2019 11 06 Catholic Charities Non DB Member Webinar

By | November 19, 2019

Arlene Patterson: Thank you for joining us
today for the CAAT Pension Plan DBplus webinar for active members in the defined contribution
or group retirement savings plan of Catholic Cross Cultural Services. My name is Arlene
Patterson and I’ll be your moderator for today’s webinar. With us today from CAAT Pension Plan is Andrea King and Steve Hyland. And from Catholic Charities are Ganesh Subramaniam and Michael Fullan.
I will now pass it over to Steve Hyland to start today’s webinar. Steve Hyland: Before we get started today
I just want to we’re lucky enough to have Michael Fullan, Executive Director Catholic Charities here with us today. I’ll pass to it him for some preliminary words on the merger. Michael Fullan: Thank you Steve. Good afternoon,
everyone. I’m glad that you could join us today. I think that you’re going to find the
next hour and a bit to be very, very interesting. We’re on the verge of doing something quite
remarkable. And you’re going to hear all the benefits of being able to do this. I know
that I think everyone is from Catholic Cross Cultural today and some of you may have heard
us or seen us in the last week because we’re out both at Scarborough in Mississauga sites
last Thursday and Friday. And so I you know, it was quite informative, and your colleagues
really enjoyed this. Sit tight. Ask your questions. It is a great thing that we’re doing.
You’re all non-DB members. You don’t get to vote but doesn’t mean it’s not important that
you have going on. It really is something. Okay. Thanks, Steve. Steve Hyland: Thank you very much, Michael.
I would also like to welcome everyone who is listening in to this webinar. We’re going to be talking
about the proposed merger between Catholic Cross Cultural Services and the CAAT pension
plan. Before we get going I’ll quickly introduce myself. My name is Steve Hyland. What I do
at CAAT I’m the leader of growth education which means that a big part of my job is education
and training. I educate and inform both new members and employers who are coming in to
the CAAT pension plan. So I talk about all things pension. Specifically with regards
to mergers, this proposed merger such as this one. I’m very pleased to have everyone here
on the line today. It’s also important to understand this is part two so to speak of our communications
plan. Like Michael was mentioning we did already come out previously to provide you with the
preliminary information about what’s going on. The important thing about todays session
is by now each of you should have received a personalized member package. That was sent
out to you in the mail. We sent them back in early October but each of these packages
are specifically tailored to you. So the package pretty much outlines everything you need to
know about this proposed merger. As we stated earlier on the preliminary sessions that we
did, both the Catholic Charities and the CAAT Pension Plan believe this merger is going
to provide each of you with a secure and stable retirement benefit, meaning should they merger
go through you will now have that sense of pension security in retirement because going forward
everyone in the Catholic Charities will have a defined benefit pension. So we’re here today
to review the merger process and provide you with a little detail on the CAAT Pension Plan.
Most importantly we’ll answer the question, what does this merger mean for you? I’m very
pleased to talk to you about your pension security here today. So who should attend this session? Well, active
members who are participating in the defined contribution pension plan or the group retirement
savings plan. And also there could be some people or employees who are not yet participating
in either plan. Now, if you are an active member of a defined contribution or group
RRSP plan keep in mind should this merger go through, your contributions will cease
effective December 31st, 2019, and you will then start to contribute to the CAAT Pension Plan.
And it will continue or you will continue to earn or accrue a pension in the CAAT plan. So this is our agenda. This is what we’re
covering throughout the webinar today. And hopefully after this webinar you’re going
to have a better understanding of the key aspects of the merger and get the answers
to the questions that you might have. So first off we’re going to talk about why merge plans.
So why are we doing this? We’re going to talk about what is in it for your employer, the
benefits for the CAAT Pension Plan but most importantly what is in it for you as a member.
We’ll provide you with an overview of the merger process and where we’re at in the process.
So right now we’re in what is called a consent phase of the voting period. We’re also going
to talk a little bit about us. The CAAT Pension Plan. Who we are and what we provide our membership.
So for those you that don’t know CAAT stands for the Colleges of Applied Arts and Technology.
