Reserve Pension- Merged

[Future Pensioner]

To clarify: "Effective the CIF, what is counted is the period 5 Aug 72 to 5 Aug 07 = 35 calender years which is called pensionable service".

To read: Effective the CIF, what is counted is the period 5 Aug 72 to 5 Aug 07 = 35 calender years which is called pensionable service. Add all your paid days within that period to equal the number of pensionable days .  Your pension cannot exceed 35 years of pensionable service (35 calender years).

Your pension is calculated on the number of pensionable days within the maximum 35 year period. Most people convert pensionable days to years and say i.e. "i have a 25 1/2 year pension", etc.

Thanks Rifleman62.


Here is a question to go along with that.  There would be a lot of Reservists who joined at age 17 and might not ever have the opportunity to accumulate the 25 years of CF Service that it would take to get an immediate unreduced pension before the age of 60.  However, if they continued in service until the age of 55, they would be able to draw an immediate unreduced pension because they would have accumulated 30 years of Pensionable service - infact, the would have accumulated 38 years of Pensionable service.  The only problem is, if as you say, they can only count 35 of the 38 years of Pensionable Service towards their "pensionable days" and who gets to decides that?

 

[Rifleman62]

I think that the buy back is smoke and mirrors to get the maximum amount of money from the Reserves possible. For example, since 1987, the maximum full benefit per year (365 days) is pegged at $1794.92. Therefor an estimate of the pension earned would be $1794.92 x the number of full years from 1987 to 2006 ( 20 years) = $35,898.

What the threshold of annual pay is required to achieve the maximum full benefit is, I do not know, but would really like to know. Reason is i.e. if it takes  $60 K of annual pay to achieve the maximum full benefit, and you are making $70 K or $80 K  you are just contributing more  funds to the Canadian Forces Pension Fund. It won't change the contribution rate but relate it to the amount we are paying due to updated pensionable earnings, 7 % CI and I believe we are being forced to contribute  a lot more than necessary. And lots of people in the CFSA, PSSA. and the RCMPSA are probably reaching that threshold.

As I have stated before ALL Reserve members regardless if in the Part I or Part I.1 , buy back at the Part I.1 rate. So if you are full time with 20 years of pensionable time to buy back you pay:

Actual Pensionable Earnings are converted to Updated Pensionable Earnings x the contribution rate (i.e. 4.3 % in 2007) to equal the Part I.1 Contribution x 7 % CI per year = Total of Part I.1 Contributions and Interest. Then they calculate the contribution you would have paid if you were in Part I, subtract that from  Part I.1 Contribution  which equal the Top Up amount. Then they take the Total of Part I.1 Contributions and Interest, add the Top Up amount to equal the Full Amount owing for Elected Service.

All full timers who reach the threshold are in the Part I plan, the CFSA, BUT the CFSA Regulations state you buy back utilizing the RFPP regulations.

recceguy it depends on what your rank is  as to how much it costs. I have previously posted figures of the cost of my buy back. I do this because even though I now have my pension I am absolutely not finished fighting this outrage of a RFPP for all Reservists. Probably tilting at windmills though.

A summary of my costs for 25.682 years is:

-  Legislation passed in 1999;

-    cost of my buy back was $274.6 K, of which $148.1 K was interest, and $126.5 K was principal (but see additional financing point below);

-  my buy back @ 4% Simple Interest (SI) should have cost me $44.5 K interest only;

-    my buy back @ 7% Compound Interest (CI) actually cost $148.1 K interest only, a increase in interest costs of $103.6 K;

-    this increase in interest costs meant I still owed $97 K after all the lump sum payments;

-    Additional financing of the $97 k over the maximum of 20 years cost an additional $74 K  interest (some mortality charge in this amount) for a total additional payment of $171.5 K over the 20 years. So due to the extra $103.6 K in 7% compound interest, I have to pay an additional $171.5 K over 20 years of which only $60 K is tax deductable.

-    total interest for my buy back was $148.1K on the principal + $74 K on the additional financing = $222.1 K interest on principal of $126.5 K; and

-    your best five years would normally be your last five years (due to possible promotion in that 5 years, pay raises, incentive increases). Incredibly my best five years were 1988 to 92. This is due to the “Updated Pensionable Earnings” (UPE) and the 7% CI, a double whammy. Therefore you buy back the pension on the Adjusted Updated Pensionable Earnings (AUPE) and 7% CI is added. Example 1988 I made $40.4 K. After AUPE this becomes $92.7 K. So I bought back $92.7 K, paid 7% CI from 1988, and due to the delay in the coming into force (CIF), paid two increases in contribution rates for pension. Note that a full time Reserve LCol, incentive 1, twenty years later, makes $92.8 K (2008 rates of pay). In fact what I bought back from 20 years ago is $30 K more than I would make today in the same rank/incentive!!

