amount of your surplus share is based on your status as of July 1, 2000.
|By how much have
the surplus shares of other members been reduced to provide the minimum
on the data we have so far, surplus shares of members who receive more
than the minimum will be reduced by only about 1%.
|What is the maximum
amount of surplus any member is getting?
provide that information, for reasons of confidentiality. However
because the Income Tax Act places a maximum on pensions, the highest paid
members do not receive any more than a person earning about $98,000.
|What is the formula
used to calculate the actuarial value of a member’s pension, and/or their
there is no simple formula that a member can use to check their calculation.
This is because the actuarial values are based on mortality rates and other
factors that vary by age, so special actuarial techniques are used that
cannot be reduced to a conventional mathematical formula. However
we have checked the calculations made by the University’s actuaries and
are satisfied that they are correct, assuming that the underlying data
|What is being
done to check that the data on which the calculations are based is correct?
things are being done. The critical data is shown on members’ individual
surplus statements, so they have the opportunity to advise the University
of any errors. If there are any people who should have received a
surplus estimate but have not, hopefully they will come forward and they
will be included in the final calculations. Also, lists of members
excluding the more confidential data such as salaries will be provided
to the relevant employee groups and the retiree association, who will be
able to compare the information with their records. Finally we will
be verifying the confidential data items for a sample of members who have
agreed to this review. All of the data verification is subject to
a confidentiality agreement to be signed by the parties who are given access
to the data.
| How will
a salary settlement for MUSA members affect their surplus shares?
salary increase retroactive to July 1, 2000 is agreed to prior to the application
to the Financial Services Commission of Ontario for approval of the distribution,
it will be recognized in the surplus share calculations. MUSA members
who are not at the minimum, and other employees whose salaries will be
adjusted to reflect such a settlement, will in that case receive an increased
share. We do not expect that it will be necessary to reduce the surplus
shares of other members, as a small portion of the surplus was “held back”
in the initial calculations to provide for this, if required.
|I am a pensioner
and I receive a supplementary pension from the University, as well as my
regular pension from the pension plan. How will this affect my surplus
surplus share is based only on the amount of pension you are receiving
from the pension plan, and is not affected by any supplementary pension
paid by the University.
be added to the surplus shares for the period from July 1, 2000 to the
date of distribution?
subject to approval by the Financial Services Commission of Ontario.
The rate of interest has not yet been determined.
|You said that
income tax will be deducted from amounts paid in cash. How much will
percentage deducted at source depends on the amount of the payment, and
ranges from 10% to 30%, depending on the amount of the payment. However
it may be the case that the withholding tax is too little, in which case
more tax will be payable when the person completes their income tax return.
to RRSPs and RRIFs
| Can I transfer
my surplus share to a spousal RRSP?
can do this only if you have sufficient unused RRSP contribution room to
contribute it to an RRSP. If you are taking some of your surplus
share as a refund of pre-1991 contributions, that portion can be transferred
only to your own RRSP.
|How do I know
if I have sufficient RRSP room?
can tell from your most recent Income Tax Notice of Assessment. Remember,
though, to allow for any other RRSP contributions you have made.
|If I transfer
my surplus share to an RRSP or RRIF, is it “locked in”?
You can withdraw it at any time - but will then have to pay income tax
on the amount you withdraw.
|I understand it
is possible to “over-contribute” up to $2,000 to an RRSP even if you have
no contribution room. Can I do that with my surplus share?
you may, but that amount would be included in your taxable income but would
not be tax-deductible as an RRSP contribution, so we do not recommend this.
of University Service
|The special report
states that I can buy-back a maximum of 18 months, but according to my
statement I was employed by the University for more than 18 months before
I joined the plan. Can I buy-back the full period before I joined
be the case that when you were first employed by the University, you were
in a category of employment in which you were not permitted to join the
plan - perhaps a part-time or temporary contract position. If that
is the case, you cannot buy back that period. On the other hand it
is possible that you were enrolled late due to administrative error, in
which case you may be able to buy back the full period. It would
be best to contact the University at 1-905-525-9140 ext. 24272 if you are
in this situation.
|Can I buy back
service with the university/employer I worked for before I joined McMaster?
The Income Tax Act does not allow that.
|Can I buy-back
service if I retire before the surplus is distributed?
Once your pension has started, you cannot buy-back service.
|If I use my surplus
share to buy-back service, then later terminate my employment and take
a refund of 2 times contributions with interest, will I lose the benefit
of the buy-back?
