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Plan description
The Ontario Teachers’ Pension Plan is a defined benefit arrangement with full inflation protection. It promises pensions based on a pre-set formula, not according to the amount of money contributed or the returns earned by the plan’s investment program. The plan pays 2% per year of service multiplied by the average salary of the member’s best five years, partially integrated with the Canada Pension Plan (CPP). Members and their survivors are promised retirement income for life.
The plan is co-sponsored by the Ontario government through the Ministry of Education and by the Ontario Teachers’ Federation (OTF). They jointly decide:
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| • | what benefits the plan will provide; |
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the contribution rate paid by working teachers and matched by government and other employers; and |
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how any funding shortfall is addressed and any surplus used. |
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These decisions are largely governed by two Ontario statutes, the Teachers’ Pension Act and the Pension Benefits Act, and by the federal Income Tax Act.
Pensions are financed by contributions from working teachers, the government and other employers (comprising in 2007 approximately $1.0 billion from working teachers, $1.1 billion from the Ontario government and $38 million from other employers and transfers) and investment income generated by the pension fund. |
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