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Please find below some of the frequently asked questions related to the proposed changes to the Municipal Pension Plan. To learn more about how the proposed changes may effect you, we have developed a calculator for general membership. Please click here to access the calculator.

General Membership - General Questions

The Agreement in Principle (AiP) includes a package of proposed changes, which need to be considered as a whole. The proposed changes for Group 1 members (all members except for police and fire) include the following:

All proposed changes will only apply to service earned after the proposed effective date (January 1, 2022).
Moving away from pension benefit and contribution formulas integrated with the Canada Pension Plan and towards flat benefit accrual and single contribution rates.
Replacing the bridge benefit on future service with a higher accrual rate on all future service.
Removing the Rule of 90 and subsidies for early retirement to further support a higher accrual rate on all future service. This results in an improved lifetime pension for most members.
None of the proposed changes will affect any benefits members have already earned.
Contribution rates and pension benefit accrual changes only affect active members; inactive and retired members’ benefits are unaffected. Retired members will benefit from improved indexing and the new health benefit trust provisions.

Group 1 lifetime pension and bridge benefit
The biggest change for Group 1 members (all members except for police and fire) is a higher lifetime pension, partially offset by changes to early retirement rules and elimination of the bridge benefit on service after January 1, 2022.

Group 1 early retirement rules
Today, about one third of Group 1 members (all members except for police and fire) retire before age 60, but all members currently contribute to early retirement subsidies. The proposed changes maintain the ability to retire with an unreduced pension at age 60 (with at least two years of contributory service), and to retire as early as age 55, but without the subsidy that is currently in place (this includes the Rule of 90).

The proposed changes only apply on benefit accruals after January 1, 2022. If a member retires before age 60, the existing rules, including the Rule of 90, continue to apply to all service earned prior to January 1, 2022.

Group 1 member and employer contributions
Effective January 1, 2022, Group 1 members (all members except for police and fire) will pay a single contribution rate of 8.61% of pay. Employers will contribute 8.71% of pay towards pension benefits. These contributions are made to the basic account and the inflation adjustment account (IAA), which provides permanent cost-of-living adjustments to pensions in pay. Employers will also contribute 0.6% of pay towards retired member group health benefits.

Current unfunded liabilities and Joint Trust Agreement (JTA)
The surplus from the 2018 actuarial valuation has largely been used to pay for past unfunded liabilities. The remaining surplus will be transferred to the RSA (rate stabilization account – to help protect active members and employers from contribution rate fluctuations in the future).

New terms in the Joint Trust Agreement (JTA) will ensure future surpluses will be used to first pay for future unfunded liabilities, and then be shared equally between the IAA and the RSA until they reach the thresholds to be determined by the Municipal Pension Board of Trustees in consultation with the plan partners.

The purpose of the RSA is to help protect active members and employers from contribution rate increases in the future. Presently, the RSA is capped at $2.5 billion. The proposal is to lift the cap to allow the account to grow through investment income and to transfer the residual 2018 surplus to the RSA, estimated to be about $500 million.

Health benefit trust
Amongst the proposed changes is the proposal to establish a new health benefit trust. The trust would receive initial seed funding of about $100 million. The primary advantage of a trust is the opportunity to retain unspent funds so the trust can accumulate investment income. Post-retirement group benefits (health and dental benefits available to retired members) would be funded with this income. The trust will also provide retired members with a greater voice in how post-retirement group benefits are managed.

This trust will be established and administered as an “Employee Life and Health Trust” as defined in the Income Tax Act and provide health and dental benefits to retired members and their dependents.

The Municipal Pension Plan has not had a comprehensive plan design review since 1966. It is being updated to reflect the changing nature of work and retirement, to better align benefits with how the majority of members are using them, and to rebalance contribution rates with accrual rates.

The proposed changes improve equity in the plan through single contribution rates and flat benefit accrual rates. A flat accrual rate means all members are earning the same proportional level of benefit on all their salary.

