. On/after your early retirement birthday, you are eligible for retirement options only the CV option is not available. 32 Your OMERS Pension

35 Example: Sam s normal retirement age is 65 and his early retirement birthday (his 55 th birthday) is March 10. If Sam leaves his OMERS employer in the month he turns 55 and his employment ends March 1 through 9, Sam will be eligible for terminations options, and the benefit calculation changes will apply (for any post-2012 service). If Sam leaves his OMERS employer March 10 through March 31, Sam will be eligible for retirement options only, including the option for an immediate early retirement pension starting on April 1. The CV option would not be available to Sam, and the benefit calculation changes would not affect him, even if he has post-2012 service. Locked-In Pension Benefits Under Ontario law, when your OMERS Plan pension is locked-in, you must use it as future retirement income. Your OMERS pension benefit is immediately locked-in when you become a Plan member. Commuted Value During Grievance If you file a grievance/legal proceeding for termination of employment, with the intention of being reinstated, you will still have the option of taking a commuted value (CV) transfer benefit, in addition to the other transfer options or starting your OMERS retirement pension. If you are reinstated, you may repay the benefit to OMERS to re-establish your record. Leaving Employment 33

36 section seven Benefit Calculation Changes Important Information: Starting January 1, 2013, benefit calculation changes will affect you if your employment ends and you are not yet eligible for an early retirement pension. That is, you have not reached your early retirement birthday (55 th birthday for normal retirement age 65, or 50 th birthday for normal retirement age 60). If you leave your OMERS employer before your early retirement birthday, your benefit will be calculated in two parts: The benefit based on pre-2013 credited service includes pre-retirement indexing (inflation protection) and early retirement subsidies (including the OMERS Plan bridge benefit). The benefit based on post-2012 credited service does not include pre-retirement indexing or early retirement subsidies. 34 Your OMERS Pension

37 Inflation Protection (Pre-Retirement Indexing) Pre-retirement indexing is the inflation protection we apply to your benefit from the date you leave your employer until the date your pension begins. The pre-2013 portion of your benefit will have this pre-retirement inflation protection, whether you leave your benefit in the OMERS Plan (as a deferred pension) or transfer the commuted value out of the OMERS Plan. The post-2012 portion of your benefit will not have this pre-retirement inflation protection. This change doesn t affect inflation protection once your pension payments begin. Early Retirement Subsidies The elimination of early retirement subsidies will affect your benefit calculation for service earned after 2012, and the amount of your OMERS Plan bridge benefit. Currently, if you leave your employer before you are eligible for early retirement, you may eventually become eligible for an unreduced early retirement pension, if you have 30 years of service, or when your: age + service = 90 or more (the 90 Factor ) if your normal retirement age is 65 age + service = 85 or more (the 85 Factor ) if your normal retirement age is 60. Otherwise, the early retirement pension is reduced. If you retire early, you also receive OMERS bridge benefit until you reach age 65. More about the bridge benefit is on page 22. Early retirement pensions (reduced and unreduced) are covered in greater detail, beginning on page 24. Starting January 1, 2013, your benefit will be calculated in two portions: The pre-2013 portion: you may eventually qualify for an unreduced pension for the pre-2013 portion, or if not, your early retirement pension will be reduced by 5% per year you re short of the 90 Factor, 85 Factor, 30 years of service, or your normal retirement age. (This is the subsidized reduction.) OMERS bridge benefit will be included in the pre-2013 portion. The post-2012 portion: this portion no longer includes a possible unreduced early retirement pension. When you eventually begin your pension, the post-2012 portion will be reduced on an actuarial-equivalent basis ( unsubsidized reduction). OMERS bridge benefit will not be included in the post-2012 portion. Benefit Calculation Changes 35

38 section eight Shortened Life Expectancy Benefit If, because of an illness or other condition, your life expectancy is less than two years, you may be able to withdraw the cash value of your pension. Once you receive this shortened life expectancy benefit, no further benefit is payable from the OMERS Plan to you, your survivors, beneficiary or estate, whether or not you outlive the medical expectations. To apply, complete and submit a signed Form 146 Application for a shortened life expectancy benefit (available at or call OMERS Client Services). Medical evidence to support your claim must be included with the application and is subject to approval by a medical doctor appointed by OMERS. If you have an eligible spouse, they must provide their written consent for you to withdraw the funds. 36 Your OMERS Pension

