Member news: March 23, 2018
A letter to members from David Vipond, Chair of the Public Service Pension Plan Board of Trustees
Dear Plan Member,
A week ago the Public Service Pension Board of Trustees (board) announced changes to the Public Service Pension Plan (plan). Let me begin by acknowledging that the announced changes are complex and that it can be frustrating at times to fully understand how you are affected.
The plan is a jointly trusteed pension plan which means that the plan partners (the BC General Employees’ Union and the provincial government) appoint the board, share the responsibility of plan governance and share the risks and rewards of plan sponsorship. The role of the board is to make decisions for the prudent management of the plan and pension fund, including decisions relating to plan design, that are in the best interests of members.
Plan changes agreed to by plan partners and approved by the board will take effect April 1, 2018 for pensionable service earned on or after that date. In summary, these changes are:
- A 1.85 per cent flat accrual rate on future service with a corresponding flat contribution rate. This is an improved accrual rate resulting in an improved lifetime pension for the vast majority of members. It results in a 26 per cent higher lifetime pension for the average plan member.
- A removal of the bridge benefit but only for future service
- A removal of the rule of 85 but only for service accrued on or after April 1, 2018 (Please see the new website animated rule of 85 learning module which provides a thorough explanation of how this will operate in practice.)
- Implementation of an unreduced pension after 35 years of contributory service
- Introduction of new early retirement reduction factors applicable to each year for retirements before age 60 (The old reduction factors apply for benefits accrued before April 1, 2018.)
- Introduction of new early retirement reduction factors applicable to each year for retirements before age 65 for members with fewer than two years of contributory service
As a result of the plan’s recent valuation and surplus of $1.9 billion, the board is also improving pension benefits for pensionable service accrued between April 1, 2006 and March 31, 2018, inclusive. This improvement applies to active, inactive and retired members who accrued pensionable service between those dates. If applicable, your pension will be amended on a go forward basis only (i.e., no retroactive payments) effective October 1, 2019. Note, however, that if you retired before April 1, 2006, these changes will not affect your pension. These changes are:
- The accrual rate for below the YMPE will increase from 1.35 to 1.65 per cent, improving your lifetime pension (Approximately 80 per cent of pensionable earnings of plan members are below YMPE. This represents an accrual rate increase of 22 per cent for those 12 years.)
- The corresponding bridge accrual rate will reduce from 0.65 to 0.35 per cent (This is required to be in accordance with the Income Tax Act (Canada) which limits the accrual rate to 2 per cent.)
All of these changes were timed to align with the new fiscal year and recent valuation results which the board received in December 2017. The board needed to be thorough in its processes and fully understand all implications before coming to a positon to be able to communicate to members and employers. The plan partners only reached agreement on changes in late January 2018 and the board approved the plan changes at its January 30, 2018 meeting.
There are many complexities in changes like these and it takes time to work through all of the details. Be assured that the changes modernize the plan, simplify reporting, are equitable for active members regardless of retirement age, earnings or employment, and will result in an improved lifetime benefit for the vast majority. Also be assured there is no need to make any quick retirement decisions. Your pension will increase every month that you work past March 31, 2018. Further, for those of you who have worked in the Public Service for the past 12 years or more and who are retiring in 2018, your lifetime pension will be higher effective October 1, 2019.
With the assistance of BC Pension Corporation (corporation), the plan’s administrative agent, the board has developed FAQs, an eLearning module and a number of pension scenarios to assist with your understanding of the changes. I encourage you to review those materials carefully – take your time, they are complex and require a bit of study to fully understand how they apply to you. The personalized pension estimator, available through My Account, is being updated and will be back online May 1, 2018. In addition, the corporation has scheduled numerous workshops designed to provide information and answers to your questions. Additional workshops are being scheduled and I encourage you to attend one near you to learn more about the changes.
Significant effort is being undertaken to implement these changes on your behalf. The corporation is updating their systems and the online pension estimator as quickly as possible. Tens of thousands of members are affected by the changes and implementation will take time. We ask for your patience while system changes are being made and tested.
Public Service Pension Board of Trustees