 

[Rifleman62]

Future Pensioner

RFPP Regs http://laws.justice.gc.ca/en/showdoc/cr/SOR-2007-32/bo-ga:s_1::bo-ga:l_1?page=2

Immediate annuity

43. (1) A member who ceases to be a participant and has to their credit not less than two years of pensionable service is entitled to an immediate annuity, if

(a) they have completed not less than 9,131 days of Canadian Forces service;

(b) they have reached 60 years of age;

(c) they have reached 55 years of age and have to their credit not less than 30 years of pensionable service


So (a) is basically full time (9,131 divide by 365 = 25 years);
    (b) is part time and full time;
    (c) is part time and full time if you have a total of 30 pensionable (calender) years

There is no regulation that states that the 35 YOS is from date of election. The only regulation that there is on that particular subject CFSA Reg 12.2(3). At the time of my election, I had already accumulated some "pensionable" service, the period being from 1 Mar 07 to 14 Apr 07. That period is considered current pensionable service as opposed to "elected" pensionable service. Combined, the maximum allowed is 35 years.

CFSA Regs   http://laws.justice.gc.ca/en/showdoc/cr/C.R.C.-c.396/bo-ga:s_10-gb:s_12_2//en#anchorbo-ga:s_10-gb:s_12_2

Election for Reserve Force Service

(12.2) In respect of a member, or former member, of the reserve force who becomes a contributor on or after March 1, 2007, clauses 6(b)(ii)(G) and (H) of the Act are adapted as follows:

(G) any period of reserve force service referred to in subsection 12.2(1) of the Canadian Forces Superannuation Regulations, if the contributor elects — during the period beginning on the day on which they become a contributor and ending the later of one year after the date of the written notice advising the contributor that they have become entitled to make the election, and March 1, 2010 — to pay for that service,

  (3) The election for reserve force service set out in clauses 6(b)(ii)(G) and (H) of the Act, as adapted by subsection (2), is for all of the contributor’s reserve force service. However, there shall be counted as years of pensionable service, starting with the most recent, only those that would result in a maximum of 35 years of pensionable service to the credit of the contributor.

 

[Future Pensioner]

  Thanks again for all your wisdom Rifleman 62!!!

BZ

 

[begbie]

I think that the buy back is smoke and mirrors to get the maximum amount of money from the Reserves possible. For example, since 1987, the maximum full benefit per year (365 days) is pegged at $1794.92. Therefor an estimate of the pension earned would be $1794.92 x the number of full years from 1987 to 2006 ( 20 years) = $35,898.

What the threshold of annual pay is required to achieve the maximum full benefit is, I do not know, but would really like to know. Reason is i.e. if it takes  $60 K of annual pay to achieve the maximum full benefit, and you are making $70 K or $80 K  you are just contributing more  funds to the Canadian Forces Pension Fund. It won't change the contribution rate but relate it to the amount we are paying due to updated pensionable earnings, 7 % CI and I believe we are being forced to contribute  a lot more than necessary. And lots of people in the CFSA, PSSA. and the RCMPSA are probably reaching that threshold.

As I have stated before ALL Reserve members regardless if in the Part I or Part I.1 , buy back at the Part I.1 rate. So if you are full time with 20 years of pensionable time to buy back you pay:

Actual Pensionable Earnings are converted to Updated Pensionable Earnings x the contribution rate (i.e. 4.3 % in 2007) to equal the Part I.1 Contribution x 7 % CI per year = Total of Part I.1 Contributions and Interest. Then they calculate the contribution you would have paid if you were in Part I, subtract that from  Part I.1 Contribution  which equal the Top Up amount. Then they take the Total of Part I.1 Contributions and Interest, add the Top Up amount to equal the Full Amount owing for Elected Service.

All full timers who reach the threshold are in the Part I plan, the CFSA, BUT the CFSA Regulations state you buy back utilizing the RFPP regulations.

recceguy it depends on what your rank is  as to how much it costs. I have previously posted figures of the cost of my buy back. I do this because even though I now have my pension I am absolutely not finished fighting this outrage of a RFPP for all Reservists. Probably tilting at windmills though.

A summary of my costs for 25.682 years is:

-  Legislation passed in 1999;

-    cost of my buy back was $274.6 K, of which $148.1 K was interest, and $126.5 K was principal (but see additional financing point below);

-  my buy back @ 4% Simple Interest (SI) should have cost me $44.5 K interest only;

-    my buy back @ 7% Compound Interest (CI) actually cost $148.1 K interest only, a increase in interest costs of $103.6 K;

-    this increase in interest costs meant I still owed $97 K after all the lump sum payments;

-    Additional financing of the $97 k over the maximum of 20 years cost an additional $74 K  interest (some mortality charge in this amount) for a total additional payment of $171.5 K over the 20 years. So due to the extra $103.6 K in 7% compound interest, I have to pay an additional $171.5 K over 20 years of which only $60 K is tax deductable.

