Retiring from NSHEPP

How your benefit is calculated

Your personalized Annual Statement that you receive around June of each year includes estimates of your pension at future dates. You should refer to your Annual Statement if you’re wondering how much pension you might expect to receive at retirement. The following provides a description of how your pension is calculated.

Your pension is based on a defined benefit formula tied to your annualized pensionable earnings and years of credited service as follows:

Log in to your Secure Account and access the Pension Calculator to get an estimate of your pension at retirement.

The Plan uses a Base Year to determine your annualized pensionable earnings for the earlier years of your plan membership. Your annualized pensionable earnings for years of Plan membership before the Base Year will be the same as your annualized pensionable earnings in the current Base Year.

Using the current Base Year earnings instead of your annualized pensionable earnings for your earlier years of Plan membership increases the amount of your pension. This happens because your annualized pensionable earnings in the current Base Year are usually higher than the annualized pensionable earnings you actually received during those years before the current Base Year.

(Note: the current Base Year is used unless an earlier Base Year produces a higher pension benefit for you.)

Base Year upgrades, when approved, apply only to active members and usually take effect on January 1. Effective December 31, , the Base Year was upgraded from to .

Base Year upgrades are usually considered each fall. If the Base Year is upgraded, an announcement will be made as soon as it is approved.

Please note: If you are considering termination or retirement late in the calendar year, you may wish to consider the impact that any Base Year upgrade could have on the amount of your benefit. In some cases there can be a substantial financial advantage if you delay your termination or retirement until after the new Base Year is effective.

Now let’s look at the details:

Part-time employees, or employees on an unpaid leave of absence who chose not to contribute to the Plan during their leave, will receive a partial year of credited service that is prorated based on the percentage of a regular work year they were employed and contributed to the Plan.

Note: Due to an Income Tax limit, if your Base Year’s annualized pensionable earnings are greater than the average of your highest 36 consecutive months of pensionable earnings, the latter will be used to determine your benefits for credited service up to the end of the Base Year.

Your bridge benefit if you retire before age 65

If you retire any time before age 65, you will receive a temporary bridge benefit that is paid in addition to your lifetime NSHEPP pension. It is called a “bridge benefit,” because it “bridges” you from the date of your early retirement to age 65, which is the age at which you first become eligible for an unreduced pension from the Canada Pension Plan. If you die before age 65, your bridge benefit ceases and does not form part of survivor benefits payable after your death.

The bridge benefit is based on the following formula:

Therefore, the bridge benefit, when combined with your lifetime pension, increases your total pre-65 pension to a full 2% of your pensionable earnings for each year of credited service.

Please note that the Income Tax Act sets limits on the maximum amount of pension that can be earned in the Plan each year. If the Plan’s formula would create an annual pension amount that exceeds the Income Tax limits, your benefit will be limited to the maximum amount allowed under the Income Tax Act.

When can you retire?

You can retire and start receiving an unreduced pension at the earlier of:

1. Age 65 (the Plan’s Normal Retirement Date)
2. Age 60 or over, with at least 10 years of continuous service.
3. Age 55 or over, if your age, when added to your years of continuous service, equals 85 or more (the Rule of 85) (for example, at age 55 with 30 years of service, or at age 57 with 28 years of service, etc.).
4. If you have been an active member of the Plan since before January 1, 1999, if your age, added to your years of continuous service, equals or exceeds 90 (the Rule of 90).

You can retire and commence receiving a reduced pension at the earlier of:

1. Age 50 or over, with at least 10 years of continuous service.
2. Age 55 or over, regardless of your years of continuous service.
3. The date on which your age, when added to your years of continuous service, equals 80 or more.

When you select a reduced pension, the amount of your earned pension is calculated up to the date your employment ends, but those benefits are permanently reduced by ½ of 1% for every month before the first date that you are eligible for an unreduced pension.

What are your survivor options at retirement?

At the time of your application for retirement, you will be asked to choose a survivor option. The options available to you will depend on your spousal status on the date your retirement pension starts.

In all cases, your lifetime pension continues for the rest of your life, whether you live 5 or 50 years after you retire. Upon your death, benefits may be payable to your spouse, beneficiary, dependent children, or estate, depending on the form of pension you were receiving.

Here are the forms of pension payable and your available options under the Plan:

If you have a spouse at retirement:

• Normal form of pension

  You will receive a lifetime pension, with a 60-month guarantee. After your death, your spouse will first continue to receive your full lifetime pension for the balance of the 60-month guarantee period, if applicable. Then your spouse will receive a lifetime pension equal to 66⅔% of the amount of your lifetime pension at the time of your death, adjusted for any cost-of-living increases applicable.

• Optional form of pension

  As an option, you may choose to have your spouse receive, after your death, a lifetime pension equal to 75% of your lifetime pension, rather than the normal 66⅔%. If you select this option, a small reduction will be made to your lifetime monthly pension to reflect the higher value of the 75% option.

  The spousal rules described above will not apply if your spouse waives their right to a survivor pension in a manner permitted under pension legislation.

If you do not have a spouse at retirement:

• Normal form of pension

  In this situation, your spousal status is considered by the Plan as “single.” You will receive a lifetime pension, which is guaranteed for at least 180 months. This means that if you die before 180 monthly payments have been made by the Plan, your designated beneficiary will receive the remaining lifetime payments in the 180-month guarantee period as either a monthly payment or a one-time lump sum payment of the value of the remaining payments. If you have not named a beneficiary, the lump sum commuted value of any payments remaining in the guarantee period will be paid instead to your estate.