And then we’re going to get into some of the features of DBplus. Including, we’re going
to run through an example. We’re going to show you how to earn a pension year over year
and how it accrues. We find this is actually very, very helpful, especially to people that
don’t have too, too much pension knowledge in their background. And then lastly we’re
going to end with talking about purchasing additional pension. This is very, very important
specifically to those listening in who have a defined contribution pension plan right
now because you’re going to have the option to purchase more pension under DBplus and
that is the same for members that have group RRSP. And my favorite part of the webinar
today, we’re actually going go through a demo. We’re going to show you how to use some of
our tools which are available on the microsite for Catholic Charities members. We’re going
to show you how to use that pension estimator, how to estimate your pension and how to factor
in a pension purchase. And then of course we’re going to point you to all the additional
resources that are available at your fingertips. So let’s get going. So why merge the plans
or what is in it for you? So these are the benefits of the plan merger. And first off,
you should know that your defined contribution pension that you have earned with the Catholic
Charities is yours. Okay. Whether that be, you know, with DC plan or whether that be
the group RRSP. So that pension that you earned is yours to keep. But going forward, should
this merger go through, you will now earn a defined benefit pension. Okay, now, there are many different types
of pension plans out there. For example, flat benefit plans, target benefit plans, defined
contribution plans. So here at CAAT, we believe that defined benefit pensions are the gold
standard. Okay. So with a DB plan your benefit at retirement is going to be defined. In other
words we know what it is going to be because it is based on a set formula. That formula
will be the same for everyone listening in. So your pension will now predictable. It is
going to be secure and you can never outlive your savings. At CAAT you will receive valuable
features through your working life; at retirement and even in retirement. Now, we’re going to
talk more about all these features a little later on in this presentation. So what are the benefits for your employer?
Well, they now get stability and predictability of their contributions and financial reporting
which is a very important and valuable thing to employers these days. For active members,
effective January 1 2020, you’ll now have fixed contribution rates and your employer
will be matching those contributions. We’re going to show you how that is going to work
as well. But most importantly, Catholic Charities is now able to offer defined benefit pension
plans to all its employees on a go forward basis. This is obviously a very attractive
recruitment and retention tool. Employees want defined benefit plans and employers
want to offer it. So what is in it for us? What is in it for
the CAAT Pension Plan? For starters it helps to diversify our membership. When CAAT plan
was originally founded back in the 60s it was originally intended to provide that pension
security for members of the Ontario Community College system so teachers who work within
that college sector so to speak. Now, we can continue to grow that membership beyond simply
that college sector and we can involve other industries. Now, this is a diversification
technique which helps us to derisk our plan. Now, also, as a result, a larger membership
base simply increases more advocacy for defined benefit pensions. So not only in the public
sector but in the private sector as well. Now, another thing to keep in mind that is
we can increase our assets under CAAT. So mergers such as this one gives us access to
other enhanced investment options. So now we already are a large plan with about $11 billion
in assets but getting larger and having assets to a larger number of investments.
That is certainly going to help the plan fund overall in the long run. It helps to reduce
our costs. This also ties into better economies of scale and what we really mean here when
I say that is it allows our fixed cost to be spread over those larger assets. For example,
it lowers investment and administration costs for fees. And this is going to ultimately
reduce our cost per member on a go forward basis. So it gives us better economy of scale
as we grow through mergers. And lastly, another great benefit for CAAT
is that it simply expands our defined benefit coverage across Canada. So currently I believe the
numbers are about two thirds of working Canadians don’t have an employer sponsored pension plan
and here at CAAT, we’re very passionate about pensions and we believe that all Canadians
should have access to a defined benefit plan. So let’s go over the merger process.
So as I said earlier, we are in what is called the consent phase or the voting period. This is
specifically for defined benefit members who are in the Catholic Charities but here are
the requirements for the merger to actually proceed. So this is specific criteria that
needs to happen for this preferred merger to happen. So it is important to know right
off the bat that these requirements are rules in legislation. These are not CAAT’s rules,
these are not Catholic Charities rules, these are legislative requirements. So for it to
proceed it is a two part criteria here so the first part is at least two thirds of active
defined benefit members or the union representing them vote in favor of the merger. And no more
than one third of inactive members, okay, that would be retirees, surviving spouses,
deferred pensioners, they can vote against. No more than one third of these people here
can vote against the merger. Okay. So that is the two criteria that must be met.
Now, for those in the union, it is going to be OPSEU will vote on behalf of its defined benefit
plan members and they’re going to vote as a block. This simply describes what is in your merger
package that we sent out back in early October. As you can see here if you’re a defined contribution
plan member, what is in there is information on how to estimate your pension. There is
a joint letter from Catholic Charities and CAAT with information on DBplus. There’s a notice of plan amendment and of course there’s a generic DBplus member handbook which is very important and we encourage you to read through that. Probably the most important thing on this
list is the information on how to estimate your pension. CAAT has a designated microsite
specifically designed for members of Catholic Charities and on that microsite are our useful
estimator tools. And what we’re going to do today, we’re going to demo that tool.
That will be a little bit later in the presentation. Now, here is what is in your package. If you
are a group RRSP member there is information on how to estimate your pension. That joint
letter from Catholic Charities as well as that handbook as well. The only difference
here between the DC plan member and group RRSP member is there is no notice of plan
amendment because that is not a requirement for group RRSP members. So let’s shift gears a little bit and talk
a little bit about who we are. So the CAAT Pension Plan or the Colleges of Applied Arts
and Technology Pension Plan was established back in 1967. To provide those teachers from
that community college sector with DB pension which in turn provides that great benefit
security. So what we provide is guaranteed lifetime pension; that is for our members.
