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Pension definitions

The estimated amount of money needed today to be invested to pay the future benefits you have under the Plan. The actuarial present value is based on assumptions such as interest rates, inflation, mortality, and salary escalation.
The YMPE in each year in the averaging period used to determine your best average earnings for calculation of your pension benefit at termination or retirement. Here is how we determined the 2020 average YMPE for a member who is retiring on January 1, 2021:
YMPEEarnings
2020 YMPE $58,700
2019 YMPE $57,400
2018 YMPE $55,900
2017 YMPE $55,300
+2016 YMPE $54,900
Subtotal $282,200
Divide by five $56,440
You can name any person, organization, or your estate as your beneficiary to receive survivor benefits in the event that you do not have an eligible spouse, or spousal benefits have been waived, or you do not have eligible children at the time of your passing. To make an update to your beneficiary information, log in to My Pension Resource and complete the Spousal Declaration and Beneficiary Designation form.

The annual average of your pensionable earnings for the highest 60 consecutive months of service during the last 120 months of pensionable service before your retirement or termination from the Plan. If you worked less than 60 months, your best average earnings will be based on your average earnings as a member of the Plan.

A temporary benefit provided to employees who retire prior to the age when unreduced CPP benefits begin. It is paid when you retire from your participating employer before age 65 (even if you collect an early CPP pension). The bridge benefit is payable until the earlier of age 65 or your passing.

Learn more about the bridge benefit.

 

The CPP is a contributory, earnings-related social insurance program that is paid by the federal government. It provides a measure of income to contributors and their families upon retirement, disability, and death. For further details, contact Service Canada.

The CRA is the federal regulatory agency that administers the Income Tax Act.

The lump-sum value of your earned pension. The commuted value changes based on factors such as age, life expectancy, inflation and interest rates.

An inflation measure computed by Statistics Canada that calculates the change in prices of a fixed set of commodities purchased by Canadians each month. If the combined cost of these goods goes up, inflation increases. The CPI is used to calculate annual cost-of-living increases for pension benefits, also referred to as “indexing”.

This is the pension benefit earned up to the date of termination of employment, which is calculated at the time of termination of employment but payable at a later date. Learn more about this onleaving your employer.

A pension plan that defines the ultimate pension benefit to be provided in accordance with a formula, usually based on years of service and earnings. WISE Trust is a defined benefit pension plan.

Learn more on the advantages of a defined benefit pension plan.

Retirement before you reach age 65, in which you may receive a reduced pension or an unreduced pension.

Learn more about this on the retirement page.

 

An eligible child includes your natural, adopted, or step child in respect of whom you are acting in the role of a parent and who is:

  • under age 18; or
  • 18 or older but less than 25 and attending full-time, continuous education; or
  • 18 or older and suffers from a physical or mental disability that has prevented them from earning a living since reaching 18 or since your death, whichever occurred most recently.

Eligible spouse means, on the relevant date, either of two persons who are

  • married to each other; or
  • not married to each other but are living together in a conjugal relationship, either:
    • continuously for a period of not less than three years; or
    • in a relationship of some permanence, if they are the parents of a child, as set out in Section 4 of the Children’s Law Reform Act pursuant to subsection 1 (1) of the Pensions Benefit Act.

On termination of employment, the Plan compares 50 per cent of the commuted value of the member’s deferred pension to the total of their contributions plus interest. If the member’s contributions plus interest equal more than 50 per cent of the commuted value of the pension, then that member is entitled to a refund of the difference, called excess contributions.

An independent regulatory agency, an objective of which is to improve consumer and pension plan beneficiary protections in Ontario.

Learn more about them on FSRA’s website.

The Policy, which is approved by the WSIB and the OCEU as Sponsors of the Plan, provides a framework for the financial management of the pension benefits earned under the Plan and the corresponding assets of the trust fund that secure those pension benefits.

A federally legislated act with underlying regulations that outline, among other things, the maximum limits for registered pension plans. The Income Tax Act allows employees and employers to deduct pension contributions from their respective income for tax purposes and sets standards for the benefits a pension plan can provide. It is regulated by CRA.

A method in which pension benefits are adjusted to take into account changes in the cost of living.

A pension plan in which decision making and funding of the benefits is shared jointly by both employees and the participating employer. It’s a pension plan where there is a partnership in the governance of the plan.

The lifetime pension is the amount paid to you for the rest of your life once you retire, inclusive of any further indexation. This amount does not include the bridge benefit, which is paid on top of the lifetime pension up to age 65. Once you reach age 65, the bridge benefit ends and you continue to receive the lifetime pension.

A legislative requirement stipulating that vested entitlements under a pension plan must be used to provide pension payments at retirement and are not available as immediate cash.

A tax-sheltered retirement savings arrangement in which the funds are subject to locking in under pension legislation. Funds in a locked-in retirement savings arrangement cannot be withdrawn prior to the age of 55 and the payment of retirement income from the arrangement must begin no later than the end of the year in which you reach age 71. Examples include annuities, locked-in retirement accounts, life income funds, and other registered pension plans that will accept the commuted value of a deferred pension.

