How the Amendments Impact Pension Accruals

As shown in the chart above, one of the amendments will change future pension accruals from 60% of contributions to 50%. As we discussed during the Webcast, we expect that, because people live longer today than when the Plan was first established, the same total benefit will still be paid. That’s because, although each monthly payment will be lower, these payments will be paid for a longer period of time.
Another amendment expands the contribution levels from three choices to six. This gives schools the opportunity to maintain current pension benefits, even with the change to future pension accruals, by increasing their contribution level.
Each school community should consider which option best helps it achieve its mission. For example, a school can maintain the current benefit level for their participants by increasing the contribution level. That means participants will not have to work longer for the same pension, or save more to fill the gap. It also means that the school community will need to decide how to fund the additional contribution.
On the other hand, if the school decides to keep contributions at the same level, benefits will be lower. Participants may need to work more years, try to save more in personal savings, or determine ways to live on less money during retirement. Schools may have staffing issues to contend with; for example, teachers may need to continue working beyond current retirement ages to fill the benefit gap. For those schools that offer early retirement packages and want to maintain current retirement ages, they may have to find ways to enhance those packages.

Remember…

The amendments to the CSI Pension Plan will only affect benefits earned on and after the effective date of the changes - September 1, 2005. All benefits earned before September 1, 2005 will be based on current plan provisions.

Examples of Impact of Amendments
The following examples show how the amendments will impact benefits at retirement:

image

 

Full Issue: No. 166 - September 22, 2004

Back to CSI Pension Updates