Today, there is a two-tiered system where Group 1 members earn 1.3% on salary up to the YMPE (Year’s Maximum Pensionable Earnings – in 2020 this is $58,700) and 2% on salary above the YMPE (any amount of salary above $58,700 in 2020). Over time, the existing formula used for determining the contribution rates above and below the YMPE has fallen out of step with the benefit being accrued. This negatively impacts lower income earners. A single contribution rate means this formula will no longer be used and YMPE will not play a role in calculating contribution rates.

Finally, it is important to note that the current average age of retirement is 61, with an average of 17 years of pensionable service at retirement. So, while all members’ contributions fund early retirement, a minority actually use this benefit. Under the proposed changes, Group 1 members who opt for early retirement below age 60 will not be subsidized by members who do not or cannot afford to retire early. The savings from the subsidy will be used to improve the lifetime pension (pension amount received throughout retirement, excluding the bridge benefit) for the majority of Group 1 members.

Much work has been done to develop a package of changes, and carefully assess how each change impacts other elements of the plan, as well as employers and members. The plan is complex on many levels and everyone involved wants to make careful and well thought out changes.

The plan includes about 365,000 members across more than 900 employers, with sectors including municipal government, health care professionals, social services, school districts and others. More than any other pension plan in British Columbia, the plan has a high diversity of members, professions, career paths and associated earnings. Given this diversity, it is critical that a comprehensive review of the plan take place to address imbalances that occur between member groups and to find the right blend of options to be even-handed in the application of benefit changes for all members and employers.

The plan partners and the board share decision-making powers and accountability for the plan’s governance and administration. Given the complexity of the redesign, the board requested that plan partners work to ensure the long-term viability of the plan, while addressing unintended imbalances which arose over time.

A number of changes have already been made to improve plan sustainability, and these proposed changes build upon changes made over the last few years. The changes already made to date include:

1) The rate stabilization account (RSA) was established with part of the surplus from the 2015 actuarial valuation. The RSA reduces future contribution rate volatility for members and employers by mitigating future contribution rate increases. Since the RSA was established, it has grown to $2.5 billion.

2) Complexity in the employer contribution rates were removed. Employer contribution rates have been simplified by removing gender and age differentiation in the previous employer contribution rate structure, improving equity and allowing employers to better forecast annual contributions. Additionally, in general, employer contribution rate changes will only occur following the triannual (every three years) valuation rather than annually.

3) Sustainable cost-of-living adjustments for retired members were implemented. Improvements were made to the indexing of pensions as follows:

a process was introduced to evaluate the sustainability of the IAA (inflation adjustment account) and capping indexing, if necessary, for three-year periods to ensure equity between generations of members; and
the contribution to the IAA was increased to improve the level of sustainable indexing. Having a cap on indexing helps to maintain the long-term sustainability of funds in the IAA so that funds are not used up faster than they can be replaced and ensures inter-generational equity.

Time/Timing Questions

No. The average years of service at retirement for plan members as of 2019 is 17 years. A very small group of members (4%) achieve 35 years of service before age 60, with 61 being the average age of retirement in 2019.

Members who work beyond 35 years may still continue to improve the pension they receive at retirement if their earnings increase as it will raise their five year’s highest average salary (HAS) which is used to calculate their pension even though they are no longer making pension contributions. Their take-home pay will also increase as they would no longer be contributing to the plan.

There are no changes to the lifetime pension benefit for retired members.

However, the plan partners and board have and continue to strengthen the plan’s inflation protection in three ways:

After the 2015 valuation, the board increased the percentage of the contribution going into the Inflation Adjustment Account (IAA). In 2015 dollars, that was worth at least $3 billion. Because retired members make up about a third of the membership, that means at least $1 billion is directly benefitting current retired members. That decision also helped increase the COLA (cost-of-living adjustment account) cap.
In accordance with the plan’s funding policy, excess investment returns have been moved out of the basic account into the IAA. That happens when the five-year annualized rate of return exceeds the actuarially assumed rate of return. That has totaled about $1.2 billion since 2015.
The plan design proposal includes provisions that ensure future surpluses will be transferred 50/50 to the IAA (and Rate Stabilization Account (RSA)) to further support indexing when needed.