Learn more about this on leaving your employer.

 

A type of RRSP available to maintain funds that are locked-in as required by pension legislation. These funds must be used to purchase a life annuity or be transferred to a life income fund no later than the end of the year in which you reach age 71.

An employee of a participating employer who is contributing to the Plan or has contributions made on their behalf. Member also includes a former employee of a participating employer who made contributions to the Plan and has either terminated employment or terminated membership in the Plan and (i) retains the right to a deferred pension payable from the Plan or (ii) is receiving a pension payable from the Plan.

This includes the period commencing on the date an employee becomes a member of the Plan until the date the employee terminates the employment that relates to the Plan or terminates membership in the Plan. Any period during which a member was absent from work on a leave of absence, as well as any period of pensionable service transferred into the plan or purchased subject to the Plan’s terms will be included in the calculation of the member’s period of membership. Membership will not be broken for the sole reason that an employee ceased employment with one participating employer and immediately began employment with another participating employer.

An online self-service site for members to log in to view their personal pension details, estimate their pension, request a quote to purchase pensionable service, download forms, tip sheets, the guidebook, and more.

Login to My Pension Resource.

Normal retirement age under the Plan is age 65. The normal retirement age does not compel retirement at age 65, but rather sets the age when unreduced pensions are paid regardless of the years of pensionable service you have under the Plan.

The Workplace Safety and Insurance Board (WSIB), Infrastructure Health and Safety Association (IHSA), Public Services Health and Safety Association (PSHSA), Workplace Safety and Prevention Services (WSPS), Workplace Safety North (WSN), and the Trustees of the Workplace Safety and Insurance Board Pension Plan Fund (WISE Trust).

The deemed value of additional pension benefits purchased for service in previous years. The CRA generally must approve the PSPA before the purchase of additional benefits can be completed and before the purchase can be included in any benefit calculation.

The CRA’s deemed value of the lifetime benefit a member earns during a calendar year under a pension plan, and it affects the member’s RRSP contribution room for the following year.

The pension adjustment is the annual pension amount earned by the member during the year, multiplied by nine, and then the prescribed amount of $600 is subtracted.

The pension adjustment is reported on your T4 tax slip, and your available RRSP contribution room for the following year is reduced by the pension adjustment amount.

Provincial legislation enforced by FSRA, which regulates pension plans in Ontario and determines minimum standards for eligibility, funding, and benefits for Ontario-registered pension plans.

Learn more about the legislation: Pension Benefits Act (PBA).

The basic amount of remuneration actually received for the position held by you, as a member of the Plan, and includes:
  • the amount of benefits that you are in receipt of under the Workplace Safety & Insurance Act (WSIA) for loss of earnings and any amount supplemented by the WSIB up to the maximum of your regular earnings
  • non-bargaining unit lump-sum merit awards
  • earnings if you are receiving long-term disability benefits

Pensionable earnings do not include:
  • overtime pay
  • irregular-hour premiums
  • performance bonuses
  • job differential pay
  • second-language bonuses
  • pay in lieu of vacation or Management Compensation Option
  • any payment in lieu of a benefit provided by your participating employer

Represents the total years, months and days of service during which you or your employer have contributed to the Plan on your behalf. Subject to the Plan’s terms, it includes any pensionable service you have purchased, transferred in, or service during which you were receiving short-term or long-term disability benefits or while you were in receipt of benefits from a claim filed under the WSIA.

If you are a part-time employee, your pensionable service is calculated as a proportion of the pensionable service that an equivalent full-time employee in the same employment category would accrue. Learn more under pensionable service.

 

A pension that starts before age 65 and is subject to a reduction for starting your pension early. The reduction for starting your pension early means the pension is reduced by three per cent for each year (and any fraction thereof) your retirement falls before the date you would have qualified for your earliest unreduced pension.

Learn more about this on collecting your pension.

This is a savings arrangement available from most financial institutions that accumulates contributions and investment earnings on a tax-sheltered basis.

The annual statement of earnings and deductions provided to employees and to the CRA by the employer.

The annual statement of pension earnings and deductions provided to retirees and to the CRA by WISE Trust.

An unreduced pension is a pension that is not subject to an age reduction. You may receive an unreduced or lesser reduced pension at age 65 or, earlier provided you have qualified under the early retirement provisions of the factor 85 or 60/20 rule.

Learn more about this on collecting your pension.

A term used in the CPP that refers to the earnings on which CPP and Quebec Pension Plan contributions and benefits are calculated. The YMPE is re-calculated each year according to a formula based on average wage levels. The YMPE is published annually by the CRA.

How your pension is calculated

The monthly pension you receive in retirement is determined using a formula that’s based on your pensionable earnings and pensionable service.

Estimating your pension

You can estimate your pension on My Pension Resource. Simply select a specific retirement date, age, or your unreduced, reduced, or normal retirement date and get a pension estimate. You can compare up to 3 estimates to see what date works best for you.

