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Teacher Newsmagazine Volume 19, Number 4, January/February 2007

BC Teachers' Pension Plan

Contribution rate changes effective July 1, 2007

The Teachers’ Pension Board of Trustees has announced that pension plan contribution rates will rise by 1.61% for both teachers and employers effective July 1, 2007.

Every three years an independent actuary assesses the financial health of the plan and the adequacy of the contribution rates for funding the plan. At the most recent actuarial valuation as at December 31, 2005, the Basic Account showed an unfunded liability for basic pension benefits of $904 million. An unfunded liability means there is a shortfall between the benefits promised and the assets available to pay for these benefits.

Although the pension fund’s investment returns in recent years have been strong, average returns are still recovering from downturns in the markets in 2001 and 2002. The last valuation assumed that the average investment returns would be 7.25% per year. In fact, the fund only earned an average of 5.4% during the previous five years (see graph below.)

On the recommendation of the actuary, the trustees determined that an increase in contribution rates was necessary for the plan to maintain its financial viability. Therefore, effective July 1, 2007, plan member and plan employer contribution rates will each increase by 1.61% of salaries to pay down this unfunded liability over the ensuing 15-year period. The trustees and the plan actuary have also acted prudently in reducing their expectations for future investment returns (see table below).

Keep in mind that the pension plan continues to be financially sound and that your basic pension is secure.

The report of the 2005 actuarial valuation may be found on the BCTF web site—bctf.ca, go to "Quick Links" in the upper right-hand corner, click on "Pensions" then scroll down to "Teachers’ pension plan reports and announcements."

BCTF members are further reminded that purchase of service costs are based on salary and contribution rates.

On July 1, 2007, both salary and pension contributions rates will increase, the former based on the 2006—2011 collective agreement and the latter based on the 2005 actuarial valuation. Purchase of service applications received by employers by June 30, 2007, will be processed using the current salary and current pension contribution rates.

The deadline to purchase many types of historical service (pre-April 1, 2002) and to reinstate a period of service for which you may have taken a refund is March 31, 2007.

See page 13 of the November/ December 2006 Teacher or check out "What’s New?" on the Teachers’ Pension Plan home page tpp.pensionsbc.ca for details.

Basic Account: Annual & five year market rates of return (click to enlarge image)

TABLE

Teacher Contributions as a Percentage of Salary*

Current Rates Rates Effective July 1, 2007
Below YMPE** 7.55% 9.16%
Above YMPE* 9.05% 10.66%

Employer Contributions as a Percentage of Salary*

Current Rates Rates Effective July 1, 2007
Below YMPE** 10.68% 12.29%
Above YMPE* 12.18% 13.79%

* Teachers and employers both contribute to the Basic Account to provide for the member’s retirement pension, and to the Inflation Adjustment Account to provide for cost of living adjustments that are not guaranteed. It is only the contribution rates to the Basic Account that will increase. The contribution rates to the Inflation Adjustment Account remain unchanged.

Note: The above percentages are inclusive of contributions to both Accounts.

** The YMPE is the Year’s Maximum Pensionable Earnings for the Canada Pension Plan. The YMPE for 2006 is $42,100.

Purchasing service

Maternity and parental leave of absence
For maternity leaves of absence after March 14, 1981, and parental leaves of absence after March 22, 1991, the cost of purchasing the leave will be calculated as follows: current full time equivalent monthly salary x the current employee pension contribution rate x the number of months of leave of absence being purchased. As the employer will be billed for its pension contribution, this type of purchase is always cost effective.

If you are purchasing maternity or parental leaves completed after December 31, 1991, the maximum that you can purchase is three years of leave. The amount of maternity and parental leave of absence purchased at the employee pension contribution rate is subject to limits established by the Employment Standards Act.

For maternity leaves of absence completed prior to March 14, 1981, or parental leaves of absence completed prior to March 22, 1991, the cost will be calculated as a general leave of absence.

The most tax effective time to purchase a maternity or parental leave of absence is during or immediately after the expiration of the leave and before April 30 of the calendar year following the expiration of the leave of absence.

General leave of absence
Calculating the cost of purchasing a leave of absence has been simplified. As of April 1, 2002, the cost of purchasing a leave of absence will be calculated as follows: your current full time equivalent monthly salary x the combined current employee and employer pension contribution rate x the number of months of leave of absence being purchased.

The most tax effective time to purchase a leave of absence is immediately after the expiration of the leave and before April 30 of the calendar year following the expiration of the leave of absence.

Further details on BCTF web site bctf.ca
Click on Pensions on the QuickLinks dropdown menu in the upper right-hand corner of the homepage for the following articles:

  • Purchase of service: General leave
  • Purchase of service: Maternity and parental leaves of absence
  • Reinstatements
  • Tax deducting your purchase of service.

