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University of Windsor Pre-Retirement Seminar

University of Windsor Pre-Retirement Seminar. Welcome ! Friday, March 17, 2006. 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 ! Friday, March 17, 2006

  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 • Sample Pension Quotes • Survivor Options • Steps to commencing retirement • Indexing of Monthly Pensions • Net Replacement Ratio • Disability Pension • Terminating Membership • Pension Plan Surplus • 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 • Canada Pension Plan (CPP)  $10,134.96 2006 maximum • Old Age Security (OAS)  $ 5,815.56 2006 1st Q maximum • 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 • Defined Contribution Plans (DC) • Contributions are defined by a formula • Pension at retirement is unknown • Plan contributions subject to annual maximums • 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 = 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. • (2006 = $42,100) (2005 = $41,100) (2004 = $40,500) (2003 = $39,900) • 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 (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 MPC Account at Retirement Actuarial Annuity Factor Actuarial assumptions include mortality, retirement age, and spousal age.

  8. Faculty Pension Plan • Minimum Guarantee (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. • Two options at retirement • 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 – has no impact on your MPP or MGB benefits • Past Service Buybacks • Defined Benefit MGB service only – does not affect MPP pension • Certain restrictions apply

  10. Faculty Plan – Increased Limits • Federal Budget 2003 and 2005 announced increases in the Defined Benefit RPP limits for the Minimum Guarantee formula. This is GOOD news for members! • Year 2005  $2,000 per year of service • Year 2006  $2,111 • Year 2007  $2,222 • Year 2008  $2,333 • Example: $2,000 x 30 = $60,000 (BAE > $105,500) $2,111 x 30 = $63,330 (BAE > $115,500) $2,222 x 30 = $66,660 (BAE > $121,000)

  11. Life as an Active Member • Compulsory membership for full time Faculty, optional for Limited Term Appointments, Sessional Lecturers and 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. Effective Dates of Retirement – Faculty and Librarians • Hired Sept. 1, 1970 or earlier  Sept. 1st following 65th birthday • Hired after Sept. 1, 1970  July 1st following 65thbirthday

  13. 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%

  14. NRD 2006 Pension – MGB payable • Date of retirement = September 1, 2006 • Pensionable Service = 35 years • Best average earnings = $90,000 (highest 48months averaged) • Final average YMPE = $40,900 • MPC Account Balance = $530,000 • Actuarial annuity factor = 10.2203 (age, spousal age, mortality) • MPP = $530,000 / 10.2203 = $51,858 per year • MGB = 35 x [0.015 x $40,900) + 0.02 x ($90,000 - $40,900)] = $55,842.50 • MGB payable at retirement = $55,842.50 per year • Subject to Income Tax Limit of $2,111 X YOS ($2,111 X 35 = $73,885)

  15. NRD 2006 Pension – MPP payable • Date of retirement = July 1, 2006 • Pensionable Service = 28 years • Best average earnings = $96,029 (highest 48months averaged) • Final average YMPE = $40,900 • MPC Account Balance = $495,822 • Actuarial annuity factor = 10.1585 (age, spousal age, mortality) • MPP = $485,788 / 10.1585 = $48,809 per year • MGB = 28 x [0.015 x $40,900 + 0.02 x ($96,029 - $40,900)] = $48,050 • MPP payable at retirement = $48,809 per year

  16. NRD 2008 MGB Payable • Date of retirement = July 1, 2008 • Pensionable Service = 33.8333 years • Best average earnings = $126,859 • Final average YMPE = $42,716 • MPC Account Balance = $799,684 • Actuarial annuity factor = 11.0756 • MPP = $799,684 / 11.0756 = $72,202 per year • MGB = 33.8333 x [0.015 x $42,716 + 0.02 x ($126,859 - $42,716)]= $78,615 • MGB payable at retirement = $78,615 per year • Subject to Income Tax Limit of $2,333 x YOS ($2,333 X 33.8333 = $78,933)

  17. Same Member- ERD 2006 MPP Payable • Date of retirement = July 1, 2006 • Pensionable Service = 31.8333 years • Best average earnings = $115,612 • Final average YMPE = $40,525 • MPC Account Balance = $723,226 • Actuarial annuity factor = 11.5207 • MPP = $723,226 / 11.5207 = $62,776 per year • MGB = 31.8333 x [0.015 x $40,525 + 0.02 x ($115,612 - $40,525)]= $67,156 • Early Retirement Reduction = $67,156 *84.87% (15.13% reduction)=$56,997 • MPP payable at retirement = $62,776 per year