The other proposed change in the plan redesign that will affect retired members is related to establishing a new health benefit trust. The trust’s governance framework has not been finalized, but it will provide an opportunity for meaningful input from retired members. The trust will be able to retain unused contribution amounts and invest them to accumulate investment gains. The health benefit trust will receive approximately $100 million in seed money which will also be invested for the purpose of funding the benefit trust to provide retiree group benefits.

The plan partners had hoped to implement changes on January 1, 2021. However, given the fluid situation with COVID-19, they adjusted the schedule and postponed planned outreach to members and employers until Fall 2020. They also extended the outreach window from four to six weeks. They believe that now is an appropriate time to share detailed information on the proposed changes with members, employers, and key stakeholders. Implementation is now planned for January 1, 2022.

No, all proposed changes are on a go-forward basis only for group 1. Also, the plan cannot reduce the benefits which have already been paid.

The primary factors which led to an unintentional imbalance are:

the rise in the YMPE (year’s maximum pensionable earnings which aligns with the average Canadian industrial wage and is a factor in the calculation of the appropriate contribution rates) outpacing the growth in wages in British Columbia, and
the established formula to determine the above/below YMPE contribution rates falling out of step with the benefit being accrued.

These imbalances emerged over time, are not easily pinpointed for individuals and amounts, and will vary between members.

The proposed changes resolve the imbalance between contributions made and benefits earned by proposing to implement a flat benefit accrual and single contribution rates on a future-service basis and provide a set of benefit improvements.

Engagement

There are about 365,000 members and over 900 employers in the plan. To create a workable and manageable process, the plan partners have developed tools for unions, employers, associations and other key organizations to engage their members.

This allows organizations to reach out in ways that best meet the needs of their members and key stakeholders. At the same time, the plan partners are making this information available directly to members on the website (mppredesign.ca).

The package of proposed changes is designed to improve equity among members. The changes will affect members differently depending on their retirement choices and their level of income.

Generally speaking, however, the increased benefit accrual rate will benefit most members, and be of greater benefit to those who earn a salary that is below the YMPE (the year’s maximum pensionable earnings – $58,700 in 2020).

Members who plan to retire before age 60 with the maximum early retirement subsidy would be the most negatively impacted. They can still retire early, but they will no longer receive a subsidy on service after January 1, 2022. They will have a greater reduction applied to future service benefit accruals. For members planning to retire in the near future, these changes will make little difference because the majority of their service will be accrued before January 1, 2022. If you have 25 years in the old plan design and five years in the new plan design, the majority of your pension will be determined under the current plan rules.

The majority of members will see an improvement in their lifetime benefit (the total pension benefit they receive throughout retirement, excluding the bridge benefit). When it comes to bridge benefit, those retiring before 65 will see a difference in the bridge benefit, as it will not be applied to their future service.

Contribution rates will also change. Currently, Group 1 members contribute 8.5% of salary up to YMPE and 10% of salary above YMPE, which includes 1.53% on all salary to the Inflation Adjustment Account (IAA). Under the proposed changes, Group 1 members would contribute 8.61% (into Basic Account and IAA contributions) of all salary. This means that some members (particularly those who earn less than YMPE) will see slightly higher contributions while higher earners may see a decrease in their contributions. However, this change is paired with an increased lifetime benefit accrual.

Group 1 members’ lifetime pension is currently calculated on 1.3% of highest average salary (HAS) up to the YMPE (at the time of retirement) and 2% on salary above the YMPE. Under the proposed changes, Group 1 members’ lifetime pension will be calculated on 1.9% of HAS. This provides an increased benefit for lower earners while very high earners will receive a decreased benefit. In other words, those who will see a slight increase to their contributions also benefit the most from the changes to the benefit accrual.

When members are considering their retirement dates and the options they have available to them in terms of the pension plan, they frequently consider how early they want to retire and what features of the pension plan might allow them to retire early. Quite often, retiring early accentuates the importance of the bridge benefit in your total pension benefit. Other members utilize various optional forms of pension (like a temporary annuity, which is similar to the bridge benefit) to provide them with a greater amount of pension income during the earlier retirement years, offset by a lower lifetime pension amount. Plan partners recognize that the plan redesign will alter these features of the plan. As such, plan partners are working to establish different forms of temporary annuities that members could use in combination with an early retirement to offset the potential impact of the plan design changes on the amount of their pension. Plan members should also recognize that the benefit entitlement that they accrued for service prior to January 1, 2022 will not change and the current early retirement and bridge provisions for this prior service will remain.