We have conditional enhancements like inflation protection. And we also have survivor benefits
as well. So we take great pride in fulfilling that pension promise to all of our members.
We are a sustainable multiemployer modern jointly sponsored pension plan. Okay. I call
it a JSPP plan for short. That is because we love acronyms in the pension world. JSPP
stands for Jointly Sponsored Pension Plan. That means we have a board of trustees and
sponsor committee that makes decision on the best interest of our plan members. Now, how
do we do this? We have a very, very strong governance structure which means that we have
equal representation at that board and sponsor’s committee level. Half the members on that
board are members represented by various union groups and the other half represent the employers.
So that is in essence what we mean when we use that term jointly sponsored. But over the years CAAT continues to expand.
You can see here we have currently 56 employers and over 55,000 members. Now, that 56 number
not only includes all 24 colleges in Ontario, but we do also have other groups in the plan
as we continue to grow. In fact growth has been the on going activity of the plan for
quite a while now with several high profile pension plan mergers already occurring. Last
year for example, we had Torstar join our plan and they actually joined us at 97% member
approval rate all into DBplus. Last year as well we had Postmedia. And then our first
non-college affiliate employer was actually ROM, the Royal Ontario Museum and that was
back in 2016. We currently have about 150 dedicated staff at the CAAT pension plan with aligned pension expertise. What this means is we have a strict,
strict focus on pensions. This is all we do. We do not provide any health or welfare benefits.
We’re not here to provide a dental plan because, again, our main focus is on providing all
of our members with that retirement security. We have a pension administration team which provides great service. We have a communications team, risk management, policy and an investment team. So remember, all of our staff are moving in that same direction delivering the same
goal which again is fulfilling that pension promise. Our staff doesn’t receive any bonuses not
even our CEO Derek Dobson receivers a bonus and we’re a not-for-profit trust organization.
This essentially means that we have a pension fund and all the money or investments goes
towards paying people out their pension. In fact we have that fiduciary responsibility
to ensure that every single dollar or dime goes towards paying people their pension benefit. Now, in terms of our investment management
program, you can see here we have $10.8 billion in net assets but in reality that is probably
$11 billion or more than that by now. And we’re 120% funded on a going concern basis.
We also have a $2.6 billion funding reserve. So we are in a surplus. What this means is
that for every dollar that we need to pay out pensions we have $1.20 sitting in the
bank backing that pension promise. In terms of our investment management program
at the end of 2018 our five year average annual net return was 8.7% as you can see here on
the screen and net meaning net of all fees and you can also see our longer term averages
our ten year net return which is 9.9%. Just under 10%. In fact no matter what period you
look at whether that be one year, two years or ten years, CAAT returns are consistently
in the first quartile. That means the top 25% of the funds in which we compare against
and usually we’re near the top of the quartile. So what else can members expect? We briefly
spoke about our great governance model or structure. Again, it is that 50/50 governance
structure. Which again means that we have equal representation at that board level.
Now, what we believe is that this 50/50 structure or model simply results in better decisions.
If there is equal sharing in the decision making about cost and risk, it drastically
improves the odds of better decisions being made. So our plan is also 50/50 cost sharing
which means that when active members contribute let’s say $100 into the plan, you can be sure
that your employer is also contributing an equal amount. So they’re going to match dollar
per dollar. So the Catholic Charities will be matching all contributions made by its
active members. Now, what else do we provide? We also offer
live education sessions so more and more people share a passion and want to learn about how
the pension works at CAAT. What we do is we hold regular information meetings to educate
and inform our membership base. For example, if you ever like to have CAAT come out one
day in the future to provide a session on planning for retirement let’s say, we would
be more than happy to pay you a visit. CAAT also has easy to understand communications.
We have a very user friendly website and again, we specifically have that microsite tailored
to you. Everything is actually posted to our website. So even our annual reports our investment
highlights, evaluation reports, etc., etc. We also have plenty of estimator tools which
we mentioned but all the tools provide our member’s with the information they need in
order to assist them in making well informed decisions when planning for their retirement. And lastly, our low operating cost simply
means that more contributions go directly towards paying people out their benefits. So let’s talk a little bit about DBplus. Now,
DBplus is CAAT’s second plan design and it is the plan design that you’ll be going into
effective January 1, 2020 should this merger go through. DBplus provides a sense of income
security in retirement because you’re going to earn a predictable and secure pension payable
for your lifetime. You’ll also receive conditional enhancements and survivor benefits meaning
where does your benefit go in the event of your passing? And with DBplus your contributions
are directly linked to the benefits that you earn but there are also enhancements for average
wage inflation. These are built in directly into the plan formula. And these enhancements
are enhancements that you receive while you’re working and they’re called AIW enhancements.
