Hybrid Pension Plan • Two Components to the Pension Plan • Minimum Guarantee Pension (MGP) • Formula which is 1.4% of your finalaverage earnings up to the average Yearly Maximum Pensionable Earnings (YMPE) plus 1.9% of earnings above the YMPE multiplied by your credited service in the Plan. • 2. Money Purchase Component (MPC) • Your contributions plus York’s contributions plus Non Reduction Reserve (NRR) plus accrued Rate of Return (ROR).
When you Retire • If you are retiring on your Normal Retirement Date the Pension & Benefits office automatically produces option packages for you. • The Pension & Benefits office will provide a termination option package (you may transfer out your funds to a locked-in RRSP) and a retirement option package. These are sent out towards the end of April. • If you are single you will have four pension options available. • If you are married you will have twenty pension options available. • The option packages provided to the member make assumptions in salary and contributions for the first six months of the year. No rate of return is assumed for the year of retirement.
Which option should you choose? • The Pension & Benefits office is able to explain the various options to you however we are unable to advise you on which option is best for you. • We advise you to seek advice from a financial specialist if you require assistance in determining the best option for you.
Retirement Option Package • Retirement date: July 1, 2005 Marital status: Married • Age difference: Spouse 3.5 years younger Service: 32.16 yrs
Example continued • Member elected the Joint & Survivor 60% guaranteed 120 months. • After the final pay has been processed the monthly pension amount is finalized. The updated pension was $2,009.96 per month. • It is expected that the July 1 pension payment will be deposited to the individual’s bank account about the third week of July.
Year End • Once the rate of return for the full year and the four-year moving average have been determined the pension is then recalculated. • It generally takes until the end of February to obtain the prior year rate of return and the four-year moving average.
Impact on Pension • Annuity factor at retirement date based on chosen option: 12.340486 • Annuity factor at end of year based on chosen option: 12.238997 • Pensioner increase percentage applicable: 1.5142% • Total money purchase balance at July 1, 2005: 314,634.44 • Actual money purchase pension at July 1, 2005: 2,124.68 • 314,634.44 / 12.340486 / 12 • Shortfall of money purchase pension: 114.72 • 2,124.68 – 2,009.96 • Accumulation of shortfall to the end of the year: 698.42 • (114.72 * 6) * (1+.06 * 6 / 24) • Calculate adjustment to money purchase pension: 4.76 • (698.42 / 12.238997 / 12) • Revised monthly money purchase pension: 2,145.50 • (2,124.68 + 4.76) * (1 + 0.015142 * 6 / 12)
Receipt of Increased Pension • The third party administrator then has to update the system and there are several steps involved. • The increase to the pension occurs on the April or May retirement income payment. • The retroactive amount from January to the date of payment is paid separately. • Applicable income tax is deducted from all pension payments.
Recent Changes • Effective January 1, 2005 the pension plan was amended to permit any member taking a leave of absence without pay/reduced pay to contribute the employee and employer pension contributions to the pension plan. • Effective January 1, 2006 the mortality table was updated resulting in approximately a 3% decrease in pensions for those retiring January 1, 2006 onward. • Effective January 1, 2007 the mortality table will be updated resulting in approximately a 2% decrease in pensions for those retiring January 1, 2007 onward. • See our website for more information on any of these changes.
Questions • Questions may be directed to the Pension & Benefits office by calling • 416-736-2100 extension 77567 or email firstname.lastname@example.org. • You may also visit our website at http://www.yorku.ca/hr/compensation/pensionbenefits/index.html