For Teachers Focus: Ontario Teachers' Pension Plan Presented by ETFO Staff: Jennifer Mitchell & Dave Wing
Getting Ready to Retire Checklist Register for OTPP iaccess and check that your pension record is accurate and up-to-date. Purchase all eligible credited service in OTPP at earliest opportunity. Check your collective agreement for possible retirement gratuity and ERIP (Early Retirement Incentive Plan) provisions. Apply for retirement gratuity and ERIP and make investment decisions. Write letter of resignation to your employer. Make decision re survivor pension waiver prior to beginning pension. Through iaccess, complete your pension application and mail required documents to OTPP. Make decisions re insured health benefit coverage. Until you are fully on pension, do not enter into any agreement to be reemployed by your board. While on pension, do not work for a school board or designated employer for more than the maximum number of days allowed. Investigate applying for the early CPP (Canada Pension Plan) when you turn 60 (http://www.servicecanada.gc.ca/eng/isp/cpp/c pptoc.shtml). Apply for OAS (Old Age Security) when eligible (65-67). (http://www.servicecanada.gc.ca/eng/isp/oas/o astoc.shtml). Inform the Ontario College of Teachers you have retired and will no longer be doing any teaching that requires maintaining membership in the OCT. 85 Factor Pension Unreduced for Early Retirement OTPP members with credited service after June 1, 1998 who go on an immediate pension and whose qualifying years of service plus age total 85, or more, will be entitled to an unreduced pension, regardless of age. An unreduced pension is 2% per year of credited service times the average of the best five years rates of pay. Even though an 85 factor pension is unreduced, it is still based on credited services earned. Age 54 57 Qualify Service 31 28 Factor 85 85 Credited Service Average Salary (best 5 years) Pension 30.5 24.3 82,000 82,000 0.02 x 30.5 x 82,000 = $50,020 Obtain Accurate Information About Your Pension Status from the OTPP 0.02 x 24.3 x 82,000 = $39,852 As a member of the OTPP, you should be receiving an Annual Statement each year. On your Statement, you will see your Service Record showing the entire history of your pension credit experience, including all periods of time when you worked, took a refund or paid for a leave or break in service. It is important to check whether the OTPP's records agree with yours before finalizing any retirement plans. In order to decide which retirement date is in your best interest, you may request pension estimates of more than one possible retirement date or create your own estimates using iaccess. Teachers are encouraged to register for iaccess web on the OTPP website. This allows full access to your personal pension records and allows you to retire on-line. Occasional & Part-Time Teaching The single most important factor in the calculation of your pension is your average salary. If a part-time teacher mixes casual occasional teaching with part-time teaching, the credited service is added together but so are the salaries earned. This will lower your average salary for that school year. page 1 of 5
Teachers near pensionable age must be extremely careful since mixing part-time and occasional teaching can lower the individual s average salary. An occasional teacher near retirement on a long-term assignment should also be cautious since mixing a high long-term rate with a lower casual rate will lower their average salary. Purchase All Eligible Credited Service in OTPP at the Earliest Opportunity Be sure that you have purchased all the credited service that you are eligible for and repay all refunds at the earliest opportunity to ensure that you have acquired maximum credited service in the Ontario Teachers' Pension Plan. ETFO Pension Workshops ETFO provides pension workshops (usually two hours). These workshops are arranged by your ETFO locals and are usually after school. Write Letter of Resignation/Retirement to Your Employer Check your collective agreement for the date(s) by which you must submit a formal letter of resignation or retirement form to your school board. You may have to submit your letter earlier in order to qualify for the gratuity. Most teachers should resign as of June 30 th and begin their pension as of July 1 st. You have already earned your whole year s salary by June 30 th. If you are on a 12-month pay system, the board will give you the money you would otherwise have received in July and August. Many teachers decide to go on pension at the earliest possible date even if it is in the middle of the school year. They usually pick the month after they reach the 85 factor. If you wish to do this, most collective agreements require you to request your board's consent to a retirement by mutual consent. For more information about your collective agreement provisions, contact your local ETFO President. Apply for Your Pension On-line Using iaccess OTPP will accept applications up to four months before your retirement date. Once you have informed OTPP that you have resigned, they will contact your employer to get your current salary and other information. Gather the