Now, AIW stands for Average Industrial Wage and it is the measure in which earnings increase
in Canada year over year. I don’t want to confuse anyone too, too much as we will be
going through an example in a few slides from now. So in DBplus you’re going to earn a defined
benefit pension. You will receive a monthly pension for your life. There are no individual
accounts. There is no stressing over investments and no wondering how much you have to accumulate
in your account or as I said earlier worrying about outliving your savings. At CAAT your
pension is guaranteed and defined. So it is predictable and easy to understand. At CAAT
we also have unique survivor benefits. In other words, we have no cost survivor benefits.
We have a no cost joint and survivor 60% pension. Meaning that if you’re married and you were
to pass away, that pension goes on to your spouse at 60% of which you were receiving.
This is at no cost to the members. No cost to you. That cost is already built in. Some
plans what they do, they reduce your pension amount once you elect to provide a pension
to your spouse. But at CAAT that is not the case. And also this applies to post retirement
marriages as well. This is also why we say unique survivor benefits because I’ll give
you an example here. Let’s say if you’re single in retirement and you get married,
your new spouse would automatically be eligible for that joint in survivor 60% pension. This
is unique to CAAT and I have not seen it in too many other pension plans. Now, the conditional adjustments or increases
to your pension while you’re working, they’re linked to the AIW. And in retirement you will
receive inflation protection that is linked to the Consumer Price Index or the CPI. To
put it simply you’re going to receive enhancements while you’re working and in retirement. These
enhancements are conditional meaning that if the plan can afford to pay them, then we
will. They are conditional on our funded status. We are currently paying them and we have been
for quite some time now. And that is simply because the plan fund is in a very healthy
position. In fact we are in that surplus position. I’ll give you an example here as well. If the plan has one single dollar of surplus
just one dollar, we’re going to continue to pay inflation protection to our current retirees.
Okay. So again, that is linked to the CPI but this is like a cost of living increase
that you get once you retire. Also, since this concept was first introduced at CAAT
we’ve never missed an inflation protection increase. That is what we mean when we use
that term conditional. You also have the option of purchasing additional pension in DBplus
and that is in respect of your past service. Now this may be especially relevant to everyone
listening in today because you could choose to use your DC account balance to purchase
more pension at CAAT. But we will talk about this a little bit more detail after we go
through an example of how your pension is builds in DBplus year over year. But before we do, there was an interesting
study that was released back in 2018 and this was conducted by the Healthcare of Ontario
Plan or HOOP for short. This study was titled The value of a good pension. What they did is they looked and compared
individual RRSP’s, large DC plans and modern defined pension plans like DBplus. Based on their findings the expected
payout for each dollar contributed is much higher with a modern define benefit plan like
DBplus than individual saving on their own or even a large DC plan. And this is without
the stress, the risks, or the costs. So if you can see here on the screen for one dollar contributed to
an individual RRSP the expected payout is $1.70. For large DC plans $2.58 and for a modern defined benefit plan, the expected payout is $5.32. The return is about five times with a modern
defined benefit plan such as CAAT. Now, let’s talk a little bit about contributions.
So first of all your contributions are tax deductible which means they’re subject to
the Income Tax Act or ITA. Contributions are deducted off your paycheck before any other deductions,
your CCP, your EI, etc. Your contributions to DBplus are ultimately matched dollar for
dollar by Catholic Charities and we say ultimately because there will be a phased in process
which we will describe. Most importantly the contributions that you’ll be paying in are
directly linked to the benefits that you earn. So this simply means that contributions are
a main factor or main driver of the pension plan formula going forward in DBplus. Here is a look at the contribution schedule.
It is not as complicated as it looks but both the member and employer will be contributing.
In a nutshell the goal will be to contribute at 5% of pay and the employer will be matching
that 5%. But you can see here how they’re phased in. So members of the Catholic Cross
Cultural Services will benefit from that phase in of their contributions over a period of
five years. So members will start contributing at 1% in 2020 as you can see here in the table.
Then the next year the members are going to contribute at 2% of pay. The year after that
3%. And so on and so on. Right up until you reach that 5% marker or 5% contribution rate.
Again, that is the goal. So in 2024 and thereafter, members will be contributing 5% and to get
employer is going to be matching dollar for dollar for a total of 10% contribution rate. A couple of other things to note is that if
you are currently contributing at a rate that is greater than the rate shown in that previous
contribution table, you will continue contributing at that rate until you’re picked up by that
table. So if you’re contributing at 3% currently, then you’re going to contribute at 3% if this
merger goes through. Then it is only going to be in 2023 when you’re picked up by the
table. It is going to increase to 4%. Also, you have the one time option to start contributing
at the ultimate rate of 5%. And that is right from the get go at January 1, 2020. I’m just
going to repeat that. You have that one time option should this merger go through to start
contributing at the ultimate rate of 5% right from January 1, 2020. So this is the DBplus pension plan formula.