Following the engagement period with member organizations from September to October 2020, which entails receiving feedback on the proposed redesign, plan partners will discuss what they learned, determine the key components of the Agreement in Principle (AiP) that have support, as well as those where there are concerns. This feedback will support plan partners in concluding a final plan redesign agreement.

There was extensive work done by the board and plan partners to understand the interaction of benefits, cross-subsidies, and inequities. Plan partners also spent some time in developing and agreeing on a set of principles and priorities. Those principles are:

To improve equity for members
To align benefits with how the majority of members use them
To set a strong foundation for the long-term sustainability of the plan
To stay within the current cost envelope.

The plan partners also sought legal, actuarial, and policy advice that considered the various plan design issues and options. They reviewed and analyzed data surrounding plan member demographics and retirement trends to inform how various changes to plan design may impact individuals across different unions and member groups and across different income levels. There were numerous costing exercises to understand the immediate and long-term impacts on various options.

The plan partners believe the proposed plan design changes, in addition to the changes implemented over the last few years, represent the best set of options that will greatly improve equity in the plan, provide benefit improvements for most plan members, and protect the plan’s sustainability into the future.

Early Retirement, Bridge Benefit and Rule of 90 Questions

Early retirement is not being removed as members will still have the option to retire early if they choose to do so. However, retiring before age 60 will cause a greater reduction to their pension amount for service earned from January 1, 2022 as it will no longer be subsidized by the entire plan membership (including members who do not or cannot retire early). The bridge benefit will also be eliminated on future service.

The early retirement subsidies and the bridge benefit will continue to apply to all pension benefits accrued prior to the implementation of the proposed changes. It is important to recall that:

Members will keep the bridge and early retirement subsidies that they have earned on service up to January 1, 2022.
The proposed changes apply only to benefits being earned after January 1, 2022.
All members can retire at 60 years of age with no reduction to their pension if they have at least two years of contributory service.
Following the implementation of proposed plan design changes, members who retire before 60 will have a different reduction applied to their pension earned for service before and after the changes. The reduction amount will be higher for pensionable service accrued after January 1, 2022 as early retirement will no longer be subsidized on retirement before age 60 and, instead, the reduction applied before age 60 will reflect the cost associated with early retirement.

To learn more about reduction factors please click here.

In 2019, approximately one in three active general members (Group 1) in the plan retired before the age of 60. While all members contribute to the cost of subsidizing early retirement, only a third of members received the benefit in 2019. The proposed new early retirement rules and the application of the new reduction factors will end the practice of members who cannot or choose not to retire before age 60, subsidizing members who do. The value of these early retirement subsidies and the bridge benefit is used instead to increase the lifetime pension (the pension received upon retirement excluding the bridge benefit) amount.

Only 15% of members qualify for the Rule of 90 before age 60. The Rule of 90 allows a member who qualifies to retire without a reduction to their pension even though by retiring early, they will receive their pension for a longer period of time. This cost is paid by all members and their employers through contributions to the plan. The majority of members do not benefit from the Rule of 90 yet their contributions pay for the minority of members that can benefit from the Rule of 90.

One of the primary objectives of this plan redesign was to improve equity among members, therefore, by eliminating the rule of 90 on future benefit accruals and transferring the value of this benefit to a higher accrual rate, the benefits become more equitable for more plan members.

Members who qualify for the Rule of 90 at their retirement date will continue to receive an unreduced pension for their service accrued before January 1, 2022, and will only have a reduction applied to the pension based on service accrued after this date (on retirement before age 60).

*The Rule of 90 is defined as your age and years of pensionable service equaling 90. For example, if you started working at the age of 20, and worked for 35 years, you would be 55 years old and have 35 years of service and this would equal 90.

The move to a flat lifetime benefit rate accrual rate addresses equity issues among members. All Group 1 members (all members except police and firefighters), will accrue 1.9% of salary for their pension no matter their earnings.