In addition to the refund of 2 x contributions, you would receive a refund
of the amount of surplus used to buy-back service plus interest.
|I will have the
option of taking my surplus share in cash, transferring it to an RRSP or
buying back service. Which would be most advantageous to me?
but we are not authorized or qualified to provide individual financial
advice, and the answer could depend on many factors which vary from one
member to another. If you need assistance in making a decision, we
strongly suggest that you contact a qualified independent financial advisor.
|Will buying back
service affect my future RRSP contribution room?
depends on whether the service is prior to 1990. If it was, there
will be no effect on your RRSP contribution room. If the service
was in 1990 or later, the University will have to report a “Past Service
Pension Adjustment” (PSPA), which will have the effect of reducing or eliminating
your RRSP contribution room, but in any event you will not have to withdraw
money from your RRSP or be subject to a penalty. The loss of RRSP
contribution room may be more or less than the amount of surplus used for
the buy-back, depending on your age.
|How can I figure
out how much my pension will increase by buying back service?
pension amount is proportionate to your years of “pensionable service”
(as shown on your annual pension statements). So for example, if
you would otherwise be retiring with 20 years of pensionable service, but
buy-back one additional year, your pension amount would increase by one
|If I buy back
service, will I be effectively paying both the member and university’s
contributions for that service?
yes. The cost of the buy-back is more than the contributions you
would have paid if you had joined the plan when you were first eligible.
|If I buy back
service, will this mean I qualify earlier for early retirement at the “rule
- the additional pensionable service you buy back counts towards the rule
of 80, which means that you may be able to retire earlier with an unreduced
pension. Members are not charged for this in the buy-back cost, which
is based on the assumption that members will retire at age 65.
|Can I buy-back
service during a leave of absence in which I was not credited with service
for pension purposes?
The only period which you can buy-back is your initial period of service.
of Pre-1991 Contributions
|Can employee members
transfer pre-1991 contributions to an RRSP?
No. We just received an
interpretation from the Canada Customs and Revenue Agency stating that
the Income Tax Act would allow that only if the plan were amended to
eliminate permanently the requirement for future employee contributions,
and the University is not prepared to do that. Accordingly only
retired and terminated members
can transfer pre-1991 contributions.
|Will members who
were active employees on July 1, 2000 but who retire or terminate their
employment before the surplus distribution be able to transfer pre-1991
contributions to an RRSP?
this will be possible, but this will require acceptance by the Canada Customs
and Revenue Agency. We will be pursuing this possibility in the near
future. Please note that such members will not be able to buy-back
|How much of the
pre-1991 contributions shown on my statement can I transfer to an RRSP
can transfer any amount up to the surplus share shown on your statement.
If you wish, you can receive a portion of your surplus share in cash (subject
to income tax) and transfer a portion (not exceeding your pre-1991 contributions)
to an RRSP or RRIF.
|Do I need to have
RRSP contribution room before I can transfer pre-1991 contributions to
Transfers of pre-1991 contributions do not require that you have unused
RRSP contribution room, and do not affect any unused RRSP contribution
room that you may have.
|Can I transfer
pre-1991 contributions to a spousal RRSP or RRIF?
Unfortunately the Income Tax Act only permits you to transfer such contributions
to your own RRSP or RRIF. However if you are age 69 or under and
have unused RRSP contribution room, you can transfer a portion of your
surplus share not exceeding the unused contribution room to a spousal RRSP.
|If I transfer
pre-1991 contributions to a RRIF, when do I have to start withdrawing the
funds from the RRIF?
Income Tax Act requires that you withdraw at least the minimum amounts
prescribed by the Act each year commencing with the year following the
date the funds are transferred to your RRIF. The minimum amount is
a percentage of the balance in your RRIF, which depends on your age.
|How are part-time
employees treated for the surplus calculations?
are treated in a similar manner to full-time employees. However the
“credited service” as shown on their statements reflects their part-time
status. For example an employee who has worked for the University
at 60% of full-time for one year since enrolling in the plan would have
0.6 years of credited service, and the “minimum surplus share” for them
would be based on 0.6 years of service. The rate of pensionable earnings
shown on the surplus sharing estimates of part-time employees is the full-time
equivalent earnings rate.
|Can surplus shares
of pensioners be used to increase their monthly pensions?
this would be contrary to the Income Tax Regulations.