This is how we take the contributions and turn them into an annual pension. It is not
as complicated as it might look. It is actually very straightforward. I’m going to break it
down into two parts. Let’s start with number 1 here. In the top box we take the total contributions
that you make and Catholic Charities makes on your behalf and then we multiply them by
what is called our Annual Pension Factor. Which is currently 8.5%. So this makes up
a member’s annual base pension or a member’s guarantee base pension. You’re going to have
a guaranteed base every single year. Then if you look at number 2 or the second
part of the plan formula, these are the enhancements to pensions that were already earned or accredited
in the previous year. But they are conditional on the plans funded status. What we’re going
to do, we’re also going to grow your pension as long as our funded ratio permits. To do
this, we’re going to take the total pension earned in the previous year and we’ll simply
multiply them by the AIW enhancement rate. So again, AIW stands for the Average Industrial
Wage. Remember it is that measure in which those wages increase in Canada every year
but just to simplify, I like to think of AIW increases as preretirement indexing or enhancements
while you’re working. Just to give you an example last year the AIW was 2.7%. So remember,
the AIW enhancement rate, this is a government number set every year. It’s not a CAAT number, a Catholic Charities number. A number that is set by Statistics Canada and this
actually changes year to year. I can tell you the average over the last 20 years is
2.2% and this is a number that we use in all of our examples that we show. So let’s look at an example and hopefully
this is going to give you a better idea or understanding how you earn a pension in DBplus.
So I would like to introduce you to Sarah. Sarah joins the pension plan on January 1, 2020. She’s 30 years old. She has pensionable earnings of $50,000. And her earnings increase
year over year at 2%. So let’s do the math. The math is relatively
straightforward. So remember Sarah’s contribution in year one she has a 1% contribution rate.
So we’re going to multiply that by her earnings of $50,000. So that is $500. Remember, Catholic
Charities contribution in year one is actually 5% times $50,000 of earnings. That is $2500.
So Sarah is going to earn an annual pension in year one of $255. So how do we get that?
We take the total there the $3000 and we multiply that by our annual pension factor. To get
the $255. Let’s now show you how that grows year to year. So if you look in the top right hand corner
of the screen there, that is the math that we just previously did. And then if you direct
your eyes to the bottom left hand corner of the screen you can see that $255 when she’s
30 years old. Okay. That is your guaranteed base pension that she’s earned. Now, the next
year is actually when it gets interesting because the next year her guarantee base represented
by that dark blue on the bottom when she’s 31 years old, that is going to increase the
$303. But what we’re going to do is we’re going to tack on the previous year’s pension.
That $255 so you can see that comes over and it gets stacked on top of the $303. But it
doesn’t stop there because now what we need to do is we need to add that AIW enhancement.
Okay. So that is what that $6 of AIW represents. We’re taking the pension earned in the previous
year that, $255, we’re multiplying that by the AIW enhancement rate to get an additional
$6 of pension. So once we total those numbers up the 303, the 255 and the $6 of AIW, when
Sarah is 31 years old she’s going to have a pension of $564 accrued. The same concept
applies going forward. Only now everything gets compounded. So when she’s 32, if you
look at the dark blue triangle at the bottom, $354 now, but now we need to stack on the
previous year’s pension. That would be the total. So the entire $564 and then we’re adding
AIW to that amount. Okay. That is $18 of AIW for a total pension of $930 in year number
three. Now, although AIW is conditional on the
funded status it is important to note once it is granted it can never be taken away.