Currently, members’ salary below the YMPE (year’s maximum pensionable earnings which aligns with the average Canadian industrial wage and is $58,700 in 2020) earns a pension benefit of 1.3%, and salary above the YMPE earns a pension benefit of 2%.

Under the proposed changes, most members will have a better lifetime benefit (the total pension benefit they will receive over their life, excluding the bridge benefit). Over the long term, it also simplifies the plan because there are fewer outside influences on contribution rates, such as the YMPE, and it is simpler to calculate.

Under the proposed changes, members who opt to retire before age 65 will no longer be subsidized through a bridge benefit by members who do not or cannot afford to retire as early. This change will enable the plan to provide a higher lifetime pension benefit to all general members (Group 1 – members who are not police and firefighters). The savings will be used to improve the pension accrual rate. This improves equity in benefits to the majority of plan members.

The bridge benefit is a temporary benefit; it is provided upon retirement until age 65 when it stops. This often causes confusion if one is not expecting it to happen.

If someone begins working at the age of 20 and contributes to the plan for 35 years, s/he can retire at the age of 55 and potentially be in receipt of a pension for 30 years or more. This puts a cost pressure on the plan and causes a subsidy to be made by all members to these members. One of the goals of this plan design proposal is to improve equity in the plan by reducing subsidies.

The package of proposed changes is designed to improve equity among members. The changes will affect members differently depending on their retirement choices and their level of income.

Contribution rates will also change. Currently, Group 1 members contribute 8.5% of salary up to YMPE and 10% of salary above YMPE, which includes 1.53% on all salary to the IAA. Under the proposed changes, Group 1 members would contribute 8.61% (into Basic Account and IAA contributions) of all salary. This means that some members (particularly those who earn less than YMPE) will see slightly higher contributions while higher earners may see a decrease in their contributions. However, this change is paired with an increased lifetime benefit accrual.

Contribution Rate Questions

Individual members may see an increase or decrease in their contributions. If a member’s salary is below the YMPE, they may have a marginal increase in their contribution rate from 8.5% to 8.61% of pay. For example, for a member earning $50,000 a year, the current contribution is $4,250 a year. Under the proposed change, the contribution would be an additional $55 per year ($2 per paycheque). At the same time, there will be a significant improvement to their lifetime pension.

In contrast, members with higher earnings may experience decreased contributions, as the current contribution rate of 10% on salary above YMPE exceeds the proposed single rate. Using the 2020 YMPE of $58,700, members earning more than $63,345 will pay less contributions under the proposed formula compared to the current rate. Very high earners may see a decrease in their benefit accrual.

The Plan actuary has calculated that employers would pay a single contribution rate of 9.31% of salary, including the contribution to the retiree health benefit trust, for service accrued on or after January 1, 2022. This means that all employers will pay less than they do currently for their Group 1 contributions.

The surplus from the 2018 actuarial valuation will be used to eliminate previous unfunded liabilities, which means employer contribution rates can be reduced. Members and employers are expected to share in the costs and the benefits of the plan, therefore, while the members are receiving a benefit improvement, employers are receiving a rate reduction. To meet Income Tax Act (ITA) requirements that members cannot pay more than half the cost of their pension benefits, the employer contribution rate to the pension plan of 8.71% of pay, (i.e. excluding the contributions to the retiree health benefit trust) is 0.1% of salary higher than the member contribution rate.

The YMPE (year’s maximum pensionable earnings) is an important factor in the current formula for calculating the pension benefit, but it will not be used in the proposed new formula. Currently, members earn a lifetime pension of 1.3% of highest average salary (HAS) up to YMPE and 2% of HAS above YMPE, for every year of service. With the proposed plan design changes, pension benefits on future years of service will accrue at 1.9% of HAS, regardless of YMPE.

The YMPE is also currently used in the calculation of contribution rates but will no longer be a factor. With a flat accrual rate, there will also be a single contribution rate.