39 section nine OMERS Survivor Benefits The OMERS Plan offers excellent survivor benefits. OMERS Plan survivor benefits are paid according to a set order of entitlement that complies with the Ontario Pension Benefits Act. A legal will cannot change this order, but it does help us to direct any benefit entitlement to your beneficiary or estate if there is no eligible spouse or children. OMERS Survivor Benefits 37

40 Survivor Benefits in the Event of Death Before Retirement See Definitions beginning on page 42 for the definition of pre-retirement spouse and eligible dependent children. Relationship to you 1. Your pre-retirement spouse is first in line for survivor benefits. 2. If there is no pre-retirement spouse, a pension will be paid to any eligible dependent children for as long as they are eligible. Type of benefit Survivor pension 662 3% of the lifetime pension you earned to the date of death or to the date you left your OMERS employer; plus a further 10% for each eligible dependent child, up to a total of 100% of the pension you earned. This pension: is guaranteed for life (it does not stop if your spouse remarries); is indexed to inflation; and does not include the OMERS bridge benefit. OR Cash refund or transfer The cash refund or transfer to a non-locked-in registered retirement savings arrangement is paid in a lump sum and equals: the commuted (present-day) value of the pension you earned since January 1, 1987; plus any contributions you made before 1987, plus interest to the date of your death. Children s pension 662 3% of the lifetime pension you earned to the date of death or to the date you left your OMERS employer. This pension: is divided equally among the eligible children and is paid to, or on behalf of, each child (when a child is no longer eligible, the benefit is redistributed among your remaining eligible children); is indexed to inflation; and does not include the OMERS bridge benefit. 38 Your OMERS Pension

41 Relationship to you 3. If there is no pre-retirement spouse or eligible dependent children, your designated beneficiary(ies) on file may be entitled to a cash refund. 4. If there is no pre-retirement spouse, eligible dependent children, or designated beneficiaries, a cash refund may be paid to your estate. Type of benefit The cash refund is paid in a lump sum and equals: the commuted (present-day) value of the pension you earned since January 1, 1987; plus any contributions you made before 1987, plus interest to the date of your death. See the description in #3 above. In the case of benefits for a minor child, benefits of $10,000 or less can be paid to the adult who has custody of the child; benefits over $10,000 are subject to Guardianship of Property rules. The benefit is payable for the period that the child is eligible. Additional Refunds In addition to OMERS survivor benefits, the following refunds may be payable in the event of death before retirement. 50% Rule refund If your contributions plus interest from January 1, 1987 to the date of death is greater than 50% of the commuted value of the pension earned since 1987, OMERS will refund any excess contributions to your designated beneficiary(ies) or, if none, to your estate. Special refund When the commuted value of your OMERS Plan pension earned after 1986 is greater than the amount needed to fund the survivor benefit for your eligible dependent child(ren), the difference is paid as an OMERS Plan special refund. It is paid to your living designated beneficiaries on file or, if none, to your estate. OMERS Survivor Benefits 39

42 Survivor Benefits in the Event of Death After Retirement See Definitions beginning on page 42 for the definition of retirement-date spouse, post-retirement-date spouse and eligible dependent children. Relationship to you 1. Your retirement-date spouse (or postretirement-date spouse if there is no eligible retirement-date spouse) is first in line for a survivor pension. Type of benefit Survivor pension 662 3% of the lifetime pension you were receiving at the date of death; plus a further 10% for each eligible dependent child, up to a total of 100% of your lifetime pension. This pension: is guaranteed for life (it does not stop if the surviving spouse remarries); is indexed to inflation; and does not include the OMERS Plan bridge benefit. 2. If there is no retirement-date spouse or post-retirement-date spouse, a pension will be paid to any eligible dependent children for as long as they are eligible. Children s pension Equal to the greater of: 662 3% of the lifetime pension you were receiving at the date of death; or the survivor s pension the spouse was receiving at their date of death (less any entitlement for eligible children). This pension: is divided equally among the eligible children and is paid to, or on behalf of, each child (when a child is no longer eligible, the benefit is redistributed among the remaining eligible children); is indexed to inflation; and does not include the OMERS bridge benefit. 40 Your OMERS Pension

