Department of National Defence Modernization of the Canadian Forces Pension Plan Reserve Force members under Part I.1 February 2007
Dec 18, 2015
Department of National DefenceDepartment of National Defence
Modernization of theCanadian Forces Pension Plan
Reserve Force members under Part I.1
Modernization of theCanadian Forces Pension Plan
Reserve Force members under Part I.1
February 2007
2Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
OutlineOutline
• Eligibility, contributions, and definitions
• Benefits
• Pension formula
• Counting past earnings/service
• RFRG
• Coming into force
3Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
For more informationFor more information
1-800-267-0325Toll-free
www.admfincs.forces.gc.ca/pension/intro_e.aspOn-line
Presentation focuses on pension policiesConsult the CFPMP website www.forces.gc.ca/hr/dgcb/cfpmp
Beginning 1 March 07, contact DAPPP/Pension services for eligibility, benefit and election questions
4Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
About CFSA Part I.1About CFSA Part I.1
Provides a benefit based on set formulas (defined benefit)
Takes into account updated career earnings (part-time)
For Reserve Force members who are: Class A Short-term Class B Short-term Class C
5Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
EligibilityEligibility
Participation begins after earnings are at least 10% of YMPE for two consecutive 12-month periods
Earnings in months from April 1999 can be used to become a participant at Coming into Force (CIF)
Deemed earnings are used for authorized periods of maternity and parental leaves
Former members of the Regular Force who are annuitants will not be able to contribute to Part I.1
YMPE—Year’s Maximum Pensionable EarningsCanada Pension Plan earnings ceiling
(2007 = $43,700)
6Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
EligibilityEligibility
YMPE for:2005 = $41,1002006 = $42,1002007 = $43,700
Date joined Force 30/06/05
Earnings to 29/06/06 $4,200 Blended 05/06 10% threshold = $4,160
Earnings 30/06/06 to 29/06/07 $4,400 Blended 06/07 10% threshold = $4,290
Date joined plan 01/07/07
ExampleExample
7Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
ContributionsContributions
Reduces to 1% of pensionable earnings when member has 35 years of pensionable service
Pensionable earnings include basic pay and PILL
Year
Fixed percentage of pensionable
earnings
2007 4.3%
2008 4.6%
2009 4.9%
From 2010 on 5.2%
8Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
CF serviceCF service
Days of service in the Regular Force for which pay was authorized and authorized maternity and parental leaves
Days of service in the Reserve Force for which pay was authorized and authorized maternity and parental leaves
Days of training or duty of less than 6 hours = half-days Days of Class “A” service = 1.4 days Periods before April 1, 1999 (when duration of period is
verifiable but not the number of days) = quarter time During maternity and parental leaves, days of CF service
will be based on service in previous 12 months
DefinitionsDefinitions
After 25 years of CF service, a member is entitled to an immediate annuity.
9Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Pensionable servicePensionable service
Any period during which the member is a participant
Any period for which the member has elected to pay
Authorized periods of maternity and parental leaves
Counted on an elapsed-time basis
DefinitionsDefinitions
10Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
VestingVesting
Vesting is the right of a plan member to receive a benefit from the pension plan other than a return of contributions
An immediate annuity, or A deferred annuity that may be converted to an annual
allowance or transfer value
Vesting occurs after 2 years of pensionable service
DefinitionsDefinitions
11Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Transfer valueTransfer value
A lump-sum amount, expressed in today’s dollars, of your future pension benefits payable at age 60
Received if...• Vested,• Not entitled to an immediate annuity, and • Younger than age 50
Must be transferred to...• Locked-in RRSP,• New employer’s plan (if accepted), or• Insurance company, to buy an annuity
DefinitionsDefinitions
12Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Benefits at retirement or releaseBenefits at retirement or release
With 2 or more years of pensionable service
Immediate annuity + bridge benefit if…
• 25 years of CF service (9,131 days) • Age 60 • Age 55 with 30 years of pensionable service, or • Released for workforce reduction (20 years of pensionable service or
age 55 or older with 10 years)
13Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Benefits at retirement or releaseBenefits at retirement or release
With 2 or more years of pensionable service and no immediate annuity
If age 50 or older, a reduced annuity (annual allowance) + reduced bridge benefit
If younger than age 50, a deferred annuity starting at age 60 + bridge benefit, or option of:
• Transfer value • Reduced annuity (annual allowance) starting at or after age 50 +
reduced bridge benefit
With less than 2 years of pensionable service (not vested)
• Return of contributions with interest
14Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Ceasing participationCeasing participation
Members cease participating under Part I.1 when they... Release from the Reserve Force Do not have any earnings for a 12-month period Join the Regular Force Qualify as a contributor under Part I
15Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Benefits in case of deathBenefits in case of death
At death of a vested member or pensioner, his or her... Spouse receives a survivor lifetime pension
• 1% X updated pensionable earnings X reduced annuity factor, if any
Dependent children receive a child annual allowance• Payable to age 18 or age 25 during periods of full-time
school attendance
16Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Benefits in case of disabilityBenefits in case of disability
If participants are vested and have not ceased participation, they are entitled to...
