March 9, 2001
Special Notice to Employers
The Ontario Teachers’ Federation has announced a number of benefit improvements. These benefits, totalling $6.2 billion, will be paid from the pension plan surplus.
Reduced pension at 50
Effective June 30, 2001, teachers can begin collecting a reduced pension as early as age 50, down from age 55. The reduction remains at 2.5% per point from the 85 factor.
As a result of this change, you may experience an increased number of last-minute resignations. Some teachers between ages 50 and 55 may decide to take the commuted value (CV) of their pension at the end of this school year.
Permanent 85 Factor
The early retirement window created June 1, 1998 will become permanent. Teachers can retire with an unreduced pension when their age and qualifying years of service equal 85 or more. Teachers that will be impacted by this change will have their new earliest unreduced retirement dates reflected in their annual statements sent next fall.
LTIP top-up contributions waived
Teachers currently receiving long-term income protection (LTIP) benefits will have the top-up of their pension contribution waived effective September 1, 2001. Top-ups will no longer be required as teachers on LTIP will now have their salary automatically adjusted each year for inflation.
New LTIP agreement
All LTIP will be non-contributory for teachers becoming disabled on or after September 1, 2001.
This change is the biggest “win” for employers. It will greatly reduce the amount of pension-related work you need to do for teachers on long-term disability. You will no longer be required to send us contributions for a teacher’s lost service during their period of absence.
Return to work requirement eliminated
Effective September 1, 2001, teachers can take an employer-approved leave of absence and purchase the credit without having to return to work for 70 days. Additional amendments were also approved that simplify the rules regarding purchasing credit for absences. We’ll review these amendments in the upcoming issue of Pension Update.
Option for 10-year pension guarantee—automatic for single pensioners
By taking a nominal reduction to their pension, teachers can provide an optional 10-year guarantee of their teachers’ pension. If they’re single, they’re automatically entitled to a 10-year pension at no cost. If they die within the period of the pension guarantee, their survivor or estate will receive the amount of their pension for the balance of the period.
Lower CPP reduction
Beginning January 1, 2002, the CPP reduction to teachers’ pensions will be lowered to 0.0045 from 0.0060.
Five-year average YMPE to calculate CPP reduction
When calculating the CPP reduction, we will now use the five-year average YMPE (previously used three-year average). As a result of this change, teachers will keep more of their pension.
Older retirees’ pensions to increase based on their approximate best-5 years’ average salary
Teachers who retired prior to May 31, 1982 had their pensions calculated based on their best-7 or last-10 year average salary. These retired teachers (approximately 11,500) will have their pensions increased based on their approximate best-5, from the effective date (June 1, 2001) onward.
Teachers now being informed of changes
We are informing teachers of these plan changes in the following ways:
- Web site update (www.otpp.com)
- Message sent to teachers who have registered their e-mail address with us
- Special issue of Exchange being mailed to all teachers
- Special issue of Pension News being mailed to all retired teachers
Keeping you informed
In addition to faxing this Special Notice to you, we directly e-mailed it to all those employers who have provided us with their e-mail address. We will also send you a paper copy of this Special Notice, as well as the two newsletters, as soon as they are available.
In addition, we’re updating the Employer Handbook to reflect these changes. We’ll update the revised sections of the handbook on the Web site and send you paper copies as soon as possible.
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