Health benefit trust questions

Currently retiree group benefits are funded by employer contributions and retired member premiums. The current set-up is due to limitations imposed by the Income Tax Act. The funds do not accumulate nor earn interest over time. Unused contributions are transferred to the inflation adjustment account to fund cost-of-living adjustments. The full contribution 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 design changes propose that a new health benefit trust for retiree group benefits be established to provide more flexibility in funding retiree group benefits. The fund would be seeded by an initial transfer of funds of about $100 million and sustained by ongoing funding. Trust funds will be invested to further support the benefit trust. The trust’s governance framework will allow for retiree input.

Past surveys did not specifically ask respondents asked about the creation of a health benefit trust. However, respondents were asked about their preferences related to how best to allocate the unused portion of employer contributions earmarked for group benefits. Survey respondents were virtually split in preferences for using the funds: possible enhancements to post-retirement group benefits (that may be only for a limited time – 39%) or covering future cost-of-living adjustments (44%).

COVID-19

The plan is well positioned to withstand ever-changing financial markets and a slowing global economy. The board of trustees has ensured that the plan’s investments are broadly diversified, which helps lessen the impact of the current market downturn, with its investments split between a wide variety of public equities, bonds, real assets and other investment vehicles.

These proposed plan design changes aim to enhance the long-term sustainability of the plan and increase equity amongst members.

FAQs for Public Safety Employees

Group 5

Given the unique nature of Group 5 members’ work, their negotiated benefits and their lower age of retirement, there are several proposed changes for Group 5 members.

For Group 5, the following changes are being proposed and will only apply to new service after January 1, 2022:

Move to a flat lifetime pension accrual rate of 2.12% that is not dependent on YMPE, and make consequential changes to the bridge. Currently, there is a dual rate for the lifetime pension accrual below YMPE (1.63%) and above YMPE (2.33%). YMPE is the Year’s Maximum Pensionable Earnings, set by the Federal Government to represent the maximum earning that the Canada Pension Plan applies to, and in 2020 is $58,700.
Move to a single contribution rate of 11.12% that is not dependent on YMPE. Currently there is a dual contribution rate for members on salary below the YMPE (10.44%) and salary above the YMPE (11.94%).
Establish the group contribution rate rebalancing account (GCRRA) with funding to protect against future contribution rate rebalancing requirements. This occurs when the demographics of the different groups in the plans change requiring adjustment to the contribution rates to ensure each group is paying the correct amount of contributions for the benefits they will receive.

The following proposed changes will apply to all public safety service (service as a member of Group 2 or 5) so long as the member earns at least one day of Group 2 or 5 service on or after January 1, 2022:

Moving to a highest average salary (HAS) that is calculated based on a member’s best four years of earnings, instead of the current best five years. This means that the HAS will be calculated on a fewer number of years and will result in an improved pension.
Changing the “normal form” of pension to a single life 10-year guarantee pension. The normal form is the standard pension calculation. Changing the normal form to a pension with a guarantee causes any pension option a member chooses to be higher than under the current normal form.

Early retirement in Group 5 is defined as retiring between the ages of 50 and 55.

Early retirement benefits, in the form of subsidies, will remain in effect for Group 5 members, including the “Rule of 80”.

For Group 5, it is being proposed that the lifetime pension accrual rate increase and, because of Income Tax Act (federal) limits, the bridge accrual rate will decrease from 0.70% to 0.21%, the bridge benefit is calculated based on the difference in the lifetime pension accrual rate and 2.33%, which is the highest allowed pension accrual permitted by the Act. This bridge benefit is payable from retirement to age 65, or death if earlier.

The decrease in the bridge benefit is offset by an increase in the lifetime pension.

This change will only apply to service earned on or after January 1, 2022.

A part of how your pension is calculated is your highest average salary (HAS), which is currently your best five years of earnings as a plan member. One of the proposed changes for public safety (Group 2 and 5) is to change how your HAS is calculated: from your best five years to your best four years of earnings.

This proposed change is being considered to apply to all public safety service (service in Group 2 or 5) so long as you have at least one day of service in Group 2 or 5 on or after January 1, 2022. With fewer years across which to average your salary, your HAS is almost certain to be higher. This will have a positive impact on your lifetime pension as most public safety members have a higher salary towards the end of their careers because of wage increases and promotions.

