THE DALHOUSIE UNIVERSITY STAFF PENSION PLAN

1
THE DALHOUSIE UNIVERSITY STAFF PENSION PLAN

• Pension Plan Information Session
• Presented by Lee Crowell, Dalhousie University
• May 7, 2008

2
Plan Options

• Commence a Pension from the Dalhousie Plan
• Deferment of a Pension
• Transfer Entitlement to an RRSP

3
Definitions

• Commuted Value Present Value (Lump Sum) of the
  pension a Member has accrued in the Dalhousie
  Plan.
• SOCC The value of a members and employers
  contributions to the Plan plus accumulated
  interest.

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Definitions (Contd)

• Unlocked Funds 100 of the vested contributions
  made prior to 1977 and 25 of the Commuted Value
  of the benefits earned between 1977-88.
• Type II Pension Options Provide survivorship to
  spouse pension is reduced if either member or
  spouse dies.

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Definitions (Contd)

• CRA Transfer Maximum The amount of pension
  entitlement which can be transferred to an RRSP
  from a defined benefit pension plan. This amount
  is the product of the accrued pension and a
  factor provided by the CRA.

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Dalhousie Pension

• Characteristics of a DB Plan
• Benefit is based on a formula
• Contributions are adjusted periodically
• Pension plan is regulated both federally and
  provincially
• Financial risk is borne by the Plan Sponsor

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Dalhousie Pension

• Best Average Earnings Formula
• 2 x best three consecutive years average salary
  x pensionable service
• Contributions
• 4.65 of first 5,000 of salary, 6.15 of balance
  of salary to maximum
• Maximum 35 years contributing to the Plan

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Maximum Pension Benefits

• 2008 Maximum Pension 81,655/yr and Pensionable
  Salary 116,650
• 2009 Maximum Pension 85,540/yr and Pensionable
  Salary 122,200
• Future Years - Increase is the increase in the
  average industrial wage

9
Early Retirement Benefits

• Reduction Factors
• For each year between age 55 and normal
  retirement the pension is reduced based on an
  adjustment factor

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Optional Payment Forms

• Lifetime Pension for the members life
• The Plan provides other options at retirement to
  suit your circumstances (e.g. JS 75, JS 100)
• Certain guarantees can be added (E.g. a minimum
  number of guarantee payments or an ongoing
  pension to your spouse, should they survive you)

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Optional Payment Forms (Contd)

• Life 10
• Example pension of 2,000 per month
• Paid for your lifetime and ceases upon death
• What if death occurs before payments have been
  made for 10 years?
• Balance of remaining payments to beneficiary

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Optional Payment Forms (Contd)

• JS 66 2/3 (guaranteed 5 years), Type I
• Pension paid for your lifetime
• Death of pensioner?
• Surviving spouse at time of retirement receives a
  survivors pension equal to 66 2/3 of Members
  payments.
• What if death of both spouses occurs before
  payments have been made for 5 years.
• Balance of remaining payments to beneficiary

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Optional Payment Forms (Contd)

• Dalhousie also offers a Type II pension
• Amount continuing to Member or spouse is the
  same, regardless of who dies first
• Example, Type II with 75 continuance
• Initial pension - 2,000/month
• Reduces on death of either the Member of the
  spouse to 1,500/month

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Optional Payment Forms (Contd)

• Base pension for a Member retiring at NRD after
  25 years (22 yrs. Before June 30/04, 3 yrs.
  after) with BAS of 38,000 is 19,000 p.a.
• Amount of actual pension depends on level of
  guarantees following are samples of options
  available (assumes spouse is same age)

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Optional Payment Forms (Contd)

• Pension law requires that you provide a minimum
  60 survivorship to your spouse.
• We recommend that the Plan member consult with a
  financial advisor before deciding what optional
  pension to choose.