An immediate annuity
If participants have ceased participation and are eligible for a deferred pension or annual allowance, and become eligible for C/QPP disability pension, they are entitled to...
An immediate annuity, but not bridge benefit
You are considered disabled if you suffer from a mental or physical impairment that prevents you from engaging in any employment for which you are
reasonably suited by virtue of education, training or experience and the disability is reasonably expected to last for the rest of your lifetime.
17Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Other featuresOther features
Annual increases for inflation – indexing for CPI For annuity and annual allowance, indexing begins at...
• Age 60, or• Age 55 or older, if age plus full years of pensionable
service total 85 or more For survivor and child annual allowance and disability
pension, indexing is...• Immediate
At death, minimum guarantee of 5 years of annuity payments
18Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Pension formulaPension formula
Yearly amount is 1.5% of total pensionable earnings updated for wage growth
0.5% of total updated pensionable earnings, up to the CPP 5-year Average YMPE(ends at age 65 or start of C/QPP disability payments)
Annuity Bridge benefit
Note: Updating reflects growth in military wage levels as measured by an index based on wage increases at the Corporal Rank—most populous in the Canadian Forces (5-year average).
19Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Pension calculationPension calculationExampleExample
Year
Actual pensionable
earnings YMPE Wage Index
Updated earnings to 2007
Updated earnings
to AYMPE 1978 $2,055.74 $10,400 24.5 $9,069 $9,068.75 1979 $3,052.00 $11,700 25.75 $12,810 $12,810.10 1980 $2,466.40 $13,100 25.75 $10,352 $10,352.16 1981 $2,520.63 $14,700 29.25 $9,314 $9,313.82 1982 $2,902.13 $16,500 33.25 $9,433 $9,433.43 1983 $3,016.30 $18,500 36.25 $8,993 $8,993.16
1984-2002* 2003 $8,921.52 $39,900 101.64 $9,487 $9,486.79 2004 $9,525.38 $40,500 104.18 $9,882 $9,881.96 2005 $9,944.94 $41,100 104.18 $10,317 $10,317.23 2006 $10,301.42 $42,100 113.7 $9,792 $9,792.23 2007 $2,493.31 $43,700 116.7 $2,309 $2,309.14
Bridge benefit $1,394
Pension $4,181
* Earnings from 1983 to 2003 are not shown here. Actual pensionable earnings continued to increase at a typical rate.
20Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Pension calculationTypical Reserve Force pensionPension calculationTypical Reserve Force pension
A member with typical earnings and service would be entitled to...