-    total interest for my buy back was $148.1K on the principal + $74 K on the additional financing = $222.1 K interest on principal of $126.5 K; and

-    your best five years would normally be your last five years (due to possible promotion in that 5 years, pay raises, incentive increases). Incredibly my best five years were 1988 to 92. This is due to the “Updated Pensionable Earnings” (UPE) and the 7% CI, a double whammy. Therefore you buy back the pension on the Adjusted Updated Pensionable Earnings (AUPE) and 7% CI is added. Example 1988 I made $40.4 K. After AUPE this becomes $92.7 K. So I bought back $92.7 K, paid 7% CI from 1988, and due to the delay in the coming into force (CIF), paid two increases in contribution rates for pension. Note that a full time Reserve LCol, incentive 1, twenty years later, makes $92.8 K (2008 rates of pay). In fact what I bought back from 20 years ago is $30 K more than I would make today in the same rank/incentive!!

Wow.  I think this is your best summation of how the effects of compount interest really hurt.  Wasn't it Einstein who said that compound interest is the most powerful force on Earth? 

I understand your outrage even more clearly now.  Have you considered seeking out the advice of an actuary as you advance your case?

 

[Fishbone Jones]

Rifleman62,

Thanks. I appreciate your time.

 

[Rifleman62]

Did not consider an actuary. Who would pay?

My pension is reduced monthly by the buy back financed over 20 years (or death!), and at 65 will be reduced again as are all Canadian SA pensions.

On November 21, 2008, New Democrat Veterans Affairs critic, Peter Stoffer moved for leave to introduce Bill C-201, An Act to amend the Canadian Forces Superannuation Act and the Royal Canadian Mounted Police Superannuation Act (deletion of deduction from annuity). Bill C-201 is scheduled for Second Reading and debate later this month. It is highly unlikely this will pass, and it does not include the RRPP anyway. DAP has explained this previously.

I know positively that the pension summary has been in the hands of senior appointments in Ottawa for several months. Nothing heard.

 

[begbie]

Did not consider an actuary. Who would pay?

A valid point. 

The lack of similar treatment between RFPP buyback and other PS/CF plan buybacks is a compelling complaint.  It would be interesting to know how private sector DB plans treat and calculate buyback amounts for prior pensionable service.  I would not be surprised to learn that the decision to use 7% CI is driven by a policy that resembles private sector treatment of buybacks.

At the end of the day, this is a classic example of the political world and the bureaucratic world working at cross-purposes.

 

[logie]

In the slide shows and information that has been presented on the websites, where does it tell you that you will immediately begin paying 4% interest on the unpaid balance as soon as you elect?  I would like to see this in writing as I am drafting a redress.  I locked my RRSP in for another 3 yrs (which is when I will retire), not knowing that I am paying 4% - I could have paid it off. 

 

[geo]

logie... what is the premise of your redress ?

 

[dapaterson]

Interest rates for the buyback are set by statute and regulation - the CFSA and its related regulations.

All online at:

http://laws.justice.gc.ca/en/ShowTdm/cs/C-17//20090326/en?command=home&caller=SI&search_type=all&shorttitle=canadian%20forces&day=26&month=3&year=2009&search_domain=cs&showall=L&statuteyear=all&lengthannual=50&length=50

 

[Rifleman62]

Logie

It is 4% Compound Interest you will be paying.  Thats a big difference from 4% SI.

http://laws.justice.gc.ca/en/showdoc/cr/SOR-2007-32/bo-ga:l_1//en#anchorbo-ga:l_1

Reserve Force Pension Plan

Amount to be paid

15. (1) A participant who makes an election to count past earnings as pensionable earnings shall pay the full amount to count all of those past earnings that can be counted as pensionable earnings or a lesser amount for which the participant opts at the time of making the election.

Determination of full amount

(2) The full amount shall be the total of all amounts — plus interest at seven per cent compounded annually and calculated from the middle of the calendar year until the day of the election — determined for each calendar year by the following formula applied to those past earnings that can be counted as pensionable earnings that relate to any period in that year:

(The formula then is shown)

If amount is not more than $500

16. (1) If the amount to be paid is not more than $500, the participant shall pay it in a lump sum no later than 30 days after

(a) the day of the election, if the participant opted for an amount of not more than $500; or

(b) in any other case, the date of the notice advising the participant of the amount to be paid.