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Survivor Options

• Normal Forms
• In respect of service to June 30, 2004
• Single life guaranteed 10 years
• Married Joint Survivor 66?, guaranteed 5
  years
• In respect of service from July 1, 2004 onwards
• Life guaranteed 7 years (whether single or
  married)

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Retirement Age

• Early Retirement prior to Normal Retirement Date
  
• As early as age 55
• Normal Retirement Date
• July 1st following your 65th Birthday

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Early Retirement Example

• Retirement at age 60 with 20 years of employment
• Based on Adjustment Factor Table, pension reduced
  by a factor of
• .95, for years up to June 30, 2004
• .78, for years after June 30, 2004

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Early Retirement Example (Contd)

• Assume pension at normal retirement is 30,000
  and
• 16 of the 20 years are pre-June 04, and 4 of
  the 20 years are post-June 04

30,000
? Pension payable at age 65
x 0.916
? Adjustment factor
27,480
? Early retirement pension
Calculated as 16/20 x 0.95 plus 4/20 x 0.78
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Survivorship Benefits

• EXAMPLE OF JS PENSION
• Pension of 30,000 per year at time of members
  death
• Surviving spouse to receive pension of
• 30,000 x 66 2/3 20,010/ year
• Type II pension would be reduced at the death of
  either the member or spouse

21
Indexing

• To maintain the purchasing power of the initial
  pensions
• Two aspects of indexation at Dalhousie
• 1) Indexation based on the Excess Interest
  Method (i.e. over 5.05)
• 2) Discretionary catch-up indexation

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Indexing (Contd)

• Excess Interest Indexation equals the lesser
  of
• 1) Three years average return of the RTF in
  excess of 5.05 and
• 2) Increase of CPI over the past fiscal year

23
Indexing (Contd)

• Each January 1st,
• Initial indexation is the second January
  following retirement and will vary depending on
  the month in which pension payments start
• Jan - 150
• Jul 100
• Dec 58.3

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Retirement Benefits

• These options are considered to be retirement
  options which entitle the Member to health,
  dental and tuition fee waiver benefits, subject
  to eligibility rules

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Deferment

• Typically chosen if the Member has an alternative
  source of income
• Entitlement (commuted value) will receive
  investment rate of return on the RTF
• Maximum deferral period to December 31st of 69th
  birthday

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Deferment (Contd)

• Three year weighted average
• Retirees Trust Fund 10.83 (for 2008)
• Pension Trust Fund 11.22 (July 1, 2007 to June
  30, 2008)
• Ultimate pension is limited by CRA maximum
  pension rules

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Deferment (Contd)

• Members who terminate at age 55 or older
• Elect to defer in writing
• The deferred pension will grow at the rate earned
  by the RTF but will be limited to the maximum
  pension prescribed by the CRA.

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Deferment (Contd)

• Members who terminate at less than age 55
• SOCC will remain in the PTF to be credited with
  interest as earned by the PTF
• If the member does not transfer out the SOCC by
  the members NRD they will receive a pension
  equal to the amount accrued at date of termination

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Termination of Employment

• Deferred vested monthly pension
• Lump sum transfer value
• RRSP (any applicable locked-in vehicle)
• To RRP of new employer
• Annuity purchase with licensed insurance company

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Termination of Employment (Contd)

• Entitled to greater of commuted value or vested
  contributions
• Withdrawn within one year of normal retirement
  date no longer applies
• Waiting until normal retirement to transfer funds
  you are deemed to be taking a pension

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Maximum RRSP Transfer Value

• Factor of your pension and age
• Factors
• Age 50 and under 9
• Age 65 12.4
• Age 71 10.3
• Pension used is unreduced
• Amount over the transfer max is paid in cash
  (less tax)

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THE DALHOUSIE UNIVERSITY STAFF PENSION PLAN
Questions and Discussion

• Pension Plan Information Session
• May 7, 2008

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• SOURCES OF
• RETIREMENT INCOME

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SOURCES OF RETIREMENT INCOME
Three Legged Stool

• Individual
• RRSPs
• House
• Non-registered savings

• Government
• CPP
• OAS (GIS)

• Employer Sponsored
• DB Plan (Dals Plan)

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SOURCES OF RETIREMENT INCOME

• WHY YOU DONT NEED 100 REPLACEMENT
• Rule of Thumb
• Many financial planners say that you will need
  about 70 of your current earnings (gross) to
  maintain your standard of living at retirement

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SOURCES OF RETIREMENT INCOME

• WHY YOU DONT NEED 100 REPLACEMENT
• No work related expenses
• Fewer deductions from pension cheque
• Deductions on your tax return
• House (other assets) paid for?
• No children to support?