Currently, the “normal form” of pension for public safety members (Group 2 and 5) is a single life pension without a guarantee. The normal form is the basis on which your pension is established; in other words, the result of the standard pension formula is the value of your normal form of pension. You can choose different pension options at retirement. The current single life option without a guarantee means if you pass away, there is no benefit paid to your beneficiary or estate. If you choose to add a guarantee to your pension or provide a survivor pension to your spouse should you die first, the pension is reduced to reflect the extra cost of the optional form and the added payment guarantee.

One of the proposed changes included in plan redesign is changing the normal form for all public safety members (Group 2 and 5) from a single life pension without a guarantee to a single life pension with a 10-year guarantee. With this change, a member can receive a 10-year guarantee without having their pension reduced because of that choice. Should you choose not to take a guarantee option on your pension, it still results in a modest improvement in your pension payment. In contrast, if you elect a more expensive optional form, it will decrease the cost of that more costly pension option.

This proposed change is being considered to apply to all public safety service (service as a member of Group 2 or 5) so long as you have at least one day of service in Group 2 or 5 on or after January 1, 2022.

One way of thinking about a guarantee on your pension is similar to life insurance. For example, with a 10-year guarantee, you are locking in a guarantee of 10 years of pension payments from the date of retirement. If you die before 10-years post retirement, your beneficiaries will receive the remaining payment of your pension. For example, if you died six years after retirement, they will receive four years’ worth of pension payments.

To learn more about your pension options please visit: https://mpp.pensionsbc.ca/choose-your-pension-option

Moving to a flat lifetime pension accrual rate and single contribution rate means that all members will be earning benefits and contributing at the same rates and receiving the same proportional benefit. Most members will see an improved pension because they are accruing more benefit on their salary.

Higher income earners may see less benefit accrued because of the flat rate. This group, however, will also see contribution rates decrease which means they will see more money on their paycheck.

Further, the plan partners are intending to increase the range of temporary annuity (TA) options available to all members, enabling any member to adjust how their pension income is distributed before and after age 65. Currently, a full TA is available, but the partners are proposing to introduce a half TA and a quarter TA option.

The changes apply on any service you earn on and after January 1, 2022, regardless of when you apply for your pension. For example if, on December 1, 2021, you submit an application to retire effective March 1, 2022, the changes will apply to the service you earn from January 1 to February 28, 2022. The improvements to your HAS and normal form of pension will apply to all of your service provided you work at least one day in 2022 or later, regardless of when you submit your retirement application.

There will be a calculator for public safety developed before implementation and after a final decision on the changes is made that takes individual member’s unique circumstances into account.

There is currently no calculator for this group as the application of the proposed changes will vary member by member based on their planned retirement age and annual salaries. Moreover, most public safety members will have a mix of both Group 2 and Group 5 service, and without knowing exactly how much service they have in each group it would not be feasible or accurate to try and calculate the results.

Group 2

Group 2 (G2) is a small group within the Municipal Pension Plan with approximately 340 members who have not moved to Group 5 and a few who are not eligible for Group 5. Given the legacy nature and size of Group 2, there are several proposed changes for Group 2 members.

The following benefits will remain in effect:

G2 will retain a dual lifetime pension accrual rate; and
G2 will see no changes to early retirement subsidies or their bridge benefit.

The proposed changes which would affect Group 2 members include:

Members will have a single contribution rate of 8.92% which includes 1.78% for the indexing account. Currently, G2 members contribute 8.50% below YMPE and 10.0% above YMPE.
Members will participate in the group contribution rate rebalancing account (GCCRA). The GCCRA will protect G2 and G5 members and employers against future contribution rate rebalancing requirements. Rebalancing contribution rates occurs when the demographics of the different groups in the plans change and require adjustments to the contribution rates to ensure each group is paying the correct amount of contributions for the benefits they will receive. A portion of the public safety groups’ share of surplus will help to protect against potential future contribution rate increases.
Members will have a highest average salary (HAS) based on their four highest earning years, as opposed to five. This means that the HAS will be calculated on a fewer number of years and will result in an improved pension.
Members will have a change in their normal form from a single life pension to a single life 10-year guarantee. The normal form is the standard pension calculation. Changing the normal form to a pension with a guarantee causes any pension option a member chooses to be higher than under the current normal form.