Partial payment

(2) If the participant pays less than that amount, the participant is deemed to have opted, at the time of making the election, for the amount received by the Minister.

If amount is more than $500

17. If the amount to be paid is more than $500, the participant shall pay it by way of monthly instalments.

Instalments

18. (1) The instalments shall be payable in equal amounts that may not be less than $5.00, except the last one, and be calculated using the mortality rates set out in the Complete life table, Canada, 1995-97, published by Statistics Canada, and interest at four per cent compounded annually.

When payable

(2) The instalments shall be payable on the first day of each month following the month of the election until the earlier of

(a) the end of the period chosen by the participant ending before the later of 20 years and the participant’s 65th birthday, and

(b) the death of the participant.

The big problem is that Pension Services is way behind providing the information WRT how much you owe. If you have made the election blind, i.e. without confirmation from Pension Services as to how much you owe, you cannot pay monthly installments that "shall be payable on the first day of each month following the month of the election" because no one knows the amount required. Pension Services does require $5.00 monthly but my experience is that thats iffy.

 

[Rifleman62]

I strongly believe you cannot Redress nor complain to the CF Ombudsman re the pension as it was enacted by the Governor in Council in regulations. Confirmed by the following, and verification with both organizations  (I personnally phoned representatives of both in the spring of 2007).

NDA Section 29
GRIEVANCES
Right to grieve

29. (1) An officer or non-commissioned member who has been aggrieved by any decision, act or omission in the administration of the affairs of the Canadian Forces for which no other process for redress is provided under this Act is entitled to submit a grievance.

Exceptions
(2) There is no right to grieve in respect of
(a) a decision of a court martial or the Court Martial Appeal Court;
(b) a decision of a board, commission, court or tribunal established other than under this Act; or
(c) a matter or case prescribed by the Governor in Council in regulations.

The Ombudsman’s Office does not have jurisdiction over issues relating to the Pension Benefits Division Act or the Canadian Forces Superannuation Act. These are pieces of federal legislation, which are amended through Parliament.

The RRPP  is federal legislation. You should phone yourself to confirm, and lets us know the answer you receive.

 

[dapaterson]

A rederss could be directed to the way that information was communicated, the way that information was provided, the way that staff did or did not reply to queries - in short, to failing of the system to deliver what is described in the regulations and legislation.  Equally, the failure to act in a timely manner could be the subject of the redress.

A good redress clearly and succinctly states what is wrong, and what solution is requested, then provides the details, then summarizes again with the solution requested.  One suggested layout:

• INTRO paragraph - Describe problem in 2-3 sentences.  Describe desired solution in 2-3 sentences.
  
• MAIN BODY - multiple paragraphs to describe in detail the problem(s) from the intro.  Introduce references if needed.  If the references aren't DND/CF orders and regulations, attach them as annexes to the redress.  If there are references that support your desired solution make sure you include them.
  
• CONCLUSION paragraph - Reiterate the solution requested (can be cut and paste from the intro).

 

[geo]

IMHO, the only thing that can be done is for Reservists & the network of Honoraries to fight the good fight - on a political leverl.... cause the CDS does not have the power to change things... he can only request & recommend changes... which the government must decide upon.

 

[54/102 CEF]

The quicker those in positions of influence (Quiz: those usually silent on all aspects reserve pension) are retired the better.

 

[Rifleman62]

I missed that. Why?

 

[geo]

54/102CEF.... Ummm.... why?

The quicker those in positions of influence are retired the better

The honoraries, are IMHO, the only people in a position to influence the outcome of the percieved injustice of compound interest.  If they are retired outa their "jobs", no one will be fighting for the gov't & the treasury board to correct.

 

[Rifleman62]

Possibly you can point me to the agenda, report, minutes or letters any of the Honoraries of the Reserves to anyone in the government or senior military. I could not get the Army Reserve Council representatives in 38 CBG's AOR to take up the cause. I had the same success getting the Honoraries to take on Reserve CSS trg.

 

[54/102 CEF]

I missed that. Why?

The why is as follows

It would seem to be good PR to be seen as presenting encouraging linking with Reserves if there was a visible person in front of the Reserve Pension Parade - with the "buck stops here" sign on their desk.

Unfortunately this is not the case

Case in point

- Member retires in Sept - gets his first check this week (28 weeks later)

- I ask for a printout of what I pay vs what I get if I go for my payout (still not received when asked for in jan)

- If you join the Forces before mar 07 you buy back at 4% (as I understand) - if you elect at April 07 - you buy back at 7%

- Thats a clear BLIP of interest given the fact that the Act to create the pension was passed 10 years prior to coming into force.

- At the least - any payments for time served before Coming into force should be at the same rate as a person transferring to the reg force and being part of the reg pension plan.

- any replies - keep it on the topic above.