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SOURCES OF RETIREMENT INCOME

• CANADA PENSION PLAN (CPP)
• Contributions on earnings up to YMPE
• 4.95 of pay up to YMPE
• YMPE is 42,100 for 2006
• matched by employer
• Target Pension at age 65
• 25 of average indexed earnings up to the YMPE
• adjusted for periods out of the workforce
• early reduced pension between 60 and 65
  (maximum reduction of 30)
• stop work or low earnings
• fully indexed pension, 60 survivor benefit

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APPLYING FOR CPP

• Recommendation is six months before you want your
  pension to start
• Application kit from HRDC (available through
  website or mail)
• Must provide
• certified copy of birth or baptismal certificate
  (if not already submitted)

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SOURCES OF RETIREMENT INCOME

• OLD AGE SECURITY (OAS)
• Universal Benefit
• residency requirements (40 years pro-rated)
• paid from General Tax Revenues
• Payable at age 65
• January 2006 5,816 per annum, fully indexed
• OAS clawed back for higher earners
• Incomes over xx,xxx in 2006
• GIS may be payable
• paid subject to income test
• 50 cent reduction per dollar other income

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APPLYING FOR OAS

• Six months before you turn 65
• Application kit from HRDC (available through
  website or mail)
• Must provide
• Birth or baptismal certificate (if not already
  submitted)
• Citizenship or immigration documents (if not born
  in Canada)
• Proof of all dates arriving and leaving Canada
  (i.e. passport) if not continuously living in
  Canada since age 18

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SOURCES OF RETIREMENT INCOME An example

• Member with 30 years in plan
• Best average earnings of 60,000

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SOURCES OF RETIREMENT INCOME (Example contd)

• Example 1 Retirement at age 60

Reduction factor assumes 28 years of pre-June
04, and 2 years post OAS starts at age 65
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SOURCES OF RETIREMENT INCOME (Example contd)

• Example 2 Retirement at age 65

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SOURCES OF RETIREMENT INCOME

• INDIVIDUAL SAVINGS
• RRSPs, House, Non-registered savings
• Personal RRSPs
• Tax-sheltered
• contributions and investment income
• Eligible contributions to RRSPs
• 18 of earnings, less Pension Adjustment (PA)
• PA on your T4 is deemed value of pension benefit
  earned
• University Plan leaves 600 in room per annum

45

• More information on government programs is
• available from
• Human Resources Development Canada
• 1-877-454-4051
• www.hrdc-drhc.gc.ca/isp

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FYI

• All of the following slides are from Lees
  presentation

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RETIREMENT/TERMINATION OPTIONS
RETIRE
RESIGN/ TERMINATE
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DALHOUSIE PENSION PLAN

• BENEFIT FORMULA
• BEST 3 YRS AVG. SALARY x 2 x YRS of MEMBERSHIP
• MAXIMUM 35 YRS
• EARLY RETIREMENT PENALTY

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MAXIMUM PENSION BENEFITS

• 2005 - MAX. PENSION 70,000/YR, PENSIONABLE
  SALARY 100,000/YR.
• 2006 - MAX. PENSION 73,885/YR, PENSIONABLE
  SALARY 105,550
• 2007 - MAX.PENSION 77,770/YR, PENSIONABLE SALARY
  111,100

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EARLY RETIREMENT BENEFITS
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NORMAL FORMS OF PENSION

• TO JUNE 30, 2004
• LIFE, 10YR GUARANTEE (SINGLE)
• LIFE , 66 2/3 SURVIVORSHIP , 5YR GUAR (MARRIED)
• AFTER JUNE 30,2004
• LIFE, 7YR GUARANTEE (MARRIED AND SINGLE)

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NORMAL FORMS (Contd)

• PBA MINIMUM 60 SURVIVORSHIP
• OTHER OPTIONAL FORMS
• TYPE II PENSIONS

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ADVICE FOR NEXT 2 YRS

• Follow pension plan changes via notice digest,
  etc.
• Annual estimates
• Website

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EARLY RETIREMENT BENEFITS

• Continuation to Age 65 (10/10/5 Rule)
• DENTAL PLAN
• HEALTH PLAN RETIREES PLAN AFTER AGE 65
• Conversion of optional Group Life