Department of National Defence

1
Modernization of theCanadian Forces Pension
PlanReserve Force members under Part I

• Department of National Defence

February 2007
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Outline

• Eligibility, contributions, and definitions
• Benefits
• Pension formula
• Counting past earnings/service
• CF employment after annuity starts
• RFRG
• Coming into force

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For more information

• Presentation focuses on pension policies
• Consult the CFPMP website www.forces.gc.ca/hr/dgcb
  /cfpmp
• Beginning 1 March 07, contact DAPPP/Pension
  services for eligibility, benefit and election
  questions

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About CFSA Part I

• Provides a benefit based on set formulas (defined
  benefit)
• Uses best 5-year average (full-time)

• For Reserve Force members who are
• Long-term Class B
• Long-term Class C

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Eligibility

• Reserve Force members join Part I after working
  1,674 days (55 months) out of 60 continuous
  calendar months
• Service from April 1999 can be used towards
  eligibility
• Credits from the part-time plan must be
  transferred
• Once in, always in rule
• Contributions to Part I will continue until
  retirement

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Contributions

• A fixed percentage of pensionable earnings
• Reduces to 1 of pensionable earnings when member
  has 35 years of pensionable service
• Pensionable earnings include basic pay and
  pensionable allowance

YMPEYears Maximum Pensionable EarningsCanada
Pension Plan earnings ceiling(2007 43,700)
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CF service
Definitions

• 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

After 25 years of CF service, a member is
entitled to an immediate annuity.
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Pensionable service
Definitions

• Any period during which the member is a
  contributor
• Any period for which the member has elected to
  pay
• Authorized periods of maternity and parental
  leaves
• Counted on elapsed time basis

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Vesting
Definitions

• 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

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Transfer value
Definitions

• A lump-sum amount, expressed in todays 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 employers plan (if accepted), or
• Insurance company, to buy an annuity

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Benefits at retirement or release
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Benefits at retirement or release
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Ceasing participation

• Members cease participation when they
• Release from the Reserve Force
• Do not have any earnings for a 12-month period

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Benefits in case of death

• At death of vested member or pensioner, his or
  her
• Spouse receives a survivor lifetime pension
• 1 X pensionable service X best average earnings
• Dependent children receive a child annual
  allowance
• Payable to age 18 or age 25 during periods of
  full-time school attendance

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Benefits in case of disability

• With 10 or more years of pensionable service and
  becomes disabled while a contributor, member is
  entitled to
• An immediate annuity
• If no longer a contributor and eligible for a
  deferred pension or annual allowance and becomes
  eligible for C/QPP disability pension, member is
  entitled to
• An immediate annuity
• Offset begins immediately

You are considered disabled if you suffer from a
mental or physical impairment that prevents you
from performing your duties.
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Other 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

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Pension formula
Temporary bridge pension payable to age 65,
included in the annuity
Annuity

• 2
• X
• pensionable service
• X
• best average earnings
• X
• adjustment factors

0.7 1 X pensionable service2 X best average
earnings, up to the average YMPE X adjustment
factors
1Reduction will gradually decrease from 0.7 in
2007 to 0.625 in 2013 2Includes CF service only
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Pension formulaAdjustment factors

• A pro-rata adjustment is applied to the pension
  formula to take into account
• All calendar years during which member worked
  part-time
• If member opted to pay for less than the full
  cost when election was made to count past service

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Counting past earnings/service

• Eligible periods of service
• Prior Reserve Force periods (no retroactivity
  restriction)
• Service becomes pensionable service
• Election includes all past earnings
• Regular Force periods
• Other eligible periods of service (same as
  Regular Force members)

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Counting past earnings/service

• 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 of 20 years or age 65

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Election calculation

• Cost of electing pensionable earnings for any
  calendar year

Pensionable earnings of the calendar year updated
to year of election X Current RF contribution
ratein year of election 7 interest compounded
annuallyfrom the middle of the year bought back
to the date of the election Difference between
contributionsfrom Part I.1 and Part I, if any
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Election calculation

• The members total cost is sum of 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

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Election calculation
Example
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Election calculation
Example

• Members cost to buy back 2003 pensionable
  earnings

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Election calculation
Example
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 February
2007.
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CF employment after annuity starts

• Once you have earnings in the Reserve Force, your
  annuity stops and you begin contributing to the
  pension plan again

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New 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 implementedMarch 1, 2007
• Calculation for periods before March 1, 2007 will
  be unchanged

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New rules for RFRG
Examples
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New rules for RFRG
Examples
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Coming into force
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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.