43 Relationship to you 3. If there is no retirement-date spouse, post-retirement-date spouse or eligible dependent children, your designated beneficiary(ies) on file may be entitled to a residual refund. 4. If there is no retirement-date spouse, post-retirement date spouse, eligible dependent children or designated beneficiaries, the residual refund of the pension may be paid to your estate. Type of benefit The residual refund is the total of your OMERS contributions plus interest, minus any pension paid to you and/or your survivors. Note: After about five years of retirement, most members have received pension payments equal to their contributions plus interest, so there may not be a residual refund. See the description in #3. In the case of benefits for a minor child, benefits of $10,000 or less can be paid to the adult who has custody of the child; benefits over $10,000 are subject to Guardianship of Property rules. The benefit is payable for the period that the child is eligible. OMERS Survivor Benefits 41

44 Definitions Common-law spouse OMERS considers a common-law spouse to be a person who is living together with the member in a conjugal relationship: continuously, for a period of not less than three years; or in a relationship of some permanence if they are the natural or adoptive parents of a child, both as defined in the Family Law Act (Ontario). Eligible dependent child OMERS considers an eligible child to be: a natural child; a legally adopted child; or a person whom you have demonstrated a settled intention to treat as a child of your family (except under an arrangement where the child is placed for valuable consideration in a foster home by a person having lawful custody). At the time of your death, the eligible child must be dependent on you for support and also must be: 18 years or younger in the year of your death; under age 25 and a full-time student; or totally disabled (see Totally Disabled Child on page 44). Legal spouse OMERS considers a legal spouse to be a person who is legally married to the member. Post-retirement-date spouse If you enter into a spousal relationship after retirement, and there is no person who qualifies as your retirement-date spouse, OMERS considers the surviving legal spouse or common-law spouse at the date of your death to be the eligible spouse for the purpose of spousal survivor benefits, provided you were not living separate and apart (see below) and he or she has not waived rights to survivor benefits. 42 Your OMERS Pension

45 Pre-retirement spouse If you die before your pension start date, your pre-retirement spouse is your legal spouse or common-law spouse on the date of death of your death (before retirement) provided you were not living separate and apart (see below) on the date of your death and he or she has not waived rights to survivor benefits. Retirement-date spouse If you die after your pension has started, your retirement-date spouse is your legal spouse or common-law spouse on the date your first pension payment is due provided you were not living separate and apart (see below) on that date and he or she has not waived rights to survivor benefits. Living Separate and Apart Whether two persons are living separate and apart is often complicated to assess. It is a question of both fact and law and must be determined on a case-by-case basis. The determination may require the assistance of a lawyer. In general, physical separation is usually, but not always, an indication that two persons are living separate and apart. However, physical separation is not always conclusive. There must also be a mutual or a unilateral intention for two persons to live separate and apart and end the marriage or common-law relationship. For example, a physical separation between two spouses caused by one of them living in a nursing home will not necessarily result in a determination that the spouses are living separate and apart, provided that both spouses intended the marriage or common-law relationship to continue despite the physical barrier. OMERS Survivor Benefits 43

46 Totally Disabled Child OMERS considers a totally disabled child to be someone whose physical or mental disability: occurred before age 21 or occurred before age 25 while a full-time student; and whose condition prevents self-support or doing any work for compensation or profit (except for an OMERS-approved rehabilitation or workshop program); and did not become disabled from a wilfully self-inflicted injury, committing (or attempting to commit) an offence under the Criminal Code, or working in an unlawful occupation. Naming a Designated Beneficiary You may designate a person, institution (such as a church, charity, hospice, etc.) or your estate as your beneficiary for the OMERS Plan. You (the OMERS member) have the sole right to name a beneficiary or beneficiaries. An executor, estate trustee, power of attorney for property, or survivor cannot change your designated beneficiaries. Planning Ahead There s no substitute for having your affairs in order. Letting your survivors or estate executor know where your important papers and documents are makes things easier for them. You can send OMERS, in advance, copies of documents such as your marriage certificate, or documents that provide proof of your common-law relationship, or the birth certificates of your eligible children. Having these documents on file will help us to process any survivor benefits. Scan this QR code with your smartphone to learn more about OMERS. 44 Your OMERS Pension