It actually forms a part of a member’s guaranteed base pension. So hopefully here as you can
see it gives you a good idea of how your pension builds year to year and you can see how everything
is compounded and the closer to retirement that you get, your pension is going to be
higher and higher. So what if we look at the rest of the future
working lifetime. This is representative from the age of 30 right up until age 65. So Sarah’s
pension continues to build right through to her retirement. This graph obviously shows
you how her pension grows. We’ve shown her pension that she’s built, that is the bottom
part of the triangle in dark blue. But remember that is her guaranteed base. We’ve also added
the AIW enhancement increases which are sitting on top and you can see how they really start
to add up through Sarah’s working lifetime. In fact, over her 35 years between 30 and
65, AIW can add almost 29% to Sarah’s pension. So just her guaranteed base alone is around
$23,500 annually. But once we add in those AIW increases by age 65 or actual pension
annually is $33,500. And again I know I’m repeating myself here but once that AIW is
granted, it forms a part of the guaranteed base and can never be taken away. So what we’ve done is shown them separately
here. So you can see how much value AIW adds right up until retirement. And finally, at the end here on the right
hand side, you can see over this 35 year period Sarah will have contributed about $119,900
to DBplus. So why is that important? Well, let’s now look at Sarah’s expected pension
payments even in retirement. So Sarah’s 35 years of contributions from her working
life are kind of smashed to the left there at the bottom of the graph on the left hand
side between ages 30 and 65 and then her pension starts at age 65. When it does, it doesn’t
stop building. It is also going to grow in retirement with inflation enhancements. So
that is at 75% of the consumer price index. And we have shown them here in the light blue
triangle that is sitting on top of the guaranteed base. You can see that her pension of 65 starts
around $33,500 but the time she reached age 90 her pension has grown substantially. And
isn’t is due to that post retirement indexing or inflation protection. So a couple of things to mention here. First
you can see just how valuable the AIW enhancements can be for your working life and how much
additional pension inflation adjustments can bring you after retirement. A couple of other things to note when we mention
the contributions that she paid in through her working life, you can see that before
the age of 70, Sarah would have already recovered everything she’s paid in. And that is why
we have what is called the guaranteed five year payment period. So from a member’s perspective,
you’re never going to get anything less out of the plan than what you put in. And you
can see that also a very, very quick return on what you paid in as well. Now, if you look at the other box on the very,
very right hand side here, that is the survivor pension. So what we did include is a survivor
pension. So we assumed that say Sarah is married and has a spouse. That she lives to age 90
which is a reasonable expectation of life for someone that is retiring at age 65, then
when she passes away with a survivor pension continuing, she can expect to receive almost
940% of her contributions in total pension payment. So that is both to her and her surviving
spouse. So the assumption here is that Sarah was married and the pension went on to her
spouse for a period of three years. So based on that return on contributions, I would argue
this is a great return on investment. So let’s go over a few points on purchasing
additional pension. Under DBplus, what you may be able to purchase or you will be able
to purchase more pension to eventually give you a larger monthly pension payment when
you retire. But remember this is your choice. So I’m not here to tell you if this is the
right option for you. I’m simply here to tell you that this is an option for you. So you
may be able to purchase past periods of employment with a participating employer that are not
credited under the CAAT pension plan. For example, periods of employment with your current
employer, the Catholic Charities. So, for example, you may have a hire to enrollment period also
known as a waiting period where you had to wait a set amount of time before you could
enrol their pension plan. If you did then you could explore the option of purchasing
more pension in DBplus or you could also purchase periods with another employer when you participated
in its registered pension plan. But that period does, indeed, need to be tied to employment.
So let’s say you worked for another employer in the past and they had a pension plan. Then
you could also explore this option. But this mostly applies to those who have a defined contribution account balance or defined contribution plan. In other words, you’re going to be able
to use your DC account balance to purchase more pension in DBplus. So again, this is
your option but the DC plan itself will have to terminate or wind up first so to speak
before you can do this. It is anticipated to happen sometime in 2020. But whenever we speak about purchasing more
pension in DBplus we need to consider where the funds are coming from. The process is
relatively straightforward. So when a member purchases pension, the funds used for the
purchase must come from a registered tax sheltered vehicle such as a defined contribution pension
plan or an individual RRSP. So again, this is an option that you’re going to have made
available to you but the funds must not come from any after tax vehicle. So no cash or
no TFSAs, for example, no money from your bank account or any after tax investment.
For those listening in this great option would only be made available down the road should
this merger happen and it would be after that DC plan terminates. So most likely again that
would be some time mid to late 2020. Now, this slide is important because it outlines
the limits to how much you can purchase. The income tax act places specific maximums you
can purchase that. Amount is limited to 18% of your total earnings for the period that
you wish to buy additional pension for. So you can see here that by taking a look at
this example, let’s assume Sarah, was to divide pension in respect of her employment with
Catholic Charities from 2015 to 2019. So this represents her period that she wishes to purchase.
And remember, she would have a DC balance because she participated in the defined contribution
plan at Catholic Charities. If you look at her earnings for this particular period, she
has a total of $252,500. So again, it is simple math. We’re going to take that amount and
multiply it by 18% which equals $45,450. This is the maximum amount of pension that she
can purchase or transfer into DBplus. Let’s show you a specifically how we calculate
these purchases. So in DBplus purchases are treated like contributions. First you make
a contribution for the period that you’re purchasing and that would be (a) here you
see on the screen. The purchase contributions are then multiplied by the annual pension
factor of 8.5%. And this comes from the DBplus pension formula which we saw earlier. That
would be (b). And lastly we’re going to multiply it by what is called a purchase adjustment
factor. So that is (c). This purchase adjustment factor depends on
your years from normal retirement which is the end of the month in which you turn age
65 at the date of purchase. So, in other words, how far are you away from age 65 when you
make that particular purchase? This means the closer you are to your normal retirement
age, the less pension your purchase will result in. So the result of the math is the annual
pension that you have purchased so always try to keep in mind this general rule of thumb
when it comes to purchasing pension and that is that the younger you are, the more advantageous
it is for you because you can purchase more pension in DBplus. And that is because of
that purchase adjustment factor. So just to reiterate, under DBplus purchase
provisions the amount to be credited to a member is the product of a x b x c, where
a equals the contribution paid by the member. B is DBplus pension factor of 8.5% and C is
that purchase adjustment factor and that simply reflects the proximity to normal retirement
date. So let’s look at an illustrative example and
hopefully this will help to clarify a little bit better. The great thing about this chart
is that it shows you how much more a member can purchase based on their age. So let’s
start off by taking a look a member who is 40 years old and wishes to purchase pension.
