University of Toronto
Proposal for Supplemental Retirement Arrangement
The University of Toronto Pension Plan (“University Pension Plan”) is a Registered Pension Plan (“University Pension Plan”) under the Income Tax Act (Canada) (“ITA”). As such, the pension payable from the University Pension Plan is limited by the maximum pension under the ITA (the “ITA” maximum pension”).The University will introduce a Supplement Retirement Arrangement (“SRA”) to provide pension benefits in excess of the ITA maximum pension. The terms and conditions of the SRA are as follows:
(i) The SRA would apply to the pension benefit for all pensionable service, for active members in the University Pension Plan on July 1, 1996.
(ii) The annual pension benefit payable under the SRA will be calculated as:
A minus B minus C, Where:
A is the annual pension benefit determined under the provisions of the University Pension Plan, without application of the ITA maximum pension. For the purposes of calculating such pension benefits, the salary (as defined in the University Pension Plan) used in any plan year for purposes of calculating highest average salary (as defined in the University Pension Plan) shall be limited to $135,000 per year. The maximum salary of $135,000 per year shall increase by $3,000 each plan year starting July 1, 1997 to a maximum salary of $150,000 per year. These increases are contingent on there being sufficient surplus in the University Pension plan and on the advice of the actuary.
B is the annual pension benefit payable under the provisions of the University Pension Plan; and
C is the annual pension benefit attributable to a “notional account” in respect of the period from July 1, 1986 onward, determined to be the aggregate of:
(a) for the period from July 1, 1986 to June 30, 1997, the accumulated required member contributions for each plan year that would have been made under the University Pension Plan in that plan year calculated by applying to the member required contribution formula in effect for the plan year to the actual salary (subject to the maximum salary at the time of the calculation of the pension being applied to the plan year in question), and CPP maximum salary in the plan year, less the maximum contribution ceiling in effect under the University Pension Plan for each plan year. Maximum member required contributions in effect for each year were as follows.July 1, 1986 to June 30, 1992 – $4,287.50 per yearJuly 1, 1992 to June 30, 1997 – $5,166.67 per year
(b) for the period of July 1, 1997 onward, the contribution of any additional salary recognized for a prior plan year in this period by virtue of the increase in the maximum salary
(c) interest thereon from the time that such contributions would have been made, had they been permitted under the University Pension Plan to the earlier of retirement, termination or death, calculated at the rate applicable to member contributions under University Pension Plan and converted using appropriate actuarial principles at the time of retirement, termination, death or disability, into an annual pension in the same form as the pension payable under the SRA and the University Pension Plan.
(iii) In the event of the member’s retirement, termination, death or disability, the pension benefits payable under the SRA will be paid at the same time and in the same form as the pension benefits payable under the University Pension Plan. However, in the case of termination of employment prior to early retirement age, any payment of the commuted value of pension benefits to which the member would be entitled under the SRA will be paid in the form of a taxable lump sum (i.e., no transfer of those amounts to an RRSP would be permitted). The University reserves the right to commute the payment of small amounts.
(iv) In conjunction with the introduction of the SRA, the maximum member required contribution under the University Pension Plan will be determined by applying the required member contribution formula (before any contribution holiday) to the maximum salary under the SRA as defined in (ii) above.
(v) The pension benefit payable to a member under the SRA will be indexed under the same formula and in the same manner as the pension benefits under the University Pension Plan.
(vi) References in the Voluntary Early Academic Retirement Program (“VEARP”) to the University of Toronto Pension Plan shall now include the SRA. This means that the retiring allowance under VEARP must be used to waive part or all of the 3% early retirement reduction applied to the pension under the University Pension Plan and the SRA, subject to (vii) below.
(vii) For members who have elected prior to June 16, 1997 to retire under VEARP at a subsequent date, the pension plan changes agreed to in this memorandum shall apply in calculating the amount of retiring allowance that must be used to waive part or all of the 3% early retirement reduction, provided that no part of the retiring allowance will be used to waive part or all of the 3% early retirement reduction for the component of pension which is payable from the SRA and the 3% reduction will continue to apply to this component.
(viii) The University will accumulate funds outside the University Pension Plan in respect of the obligations under the SRA, but such funds will not be irrevocably earmarked for pension obligations. The SRA will not be considered a Retirement Compensation Arrangements (“RCA”) under the ITA, provided the funds:
(a) do not constitute trust property;(b) will be available to satisfy the claims of the University’s creditors, if necessary;
(c) may be applied to any other purpose that the University may determine from time to time;
(d) will be commingled with other assets of the University; and
(e) will not be subject to direct claim of any members of the SRA.
(ix) Provided there is a sufficient surplus in the University Pension Plan, the University intends to set aside in University funds part of all of the University current service cost not made to the University Pension Plan, subject to the treatment of such funds described above, and shall continue to do so, until the funds (including related investment income) equal the past service liability of the SRA, as certified by the actuary.
The University will prepare a plan document for the SRA and such document will be made available to members under the same terms and conditions as apply to the plan document for the University Pension Plan.
The University will provide the University of Toronto Faculty Association (“UTFA”) with an actuarial certification of the obligations under the SRA at the same time the University provides UTFA with a copy of the funding actuarial valuation report of the University Pension Plan.