  This form of pension may also apply if you have a spouse at retirement and they waive the right to a survivor pension in a manner permitted under pension legislation.

What happens when you retire?

NSHEPP will process your retirement pension benefits. Here are the steps in the process:

Step 1 – Advise your Employer of your retirement date:

• Retirement dates are always the first of the month next following the date that you last had pensionable service;
• Most Employers require advance notice of your retirement date so you should check with your Employer to see how much notice they require.

Step 2 – Your Employer will complete a Notice of Retirement and provide you with the following forms to complete:

• A Declaration of Spousal Status at Date of Retirement;
• A Direct Deposit Authorization form; and
• A TD1 form is only required if you wish to claim more than the basic personal tax exemption.

Step 3 – You will need to complete the forms indicated above and provide copies of the following documents:

• Your proof of age (for example - a copy of your birth certificate, driver’s license, passport or baptismal certificate) and your spouse’s proof of age (if applicable);
• Your marriage certificate (if applicable);
• A void cheque or direct deposit form printed by your bank; and
• A copy of your separation agreement or court order and divorce certificate (if applicable).

Step 4 – Your Employer will send the completed Notice of Retirement and your completed forms and documents to NSHEPP. We are unable to process your retirement until your Employer runs the final payroll after your last day worked and provides us with your final payroll data.

Step 5 – NSHEPP will process your retirement pension benefits and send you out a Statement & Election of Benefits on Retirement that outlines the options you have in respect of your pension.

Step 6 – You will review your Retirement Option Statement and choose an option, and send the completed signed and witnessed statement to NSHEPP for processing.

Step 7 – NSHEPP will have you set you up to receive your monthly pension payments from our custodian, RBC Investor & Treasury Services, via direct deposit into your bank account. It’s important to note that due to processing time, your initial pension payment will be received eight to ten weeks after your retirement date.

Important Note: When completing the forms, please make sure that you complete all sections and that you sign and date, and have the form witnessed, as indicated. Otherwise the form will be returned to you to complete in full.

Once you start to receive your pension, there are a few things to keep in mind:

• Pension payments will be made on the first banking day of every month;
• Your pension benefits are taxable income;
• Each January 1st, your benefits will automatically be adjusted by a cost-of-living adjustment equal to the increase in the CPI up to a maximum of 3% (prorated if you have been retired for less than one year). Any cost-of-living adjustments above 3% must be reviewed and approved by the Pension Trustees.
• You need to let us know if you move so we can update your address in our records; and
• You need to tell us if you wish to change your bank account where your pension is being deposited.

Deferred Pensions

If you are a former employee who terminated employment and membership in the Plan, you may have selected the deferred pension option. If so, the payment of your deferred pension will start at your earliest unreduced retirement date that was applicable at the date of your termination of employment. (If you selected a deferred pension, you will have received a Certificate of Deferred Pension from the Plan.)

The Plan allows you to start a deferred pension earlier than your earliest unreduced retirement date, but on a reduced basis. This reduction reflects the fact that you are starting your pension early and, therefore, will collect it longer.

The reduction is equal to ½ of 1% (0.5%) for every month that your early retirement date falls before the earliest date your unreduced pension would have commenced. The determination of the date for your eligibility to receive an unreduced pension is based on:

• your age at pension commencement, and,
• the amount of continuous service you earned up to your date of leaving.

When you select a reduced pension, your pension (including your bridging benefit, if applicable) will be permanently reduced.

If you have any questions about your deferred pension, contact us.

Keeping up with inflation

To help protect the purchasing power of your pension, NSHEPP provides guaranteed cost-of-living adjustments (COLA).

• Each January 1st, the amount of your monthly pension and your bridge benefit will be adjusted by 100% of the increase in the previous year’s cost of living, up to a maximum of 3% per year (prorated if you have been retired less than one year).
• To measure the year-over-year increase in the cost of living, we use the Consumer Price Index (CPI) figures for Canada as of each September 30th.
• If the year-over-year increase in the CPI ever exceeds the 3% maximum covered by the Plan, the Trustees may decide to grant further increases, in their sole discretion.

Returning to work with an NSHEPP employer after your retirement pension starts

If you decide to return to work after your retirement pension from NSHEPP has started, this may affect your pension as follows:

• If you return to work with any employer who participates in the Plan, in a class of employment covered by the Plan for that employer, and if you work 50% or more of the regularly scheduled full-time hours on a regularly scheduled basis, you must join the Pension Plan after 3 months of service (but can join immediately at your option).
• As soon as you once again become a member of the Plan, your pension will cease immediately. Your pension entitlement will be recalculated and restarted when you choose to retire again. Note: The Income Tax Act does not allow you to earn further pension benefits after November in the calendar year in which you attain age 71.

If you work less than 50%, you can choose not to join the Plan when you become eligible. If you are not participating in the Plan, you can continue to receive your pension uninterrupted.

In summary, the Plan allows you to work with a participating employer after you have retired and still receive your pension provided that 1) the participating employer wants to employ you, and 2) you do not participate further in the Plan.