Let’s say is contribution is $40,000. That is the same contribution for someone who is
40, 50 or 60. So you can see under (a) there, that $40,000. Remember the formula a x b x c and a is that purchase contribution, (b) is 8.5% and (c) is the purchase adjustment
factor. You can see here that for someone who is age
40, that adjustment factor is 100% which means that it doesn’t really factor in. So this
person would be credited with $3400 at the time of purchase. But you can also see that
in the second to the last column, after that AIW growth, the pension payable at 65 would
be $5,858. And this is because after you’re credited with that pension, that pension will
continue to grow with those AIW increases and that is right up until when you decide
when you want to retire. But then you can also factor in the total retirement pay outcome
is just beside it there. Let’s say this person were to live to age 90, the total retirement
payout would be $176,000. And if you were to compare that to someone who is age 60 years
old, that is the last column on the bottom, the purchase adjusted factor decreases.
So this member’s pension credited at purchase is a little bit less so you can see here it
is $2,448 based on a factor of 72%. That is (c). So again, that pension adjustment factor is
100% for ages 40 and younger meaning that it won’t factor in whatsoever and it is going
to decrease by 1.4% per year between ages 41 and 65. And remember the factor at age
65 or older it is 65%. So you can see how your age factors into the pension purchases. So now that we have provided a few examples
we’re going to actually show you how you can use the pension estimator tool. So to do this
what we’re going to need to do is actually log on to the microsite. So here you can see
the Catholic Charities of the Archdioceses of Toronto and participating member agencies.
This is the microsite designed specifically for everyone listening in. Once you get to
this microsite which is, but the way, dbplus.ca/ccat. That stands for the Catholic Charities. This
is the home page of the landing page. There is a number of tabs here that run across the
top. You have got active members, the estimator, retired and former members information sessions
or you can sign up for sessions. What you want to click on if you want to use the purchase
tool is the estimator. Once you click on that there is a little reading this is DB pension
estimator and it describes how it works. What we highly encourage you to do is to simply
click here to read the terms of use and once due that, you can simply click this little
check box here. I agree. Then hit start. So this here, these are the inputs. Everything
that you’re putting in here drives the estimate so this is very, very important. So the first
thing you need to enter is your date of birth. So if you simply click on this calendar here,
you want to enter your date of birth. We’re going to use someone who’s, let’s say 40 years
old. We’re going to use November 6, let’s say, 1980. And the second thing you need to
do is select your pension plan name. So if you click the drop down here, it has a number
of different pension plan names. You want to click the DC or the group RRSP group member. Once you click that you go to the next input,
C enter annual earnings. This is where you enter your annual earnings in which you want
to enter as an example here $50,000. Then it asks you to estimate your earnings increase
annually. So from now until retirement you have the option to select from this drop down
here if you want to be conservative 0% what we’ll use today we’ll use 1%. Then you need to select your employer group.
So everyone listening in today on this webinar from Catholic Cross Cultural Services so we’ll
click that. And then you select your DC group RRSP contribution rate. That is on the drop
down here and that would be 1%. Now, if you were to choose to come in at the ultimate
contribution rate and you can select to choose that 5% option here but for this example we’ll
just use the 1% contribution rate. Once you’re satisfied with all the inputs you want to
review your information, make sure it is correct then simply hit estimate. Once due that in
mere seconds your numbers are going to pop up. First of all it is going to tell you your
annual lifetime pension and it is going to tell you your monthly lifetime pension. That
is at age 65. So that is what this bar here represents. What we do is we actually break
it down. Your guaranteed DBplus base pension of $13,387 and then here we have the AIW enhancement
sitting on top for a total of $17,390. Again, this is an age 65. If you look on the left
hand side, this kind of recaps the information that you previously input so your date of
birth, your annual earnings, there is your earnings increase and here your retirement
assumptions. Here is age 65. But you do have the ability to play with this and put in a
different age if you choose to which we’re going to do in a second. But before we do
that, if you want to the see the total value of your pension, you can simply click on this
button here. Now what is going to happen this is going to factor in based on the DBplus
contributions that the members put in, $68,492. We’re going to see the total return on investments.
