Date post: | 17-Dec-2015 |
Category: |
Documents |
Upload: | alexis-mcdowell |
View: | 219 times |
Download: | 0 times |
Voluntary Early Retirement
Incentive ProgramJanuary 27, 2015
Linda Byron, Partner, Aon HewittSusan Diep, Manager Compensation & Benefits
Today’s agenda Program overview Incentive options What you need to consider Online modelling tool demonstration Questions
Program overview• Monetary incentive to retire = 1 year reference
salary• Retire between July 1, 2015 and July 1, 2017• Does not change pension formula• University must approve application• Designed to help achieve budget reductions
Eligibility to apply By July 1, 2017 will you be…
A full-time Laurier continuing employee in an applicable group (WLUSA/OSSTF, CPAG, PAG, Special Constables), Management?
Yes
At least age 60? Yes
A pension plan member with a combined age and years of pensionable service at the University of at least 80?
Yes
Already participating in a phased in retirement or SVEP or on LTD benefits for more than 2 years?
No
Application and approval process
February 1, 2015 February 28, 2015 March 31, 2015
Fill out online “intent to apply” notification form
Complete and return the paper application form
University reviews applications and
sends notification
Choose one of three incentive options
Lump sum paid on your last pay at retirement
date
Salary continuance beginning up to one year before your retirement
date
Combination of salary
continuance and lump sum amount
or or
Lump Sum option
Continue to work up until retirement date
Receive pension payments
(or commuted value)
Your retirement date
Incentive paid as lump
sum
Lump sum optionPayments Single amount paid at retirement date - qualifies as
Retirement AllowanceIncome tax Deducted after applicable RRSP transfer, at lump sum rates
(10 to 30%)CPP and EI deductions,Union Dues
None
Transfer to RRSP Transfer eligible portion without affecting contribution room, transfer non-eligible portion if RRSP room available
Benefits Post-retirement benefits (capped at $30,000 per year)
Pension No further contributions or service accrual
Salary Continuance
Your program start date
Receive salary continuance for 12 months
Receive pension payments
(or commuted value)
Your retirement date
Stop working
Salary continuance optionPayments Up to 12 months of regular pay until retirement date
Salary frozen during this periodIncome tax Calculated and deducted as normal earnings
CPP and EI deductions,Union Dues
Calculated and deducted as normal earnings
Benefits Health, dental and basic life insurance benefits continue under active plan until retirement date. Employee-paid
benefits (LTD, AD&D, Optional Life) will cease.Pension Contributions and pensionable service accrual continue
until retirement dateVacation and Sick Leave Vacation and sick leave accrual ends. Unused vacation will
be paid out.
Combination option
Your program start date
Receive salary continuance for less than 12 months
Receive pension payments
(or commuted value)
Your retirement date
Balance of incentive
paid as lump sum
Stop working
1. How does your age and pensionable service affect:• when you can start the program• what options are available for you
Example 1 – Meets requirements in 2015Alex
Turns age 60 Feb 12, 2014
Reaches “80” factor Mar 6, 2012
Earliest program start date July 1, 2015
Latest retirement date July 1, 2017
Salary continuance option 12 months max
Lump sum option Yes
Example 2 – Meets requirements in 2016Alex Pat
Turns age 60 Feb 12, 2014 Nov 25, 2016
Reaches “80” factor Mar 6, 2012 May 5, 2014
Earliest program start date July 1, 2015 Dec 1, 2016
Latest retirement date July 1, 2017 July 1, 2017
Salary continuance option 12 months max 7 months max
Lump sum option Yes Yes
Example 3 – Meets requirements in 2017Alex Pat Terry
Turns age 60 Feb 12, 2014 Nov 25, 2016 Sept 6, 2015
Reaches “80” factor Mar 6, 2012 May 5, 2014 June 23, 2017
Earliest program start date July 1, 2015 Dec 1, 2016 July 1, 2017
Latest retirement date July 1, 2017 July 1, 2017 July 1, 2017
Salary continuance option 12 months max 7 months max No
Lump sum option Yes Yes Yes
2. Does your normal retirement date fall within the incentive window? Do you want to retire on your normal retirement date?
You can keep working and retire at your normal retirement date
Continue working until you reach age 65 (or later)
Receive unreduced pension payments
(or commuted value)
Your normal retirement date
Receive lump sum
Today
Or take salary continuance for up to a year before retirement
With salary continuance you continue to accrue pension
benefits
Receive unreduced pension payments
(or commuted value)
Your normal retirement date
Full pension
Your program start date
Stop working
If you retire early, your pension benefit will be reduced:Pension Reduction formulas for retirement age 60-65
Money Purchase Annuity conversion factor rate is based on your age at retirement. Lower age = lower annuity
Minimum Guarantee For each year prior to age 65, benefit is reduced:
1.5% for service prior to January 1, 2013and
3% for service on and after January 1, 2013
Let’s look at an example for a member with final average earnings of $60,000.
What difference will it make if the member retires immediately (takes the lump sum) or retires one year later (takes salary continuance)?
• The reduction is blended based on the split between pre-2013 and post-2012 service
• The reduction is much less than the true actuarial “value” of the additional years of pension
Takes lump sum and retires on July 1, 2016
Age 60
Takes salary continuance and retires on July 1, 2017
Age 61Years of service 25 26
Estimated earned pension $22,100 $22,800
Reduction applied 8.6% 7.0%
Reduced annual pension $20,200 $21,200
Difference - $1,000
4. What other sources of retirement income do you have?
Pension from former employer(s) CPP & OAS benefits RRSP
Non-registered savings Real estate Inheritance
5. What about health, dental and insurance benefits?
With salary continuance, your health, dental and basic life insurance benefits continue
under the active plan
After retirement you receive retiree health &
dental benefits ($30,000 cap on health )
Your retirement date
Full or reduced pension
Your program start date
Keep upcoming changes in mind
January 1, 2016 January 1, 2017
University-paid Retiree benefits
regardless of pension choice
Receive Retiree benefits only if receiving monthly pension
Retiree pays 15% of benefit premiums
6. Have you consulted your financial advisor?
This is an important decision.You should review how it fits into your overall financial situation with your personal financial
advisor.
Resources:Employee & Family Assistance Program• E-courses and materials on retirement planning• Plan Smart Lifestyle Counselling Services
www.homewoodhumansolutions.com/MSA1-800-663-1142
Online Pension Information Portal• View your personalized pension information• Run pension estimates for different retirement dates
https://wlu.penproplus.com
Resources:Human Resources• Questions regarding voluntary retirement incentive program• Susan Diep – [email protected] ext 4487• Mary Jo DaSilva – [email protected] ext 4368
Laurier Pension Contact Centre• Questions regarding pension estimate and options• Trouble accessing online portal• Toll-free at 1-844-342-3624