The pension formula

2% is multiplied by your best average earnings less 0.5% multiplied by the lesser of your best average earnings and average YMPE. This total amount is multiplied by years of pensionable service which equals you annual lifetime pension payable at age 65.
2% is multiplied by your best average earnings less 0.5% multiplied by the lesser of your best average earnings and average YMPE. This total amount is multiplied by years of pensionable service which equals you annual lifetime pension payable at age 65.

Understanding the pension formula

Your best average earnings is based on highest average of your annualized pensionable earnings over any consecutive 60 months, during your last 120 months of pensionable service before your termination, retirement or passing. If you have less than 60 months in the Plan, your best average earnings will be based on your number of months of pensionable service. In general, the higher your average earnings, the higher your pension will be. Your best average earnings does not include:

  • overtime pay
  • irregular-hour premiums
  • performance bonuses
  • job differential pay
  • second-language bonuses
  • pay in lieu of vacation or Management Compensation Option
  • any payment in lieu of a benefit provided by your participating employer

Your average year’s maximum pensionable earnings (average YMPE) is the average of the YMPEs during the same averaging period as your best average earnings.

Your years of pensionable service is the total time that you contributed to the Plan, or that the employer contributed on your behalf. It includes any service you transferred in or that you might’ve purchased.

Unreduced early retirement

You can retire without any reduction to your lifetime pension if you qualify under any one of the early retirement rules outlined in Collecting My Pension.

An example of how an early unreduced pension is calculated

Erin retires in 2021. Her age plus years of membership or pensionable service equals 85. This entitles Erin to an unreduced lifetime pension.

Age: 56
Years of pensionable service: 29
Best average earnings: $59,890
Average YMPE: $56,440

Erin’s annual unreduced lifetime pension is:
2% is multiplied by $59,890 less 0.5% multiplied by the lesser of $59,890 and $56,440. This total amount is multiplied by 29 years which equals $26,553.
2% is multiplied by $59,890 less 0.5% multiplied by the lesser of $59,890 and $56,440. This total amount is multiplied by 29 years which equals $26,553.
Erin's bridge benefit is:

Because Erin is retiring before age 65, she is also entitled to the annual bridge benefit, until she turns 65:

0.5% is multiplied by the lesser of $59,890 and $56,440. This total amount is multiplied by 29 years which equals $8,184.
0.5% is multiplied by the lesser of $59,890 and $56,440. This total amount is multiplied by 29 years which equals $8,184.

Reduced early retirement

If you do not qualify for an unreduced early retirement, you can still retire early if you are age 55 or older. Your lifetime pension will be reduced to reflect the fact that you’re starting your pension earlier and will probably receive it for a longer period of time.

The reduction is three per cent for each year (or 0.25 per cent for each month) that you retire prior to the date you would have qualified for an unreduced early retirement, or turned age 65 – whichever occurs first. Your monthly bridge benefit does not have an early retirement reduction.

How your pension is calculated when you retire before age 65

If you retire before age 65, you will receive a monthly bridge benefit in addition to your lifetime retirement pension. The bridge benefit is payable until you reach age 65, when you can begin receiving your full CPP, or pass away, whichever occurs first. It is not payable if you are receiving a disability pension from the Plan.

What is a bridge benefit?

The bridge benefit acts as a “top up” until you can receive your full CPP entitlement at age 65. However, you can take your CPP before you turn 65 and still receive your bridge benefit.

The bridge benefit is calculated in a similar way to your lifetime pension:

Bridge benefit formula

0.5% multiplied by the lesser of your best average earnings and average YMPE. This total amount is multiplied by years of pensionable service which equals you annual bridge benefit payable until age 65.
0.5% multiplied by the lesser of your best average earnings and average YMPE. This total amount is multiplied by years of pensionable service which equals you annual bridge benefit payable until age 65.

An example of how the bridge benefit works.

Stella is turning 65 but has been retired for 10 years now

Because she retired before age 65, the Plan has paid her a lifetime pension plus a bridge benefit – until today. The bridge benefit helps level her income until age 65 – when she can collect an unreduced pension from the CPP.

Stella receives her pension cheque in the mail

Once you turn 65, your lifetime pension continues for the rest of your life but the bridge benefit is no longer paid. Even though you can start receiving a reduced CPP pension at age 60, when paying the bridge benefit, the Plan assumes everyone starts collecting their CPP pension at age 65.

Stella has received an envelope marked “OAS”

At age 65 you may also be entitled to a retirement benefit from Old Age Security (OAS). Your WISE Trust pension is not integrated with OAS and those payments are separate from the Plan and CPP entitlements. OAS starts at age 65 and can’t be taken earlier. If you start OAS at 65, this does not impact your Plan benefit in any way.

So, Stella receives a monthly bridge benefit in addition to her lifetime pension under the Plan until she turns age 65, the age when she can begin receiving CPP and, if she qualifies, OAS. Stella’s CPP does not start automatically and will not be equal to the amount of the bridge benefit.

You can learn more about CPP and OAS by contacting Service Canada.