This is right up until age 90. So here we have got the guaranteed DBplus base, AIW enhancement
and post retirement inflation protection. This is cost of living increase that you would
get in retirement. You can see here how valuable it is. Right up until the point of the members
passing. We’ve also included a survivor pension as
well. Assuming that this person was married for a period of three years and we paid out
that survivor pension. If you want take it or leave it you can take that right off the
top. You can see here the total value of $562,209 and this is originally what the member contributed
to it. So again just to show you that feature if
you wanted to change the retirement age look at the drop down if you wanted to look at
age 60 or what your pension is going to look like you simply click there. Any time you change
something on the left hand side, what you’ll need to do is you’ll have to scroll to the
bottom. Hit calculate. Once you do, new numbers pop up. You’ll see these numbers actually
went down and the reason for that is quite simple really. We chose retirement date that
is a little earlier than 65. Those are five years of contributions that are not going
in to the pension plan. And also we’re factor factoring in an early start adjustment. Here you
can see the total pension of $10,877 and here on the right you have the total value.
Again this is for someone who is age 60 years old. So let’s revert it back to age 65. So once
we change something on the left we scroll down. Hit calculate. And then it reverts back
to what we want it to. And now, the interesting part about this estimator, this is the part
that I love. You can factor in a DBplus pension purchase. So again, on the left hand side,
just under retirement assumptions, it says right here, see the value of a purchase.
So let’s say that you have a DC account balance and you wanted to explore the option of purchasing
more pension. This is where you input the amount of your DC account balance. Let’s just
say that you had $40,000 and you were interested in doing a purchase. So you put that in there
and then the second input you need to enter the date of the purchase. So what we want
to do here because we know it is going to be in mid to late 2020, it is going to fast
forward in time a little bit. We’ll choose November for example. This is the date of
the purchase assuming that they’ll be able to do it by then. So for $40,000 you scroll
to the bottom. Hit calculate. And this is going to tell you the monthly purchase pension.
You scroll back to the top. There is guaranteed DBplus pension purchase that is credited at
the time of purchase. But also after you’re credited with the base amount, it is going
to continue to grow with AIW increases right up until age 65. So we’re factoring in the
AIW enhancements for a total of $5,858. So again, I’m just going to show you here.
Let’s say if you wanted to show the purchase pension plus the lifetime pension. In other
words, you want to see the total overall value. Okay, you would simply click on. So that is
a little toggle there. You click calculate. And now you have got the total annual lifetime
pension and this factors in the purchase. Right here it says in small font and $23,248
is the annual pension paid at age 65. Hopefully, this tool it makes sense. I find it very,
very user friendly. And again, to access this tool you simply go to www.DBplus.ca/ccat.
There it is again the microsite estimator. And now we’re going to point you to some additional
resources. This webinar is not your only means getting information regarding the proposed
merger. You can visit our DBplus microsite which you now have just seen. Hopefully it
is fresh in your head and there’s also a hot line where you can call in for any questions
that you have. You can see here the number is on the screen. 416 673 9000 and we also
have a toll free 800 number. If you have a question you’d like to send us in writing,
you can send to the e-mail at [email protected] Steve Hyland: All right. So I want to thank
everyone for joining us here today for today’s webinar. I hope you got something out of this
session. I’ll simply put the hotline, the numbers back up on the screen before we let
you go but I also want to thank Michael Fullam and Ganesh for being with us at this webinar.
We appreciate their time. Should you have any questions whatsoever just feel free
to give us a call. Even like Arlene said, if you’re going to the estimator tool and
you get stuck you’re not sure how to do something, just simply give us a call and we’ll walk
you through that. Michael Fullam: Steve, can I add one more
thing when we were out at Catholic Cross Cultural last week at the session, we did tell people
we would come back early in the new year. I think that is important because when we
get through this process we’re going for come back and talk about some of these issues in
terms of how you make extra purchases of pension benefits as well, so sometime in the first
quarter, not the first week of January, but somewhere in there. Andrea King: Yeah, that is on our agenda,
too, to reach out to all the participating agencies to schedule dates in
the beginning of the year so we can come again, walk through the process. At that point we
would have the forms prepared and give more information sessions. Michael Fullan: But we ask you in the interim to get in there and use that pension estimator and try out the tools just so you’ll be able to ask better questions
than you’re asking today which are great questions but you’ll be that much more informed. Arlene Patterson: Great plug, Michael. We
did have a couple more questions come in after the fact. But what I’m going to follow up with you by
e-mail and answer those questions. Steve Hyland: Thank you, Arlene. Again, thanks everyone for joining us. I hope you have a great afternoon.

Leave a Reply

Your email address will not be published. Required fields are marked *