following required documents well in advance to avoid delays in processing your application. Photocopies of these documents need to be sent to OTPP: your birth certificate; your married or common law spouse's birth certificate; marriage certificate; or a Statutory Declaration of Common-law Relationship (if you have a commonlaw spouse); and your separation agreement or divorce papers, if applicable. If you and your spouse agree to waive the 60% survivor pension in favour of 50%, you must both sign the waiver and send it to OTPP no earlier than one year before your retirement date. Check Your Collective Agreement for Retirement Gratuity Check the provisions of your collective agreement with your school board. To qualify for these benefits you may be required to make your intention to retire known to the school board by some deadline. Name [of Director of Education] Director of Education Name of District School Board Address [of District School Board] Dear Mr/Ms. [Name of Director of Education]: In compliance with the requirements of the Ontario Teachers Pension Plan, I would like to inform you of my intention to retire, effective [date of retirement]. According to normal Board practice, I will be performing no paid teaching duties after that time. My retirement is based upon the understanding and agreement that the Board shall provide me with all salary, benefits, and retirement gratuity due to me pursuant to The Education Act, Regulations, and the current Collective Agreement. I would appreciate confirmation, in writing, of your acceptance of my intention and of the terms I have stated. I also give you permission to release any information that is required by the Ontario Teachers Pension Plan in processing my pension. [you may wish to add personal comments] Sincerely, [your signature] page 2 of 5
Apply for Gratuity & ERIP & Make Investment Decisions Gratuities, severance pay and early retirement incentives all qualify as retiring allowances under the Income Tax Act (ITA). Retiring allowances up to certain limits may be transferred to an RRSP. You are allowed to transfer up to $2,000 per calendar year of service prior to 1996 with your employer or a related employer. This is in addition to your regular RRSP room. For example: A teacher who worked for two different Ontario school boards from September 1980 until June 2001 has worked in 22 calendar years, 16 of which are before 1996. This teacher could transfer up to: 16 years x $2,000 = $32,000 to an RRSP Any part of your gratuity that exceeds the transferable maximum must be taken as taxable income. It is important that your employer transfer the money directly into your RRSP or income tax must be withheld until you can claim a deduction when you file your tax return. Make Decisions re Survivor Pension Waiver Unless you and your spouse opt for a 50% survivor pension by signing the waiver included with your pension application, your pension will be reduced to provide your spouse with a 60% survivor pension. In addition, you may choose to take a nominal reduction to provide the 10-year pension guarantee to your eligible survivors. If the member dies within 10 years of going on pension, their survivor will receive 100% of their pension, minus the CPP reduction, for the remainder of the 10 years, and then revert to the long-term percent chosen. Single members receive the 10-year guarantee at no additional charge. If the single member or the married member and their survivor both die within 10 years of going on pension, the remaining payments in the 10-year period minus the CPP reduction will be paid to the estate. Check with the Ontario Teachers' Pension Plan about survivor benefits. You may need to seek financial advice about how to handle your gratuity to your best tax advantage. Your transfer to an RRSP may be disallowed if the Canada Revenue Agency (CRA) does not believe you genuinely severed your employment relationship. Members who begin occasional teaching too soon have had tax problems. Types of pensions from OTPP Unreduced age 65 or 85 factor immediate or 35 years credited service Reduced age 50/+ (after June 30, 2001) Disability 10 years or more qualifying service whole or partial disability Survivor even if teacher was not on pension Pension Calculation Unreduced Pension years of average of best credited service x 2% x 5 years' rates of pay Early Retirement Reduction at/after Age 50 for an Immediate Pension the lesser of 2.5 % x [85 - (age + qualifying service)] or 5 % x (65 years - age) Early Retirement Reduction at/after Age 50 for a Deferred Pension the lesser of 5 % x [85 - (age + qualifying service)] or 5 % x (65 years - age) page 3 of 5