Application forms
A Purchase of Service Application Package is also available in the Forms area on the Teachers’ Pension Plan web site tpp.pensionsbc.ca. Or you may use the TPP web site’s Purchase of Service Estimator. This is a combined cost estimator and application form that you can print and attach to your application form. All applications must be signed by the employer who granted the leave of absence and then forwarded to the Teachers’ Pension Plan.

Steps to figure out if a purchase of service is worthwhile

  1. Calculate your purchase of service cost using the online Purchase Cost Estimator at the Teachers’ Pension Plan web site, tpp.pensionsbc.ca. Print off the results. If you have received a Statement of Cost from the plan, you will not need to use the Purchase Cost Estimator. 
  2. Do a pension estimate using your Personalized Pension Estimator at My Account on the Teachers’ Pension web site. Enter the date on which you would like to retire. Click Perform Estimate and print the results.

    Note: If you have not previously logged on to My Account, you will need your 2005 Member’s Benefit Statement at hand. Your username and temporary password to access My Account can be found in Section 1 Personal Information on the statement. 

  3. Do a second pension estimate using same date entered in Step 2. Beside the label Additional Pensionable Service, fill in the amount of time you are purchasing as shown on the printed results page from the Purchase Cost Estimator¹ and or the printed Statement of Cost from the Teachers’ Pension Plan. Click Perform Estimate and print the results. 
  4. Compare the two pension estimates.² The highlighted amount is the amount you will get up to age 65; the top number above the bridge amount is the amount you will get after age 65. Make notes of the increase in the pension amount as a result of the purchase of service. 
  5. Calculate the cost return. Divide the cost of the purchase (as determined by the online Purchase Cost Estimator or the printed Statement of Cost from the Teachers’ Pension Plan) by the amount of the pension increase derived if you purchase the service. The answer you get is the cost pay back time in months. If that number is less than 120 months, the purchase may well be to your financial advantage.

¹ Note: if you are purchasing a 100% unpaid leave (general, maternity, parental) then you are purchasing both pensionable service and contributory service and can thus enter the amount of time on the "Additional Pensionable Service" line. If, however, you are purchasing a partial leave, i.e., you worked half-time and were on leave for half-time in a school year, you are only purchasing pensionable time because you will have already accrued the contributory time. If that is the case, add the amount of pensionable service time being purchased to the Pensionable Service amount shown from your last Member’s Benefit Statement two lines above the Additional Pensionable Service line.

² Note: For ease of comparison, if you are single, compare the Option 1, Single Life Guaranteed 5 results from the two estimates. If you are married, compare the Option 4, 100% Joint Life results.

 

Pension seminars

This year (2006–07) the BC Teachers’ Federation (BCTF), BC Retired Teachers’ Association (BCRTA), and the BC Pension Corporation have joined forces to present pension seminars to members of the Teachers’ Pension Plan throughout the province.

The seminars are three hours long and cover a number of topics including:

  • How to understand your annual Member’s Benefit Statement.
  • How your pension is calculated.
  • How to use online pension information and tools.
  • How to increase your pension by purchasing or transferring service, claiming credit for child-rearing time, or reinstating a refund.
  • Retirement planning and the transition from work to retirement.

The presentation is designed to meet the needs of members who are nearing retirement, but the information is useful to all members.

Registration is on a first-come, first-served basis. Members are encouraged to bring their spouse or partner. There is no charge to attend. To register, complete and return an application, which is available on the TPP website at tpp.pensionsbc.ca.

Some venues are still to be confirmed. Members who register for a particular seminar will receive an e-mail confirming specific time and location.

Contact information for registration and more information about the TPP Member Seminars is 250-356-2466, or toll-free at 1-877-558-5574.

E-mail TPPseminars@pensionsbc.ca.

City Date Time Location
Nanaimo Feb. 10 9 a.m.—12 p.m. Coast Bastion Inn
Vancouver Feb. 15 6 p.m.—9 p.m. Best Western Chateau Granville
Vancouver Feb. 17 9 a.m.—12 p.m. Best Western Chateau Granville
Prince George Mar. 1 6 p.m.—9 p.m Days Inn
Prince George Mar. 3 9 a.m.—12 p.m. Days Inn
Williams Lake Mar. 10 9 a.m.—12 p.m. Overlander
Kelowna Mar. 31 9 a.m.—12 p.m. UBC Okanagan Conference Centre
Terrace Apr. 14 9 a.m.—12 p.m. Best Western Terrace Inn
Campbell River Apr. 21 9 a.m.—12 p.m. TBA
Burnaby Apr. 26 6 p.m.—9 p.m. BCIT Burnaby
Burnaby Apr. 28 9 a.m.—12 p.m. BCIT Burnaby
Cranbrook May 5 9 a.m.—12 p.m. College of the Rockies
N. Vancouver May 10 6 p.m.—9 p.m. TBA
N. Vancouver May 12 9 a.m.—12 p.m. TBA

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