Annual lifetime annuity of $4,200 + annual bridge benefit(to age 65) of $1,400
• If at CIF, age 55 with 30 years pensionable service (elected to count all service)
21Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Counting past earnings/serviceCounting past earnings/service
Only past earnings from CF service are eligible Prior Reserve Force periods (no retroactivity restriction)
• Service becomes pensionable service• Election includes all past earnings
Regular Force periods with return of contributions
22Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Counting past earnings/serviceCounting past earnings/service
Waiting period required before electing Need 2 years of participation Service before CIF can count – if 24 months/10% YMPE test met
Limited time to make election Later of 1 year after notice of opportunity and 3 years after CIF No “late” elections
Paid by lump sum or life-insured instalments by the later of20 years or age 65
23Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Election calculationElection calculation
Cost of electing pensionable earnings for any calendar year
Pensionable earnings of the calendar year updated to year of election
X
Current contribution rate in year of election
+
7% interest compounded annually from the middle of the year bought back to the date
of the election
24Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Election calculationElection calculation
The member’s total cost equals the costs for all the years of past service
The member can elect to pay part of the full cost Service counts in full but pensionable earnings will be prorated
(thereby affecting benefits) The member cannot revisit the partial-payment decision later
25Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Election calculationElection calculation
Year
Actual pensionable
earnings YMPE Wage Index
Updated earnings
to CIF
Cost of election by year
1993 $4,709 $33,400 60.36 $8,211 $910
1994 $5,394 $34,400 60.36 $9,406 $975
1995 $5,751 $34,900 60.36 $10,027 $971
1996 $5,939 $35,400 60.36 $10,356 $937
1997 $6,609 $35,800 61.68 $11,277 $954
1998 $7,291 $36,900 80.82 $9,495 $751
1999 $8,348 $37,400 83.42 $10,532 $778
2000 $9,119 $37,600 89.52 $10,721 $740
2001 $9,662 $38,300 89.52 $11,360 $733
2002 $10,248 $39,100 97.72 $11,037 $666
2003 $10,729 $39,900 101.64 $11,110 $626
2004 $12,502 $40,500 104.18 $12,630 $665
2005 $13,292 $41,100 104.18 $13,428 $661
2006 $13,621 $42,100 106.78 $13,425 $618
2007 109.45
Total $123,213 $153,014 $10,985
ExampleExample
26Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Election calculation Election calculation
The member’s cost to buy back 1999 pensionable earnings
Pensionable earnings in 1999 $8,348
Updated pensionable earnings from 1999 to 2007
10,532
Rate of contribution in 2007 4.3%
Interest to be added (1.07)8
Cost $10,532 X 0.43 X 1.7182 = $778
ExampleExample
27Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Election calculationElection calculation
Member’s cost to buy back all pensionable earnings $10,985
Estimated transfer value if releases in 2007 $32,500
Note: The transfer value is based on a 35-year-old male and based on CIA Standard of Practice for Determining Pension Commuted Values, using the interest rates applicable in March 2006.
ExampleExample
28Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
New rules for RFRGNew rules for RFRG
The Reserve Force Retirement Gratuity has been amended
RFRG is now similar to a severance pay plan Benefits will be calculated on actual periods of paid service
rather than elapsed time These changes will be effective when the Reserve Force
Pension Plan is implemented—March 1, 2007 Calculation for periods before March 1, 2007 will be
unchanged
29Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
New rules for RFRG New rules for RFRG
With service prior to and after CIF
Underold rulesfor RFRG
Undernew rulesfor RFRG
A CWO, age 43, with 25 years of service at CIF, and releases 5 years from now with 30 years of service. The member has always served 60 days per year.
$50,400 $43,900
A CWO, age 43, with 25 years of service at CIF, and releases 5 years from now with 30 years of service. At CIF, the member has served 60 days per year for 16 years and worked full-time for 9 years. The member will work full-time for the next 5 years.
$50,400 $50,400
ExamplesExamples
30Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
New rules for RFRG New rules for RFRG
With service after CIF only
Underold rules
for RFRG
Undernew rulesfor RFRG
A CWO, age 48, with 30 years of service after CIF when he releases. The member has served 60 days per year for 16 years and worked full-time for 14 years.
N/A $25,200
A CWO, age 48, with 30 years of service after CIF when he releases. The member has always served 60 days per year.
N/A $8,900
ExamplesExamples
31Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Coming into forceComing into force
32Modernization of the Canadian Forces Pension Plan—Reserve Force members under Part I.1
Questions?Questions?
This presentation provides an overview of the some of the provisions under the Canadian Forces Superannuation Act. If there is a discrepancy between this presentation and the Act, the Act prevails.