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| You are in: The Plan : Publications : Employee Booklet : How Does My Pension Plan Work? |
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In simplest terms, a pension fund is a big pool of
money: your money, your co-workers’ money and employer
money. You and the other members of the MTS Pension Plan
make regular pension contributions. These contributions,
together with employer contributions from MTS and
Participating Employers, are invested in an effort to generate
additional funds. At retirement, a portion of the Plan funds
are simply used to provide you with a regular monthly
income.
The actual size of that monthly pension will vary from one
Plan member to another. It all depends on the person’s
earnings history, the number of years they participate in the
Plan and the age at which they choose to retire. Basically,
the more you earn and the longer you work, the larger your
pension will be.
About contributions
Your contributions are set by a formula related to your
earnings. In addition, these contributions are fully taxdeductible
up to Revenue Canada limits. In other words,
they reduce the amount of income tax you pay each year.
MTS shares the cost of providing your pension. The
Company contributes whatever additional amounts are
required to fund the pension you earn under the Plan.
At arms length
Contrary to what many people think, your pension is not paid
to you directly from MTS. The pension you eventually receive
from MTS is paid out of a separate pension fund which is a
“trust fund” established by the Company as part of the MTS
Pension Plan. This means that the money is held on behalf of
you and the Company by an independent third party known as
a trustee. It also means that the pension you earn is secure – it
isn’t tied to the Company’s financial results. Working with
MTS’s unions and retirees, a pension committee has been set
up to monitor the Plan’s operations. Your personal interests are
directly represented by those employees and retirees elected to
participate on the committee.
Planning ahead
Unlike government pension plans, your MTS Plan is pre-funded. In other
words, the money required to pay your pension is set aside in the Pension Plan trust
fund in advance.
Funding a large plan (like your MTS Pension Plan) is a complex job to say
the least. Your MTS Pension Plan is reviewed or “valued” by an independent actuary
on a regular basis to determine the so-called “funded status” of the Plan. It is the
actuary’s job to determine whether there is enough money in the pension fund at a
given date to pay all of the pensions promised under the Plan. If there isn’t enough in
the pension fund to cover the obligations of both current and future retirees, the
Company is required, by law, to make up the shortfall over a period of time.
Investing the money
Unlike your personal RRSP or any other savings arrangements you might have, you
won’t have to worry about where to invest your money. MTS is responsible for
monitoring the investment of the pension fund in accordance with a written
investment policy. The fund itself is invested by professional money managers in
a prudent way using investment vehicles such as common shares and government
bonds.
If the investments underperform, the Company is required to increase its
contribution in order to make up the difference. If the investments do better than
expected in a given year, the Company may use the additional money to fund Plan
improvements or to offset its contributions.
Additional benefits
Your MTS Pension Plan provides termination, disability and survivor benefits. As
such, the Plan can provide an important source of income to you and/or your
survivors ... even if you never collect a pension.
The Plan also gives you an opportunity to “buy-back” service under certain
circumstances. In this way, certain approved leaves won’t necessarily have to impact
on the benefit you will receive from MTS.
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