  18. Same Member- ERD 2007 MPP Payable • Date of retirement = July 1, 2007 • Pensionable Service = 32.8333 years • Best average earnings = $121,481 • Final average YMPE = $41,438 • MPC Account Balance = $760,657 • Actuarial annuity factor = 11.2996 • MPP = $760,657/ 11.2996 = $67,317 per year • MGB = 32.8333 x [0.015 x $41,438 + 0.02 x ($115,612 - $41,438)]= $69,116 • Early Retirement Reduction = $69,116 * 97.22% (2.78% reduction)=$67,196 • MPP payable at retirement = $67,317 per year

  19. 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% to 20% to provide spousal benefit • Spouse and member can waive 60% option • In ALL cases, options are permanent on 1st date of retirement

  20. 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 beneficiaries, lump sum pay out to all others. Spousal pension ceases at the end of the guarantee period.

  21. 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, the named beneficiary (or estate if none) receives 100% of the monthly pension X 84 months as a lump sum cash payment (taxable)

  22. 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. Joint and Survivor Pension reducing to 60% (J&S 60%) • 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) • 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.

  23. 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 December 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

  24. 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 to the member. Member will meet with Pension Manager to review the quote. • Member should review upcoming retirement with Department Head • Two months prior to your NRD you and your spouse if applicable will meet with the Pension Manager to choose your 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.

  25. 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 returns • 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 you and your spouse if applicable will meet with Manager, Pensions and Benefits to choose your 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.

  26. Faculty Pension Plan – Indexing Monthly Pension • Both the MPP and MGB adjusted every July 1, with retroactivity if necessary • MPP adjusted by the fund rate of return less 6% with an additional adjustment for mortality experience – can increase or decrease. July 2005 adjustment was 2.38% • MGB increase based on the increase in the Consumer Price Index. July 2005 adjustment was 2.00% • After the MPP and MGB have been adjusted (plus or minus), we compare the two, the larger amount becomes the new pension payable starting at July 1st • Indexing rights passes to those with a Survivor pension

  27. 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 – gross retirement income should equal 70% of final years salary. • CPP / OAS replace approximately 25% of pre-retirement income

  28. 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

  29. 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 • Forfeit Minimum Guarantee Pension, lifetime pension indexing rights • Higher investment fees, potentially greater investment risk to member • Forfeit all rights to University Benefits, Tuition Remission, H.K. memberships etc. • 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

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

  31. Faculty Plan – Benefits 101

  32. 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.

  33. Benefits while active Health • Green Shield University Paid • 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

  34. 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) University Paid • Optional Life Ins to age 69 Retiree Paid • St. Denis Centre (excludes the new Forge facility) University Paid • Lifetime University Club Membership (Faculty & Librarians only) WUFA sponsored

  35. Retired Faculty, Librarians, Others • Coverage ends for Short / Long Term Disability • Coverage ends for Life Insurance at NRD • University Paid Health and EAP Coverage ends • Dental coverage – premium shared equally by Univ/Retiree • Retirees Eligible to enroll in Green Shield Benefits Plan • Survivors Eligible to enroll in Green Shield Benefits Plan • Choice of Four packages – Can opt in and up, cannot opt down. No opting in and out – opt out is permanent • If enrolled in Green Shield benefits, eligible for Health Care Subsidy.

  36. Faculty Retiree Option 1

  37. Faculty Retiree Option 2

  38. Faculty Retiree Option 3

  39. Faculty Retiree Option 4

  40. Health Care Premium Subsidy • Established in the July 1, 2001 – June 30, 2004 Collective Agreement. • To provide premium subsidies for Faculty Retirees enrolled in the Group Health Care Plan for Retired Members. • Funded by University contributions only. Fund balance was $1,690,900 at December 31, 2005. • Assets invested consistent with Endowments Investment Policy and Goals. • 3 year rolling average investment return. • Pro-rated 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. • Details to be forthcoming within the next few months.

  41. Thank You! Questions?

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