Make Decisions re Insured Health Benefit Coverage Some school boards will allow teachers to continue with the board's health benefits at the teacher's expense until they are 65. Check your collective agreement. The school board will usually ask you to pay with post-dated cheques. The Ontario Teachers' Insurance Plan (OTIP) and the Retired Teachers of Ontario (RTO) each sponsor a full range of health benefits for retired teachers. The OTPP will deduct the premiums for these benefit plans from your pension each month. Your application for coverage will be accepted provided you apply for coverage within 60 days of: the effective date of your pension; or coverage ceasing with your former employer; or when coverage ceases under a spouse's plan. If you apply after 60 days, you may not meet the health requirements and therefore not qualify for coverage. Marriage & Retirement If you are considering getting married and you will be retiring soon, there are very serious pension implications if you decide to marry after retiring rather than before. If you marry before your pension begins your spouse has an automatic right to a survivor pension; that is: 50% of your pension (no reduction to your pension provided you & your spouse both sign a waiver waiving the 60% option prior to your pension beginning); or 60% of your pension if no waiver is signed (your pension will be reduced to provide the additional 10% benefit); or a higher percent of your pension. The higher the percentage, the greater the reduction to your pension. If you marry after going on pension your spouse does not have an automatic right to a survivor pension unless: you agree to reduce your pension to provide even the 50% survivor pension, you apply for the benefit within 90 days of the marriage, any spouse with whom you were living at the time of retirement has died, any minor children have reached maturity, and you survive the application by at least six months. Do Not Work for a School Board for More Than the Maximum Number of Days Allowed Some retired teachers choose to work for a school board after going on pension. This is usually supply, night or summer school teaching but it could be any kind of paid work with a school board. There is a limit on the number of days you are allowed to be re-employed in any job in education and continue to receive your teacher s pension. If you exceed the limit, your pension will stop until you once more cease working and re-apply for your pension. It would be wise to check with the OTPP each school year in case the rules change. Current rule: Fifty (50) full-time equivalent days per school year Volunteer Work Volunteer work does not count as re-employment if the duties or position would not normally be reported to the Teachers Pension Plan. Volunteering counts as reemployment if your employer otherwise treats that work as employment in education, even if you do not accept the payment to which you are entitled. OTPP Reduction at Age 65 Your OTPP pension will be reduced when you turn 65, by a formula known as the CPP reduction. This amount is not linked to the actual amount you receive from CPP. This happens because the OTPP and CPP have an integrated contribution formula. Investigate Applying for the Early CPP (Canada Pension Plan) When You Turn 60 You may apply for an early pension from Canada Pension at or after age 60. You can apply even if you have not stopped working. Your Canada Pension benefit will be reduced for each month you are younger than age 65. To learn more about the CPP online, visit: www.servicecanada.gc.ca/cpp. page 4 of 5
Apply for OAS (Old Age Security) or Seniors Benefit When You Turn 65-67 Make a note to apply for your Old Age Security pension about six months before reaching the age of eligibility, 65-67. It is paid in addition to CPP and your pension from the OTPP. Depending on your net income, OAS is subject to claw back (repayment) through taxation. Conditional Indexing Invoked Every January teachers pensions are increased by the increase in the Canadian Consumer Price Index (CPI). This is known as indexing or the cost of living adjustment. The OTPP 2015 funding valuation revealed a preliminary $6.8 billion surplus. The Ontario Teachers Federation and the Ontario government are using it to partially further restore cost-of-living increases for members who retired after 2009. Pension Credit Accrued (Earned) Conditional Inflation Protection (CIP) Levels in 2015 (2014 Valuation) Levels in 2016 (2015 Valuation) Before 2010 100% 100% 100% 2010-2013 50% to 100% 60% 70% After 2013 0% to 100% 60% 70% The level of inflation increases invoked will continue at least until the next valuation. Ontario Teachers' Pension Plan 5650 Yonge Street Toronto, ON M2M 4H5 Client Service Monday to Friday 8:00 a.m. to 5:30 p.m. Member Hotline Tel: (416) 226-2700 1-800-668-0105 (toll free) Fax: (416) 730-7807 1-800-949-8208 (toll free) Email: inquiry@otpp.com Website: www.otpp.com ETFO Does Not Have Your Pension Records You must contact the OTPP directly to access your pension records. Teachers are encouraged to register for iaccess Web through the OTPP. This allows full access to your personal pension records and allows you to retire on-line. Sound Pension Advice for All Teachers No one should alter their retirement plans because of concerns about conditional indexing. Every additional year of credited service will improve your pension. page 5 of 5
Elementary Teachers Federation of Ontario Fédération des enseignantes et des enseignants de l élémentaire de l Ontario 136 Isabella Street Toronto, Ontario, M4Y 0B5 Telephone: 416-962-3836 Toll free: 1-888-838-3836 Fax: 416-642-2424 Website: www.etfo.ca Updated May 29, 2015