Plan partners are also proposing to make changes that will benefit all members. These include:

Establish a new health benefit trust to support the sustainability and affordability of the group health benefit program for retired members.
Fund the rate stabilization account to mitigate increases in future contributions for either employers or employees.
Strengthen inflation protections to support cost of living adjustments over the long-term for retired members.

This proposed change is being considered to apply to all public safety service (service in Group 2 or 5) so long as you have at least one day of service in Group 2 or 5 on or after January 1, 2022. With fewer years across which to average your salary, your HAS may be higher. This will have a positive impact on your lifetime pension as most public safety members have a higher salary towards the end of their careers because of wage increases and promotions.

Currently, the “normal form” of pension for public safety members (Group 2 and 5) is a single life pension without a guarantee. The normal form means the standard pension formula. Single life without a guarantee means if you pass away, there is no benefit paid to your beneficiary or estate. If you choose to add a guarantee to your pension or provide a survivor pension to your spouse should you die first, the pension is reduced to reflect the extra cost of the added option.

One of the proposed changes included in plan redesign is changing the normal form for all public safety members (Group 2 and 5) from a single life pension without a guarantee to a single life pension with a 10-year guarantee. With this change a member can select a 10-year guarantee without having their pension reduced because of that choice. Should you choose not to take a guarantee option on your pension, it still results in a modest improvement and decreases other potentially more costly pension options. More information on pension options is available by clicking here.

One way of thinking about a guarantee on your pension is similar to life insurance. For example, with a 10 year guarantee you are locking in a guarantee of 10 years of pension payment from the date of retirement. If you die before 10-years post retirement, your beneficiaries will receive the remaining payment of your pension. For example, if you died six years after retirement, they will receive four years’ worth of pension payments.

To learn more about your pension options please visit: https://mpp.pensionsbc.ca/choose-your-pension-option

The changes apply on any service you earn on and after January 1, 2022, regardless of when you apply for your pension. For example if, on December 1, 2021, you submit an application to retire effective March 1, 2022, the changes will apply to the service you earn from January 1 to February 28, 2022. The improvements to your HAS and normal form of pension will apply provided you work at least one day in 2022 or later, regardless of when you submit your retirement application.

For employers in public safety, the primary changes relate to:

Changing the employer contribution rates

There will be no cost increase associated with the proposed changes for employers. In fact, employers will see an overall decrease in their costs. The pension will remain a valuable benefit for employees and a simplified contribution rate (G2/5) will make communicating the plan more straightforward and simpler to administer.

The contribution changes effectively bring employer contributions more in line with their employees’ contributions, which was a key goal in the plan’s joint trust arrangement. Member and employer contributions are now the same for each group, but for two aspects of employers’ contributions to pay i) the incremental cost of a lower retirement age for Groups 2 and 5 and ii) a small differential to ensure the plan remains within federal regulations prohibiting members from paying more than 50% of the cost of their registered pension benefits.

These changes should also be considered in the context of earlier changes made to the plan, including the simplification of employer contribution rates, eliminating gender and age differentials and enabling employers to better budget their pension expense.

Here is more information on how employer contribution rates are being proposed to change:

Employer contribution rates for Group 2 are proposed to change from a two-tiered system based on YMPE, to a single contribution rate of 12.42%. This includes 0.98% that goes into the inflation adjustment account and 0.6% to fund post-retirement group benefits.
- This is a reduction from the current Group 2 employer rates of 12.75% of earnings up to YMPE and 14.25% of earnings above YMPE. Each includes 1.53% that goes into the inflation adjustment account. Currently, a portion of the IAA contribution is used to fund post-retirement group benefits.
This change will simplify administration for employers.
A portion of Group 5 and 2’s share of the surplus is proposed to fund a group contribution rate rebalancing account. The purpose of this account is to stabilize contribution rates for these groups when demographics of the groups change such that the contribution rates between the groups need to be adjusted to ensure each group is contributing the correct amount for the benefit they are accruing. This will help to avoid big swings in contribution rates for Groups 5 and 2.

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