Plan changes for retired members
Changes that will make a difference to retired members.
Changes for retired members
The plan changes have no effect on the pension you are currently receiving. There is nothing you need to do at this time other than stay informed.
The changes support the long-term sustainability of the plan, including enhancing the inflation adjustment account (IAA) and establishing a new health benefit trust.
Strengthening the inflation adjustment account
The IAA is funded by member and employer contributions and earns investment income.
The plan changes will strengthen the IAA with future surpluses being used for any funding shortfalls. The surpluses will be shared equally between the IAA (to further support inflation protection) and the rate stabilization account (to reduce the likelihood of contribution rate increases for active members and employers). In other words, future surpluses will be used to benefit both active and retired members.
In addition, the plan’s inflation protection will continue to be strengthened for these reasons:
- After the 2015 valuation, the plan partners introduced a sustainable cost-of-living adjustment (COLA) and made the decision to increase contributions to the IAA. Since 2016, the plan has increased contributions to the IAA, which has helped grow its sustainability.
- Excess investment returns are moved out of the basic account into the IAA in line with the board’s funding policy. That happens when the five-year annualized rate of return exceeds the actuarially assumed rate of return. The excess investment returns have totalled about $1.2 billion since 2015.
New retiree benefit trust
Retiree group benefits are funded by employer contributions and retired members who choose the coverage. The current employer contributions are subject to a maximum allotment. They must be used in the same year they are paid and cannot carry over to future years or accumulate investment income. The maximum allotment cannot be used for benefits each year as there must always be a buffer built into the budget in case of extraordinary costs.
The plan changes introduce a new retiree benefit trust to provide more flexibility in funding retiree group benefits. A specific proportion of employer contributions will fund the trust. These funds will be able to accumulate and earn investment income over time to further support retiree group benefits. Retired member premiums will continue to be a component of funding group benefits.