Q6 . When was our pension plan created ?
In 1939 , Alberta teachers and the Government had the foresight to allocate some of that year ’ s education budget , which would have otherwise been available for salaries , to the teachers ’ pension plan .
Q7 . I ’ ve heard people say my pension is really a deferred salary . What does this mean ?
Each month , teachers have a portion of their salary placed into the ATRF . The government matches each teacher ’ s contribution ( teachers pay a bit more to increase COLA payments from 60 % to 70 % for service since 1992 ). These contributions are invested on our behalf by the ATRF . When we retire , our contributions and the investment returns generated by those contributions are returned to us , slowly , over the course of our remaining lives .
Q8 . What is a defined benefit plan ?
A defined benefit plan provides members with a defined pension income when they retire . The formula used to determine a member ’ s benefit usually involves factors such as years of membership in the pension plan and the member ’ s salary . Teachers contribute their monthly contributions designated for the pension fund from their take-home pay , and the employer ’ s portion is part of the teacher ’ s financial compensation package . Teachers agreed to defer that compensation and to take it as pension in retirement instead . Those monthly contributions and the profit from the investments over the course of a teacher ’ s career are an efficient and cost-effective way to provide teachers with retirement income .
Q9 . What is a full pension ?
For Alberta teachers , there is no full pension . The 85 factor ( age plus years of service ) provides an unreduced pension — they are not penalized for drawing their pension too early . Teachers can continue to earn pensionable service and pay their monthly pension payments , up to age 70 , if they have the stamina and drive to teach that long ! Each year of service adds to their eventual pension income .
Q10 . People say our pensions should give us 70 % of our teaching salary . How does that work ?
The key word here is pensions , which include both our teachers ’ pension plan and the Canada Pension Plan ( CPP ). The two pension plans make several significant assumptions : 1 ) you retire at age 65 ; 2 ) you contributed to the plans for at least thirty-nine years ( to receive maximum CPP ); and 3 ) your contributions were at or exceeded the yearly maximum pensionable earnings ( YMPE ). The CPP is designed to cover 25 % of your earnings but only to the YMPE , currently $ 61,600 ( adjusted annually ). Your teacher ’ s pension could be between 50 % and 55 % of your best fiveyear average salary depending on the number of full-time years . Our full-time salary exceeds the YMPE , so when we add the two pension amounts , we get around 70 % of our best five-year average salary . Old Age Security payments often bring that number above 70 %.
Members of the Pension & Financial Wellness Committee worked together to write this article . They sought advice from individuals and used previously written material from both the ATA and ATRF . Many thanks to Sheila MacKay , Blair Lowry , Ray Hoger , and Marilyn Bossert .
news & views SUMMER 2021 | 41