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CF pension reform and terms of service changes

MJP

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Over the last few months I've seen people refer to the pension reform and the changes to the terms of service, and usually give wrong advice or interpretations of both.   I've bit my tongue, mostly because I didn't know all the changes that were proposed myself.   I think a lot of bad info was conveyed by some really bad powerpoint presentations that were floating around a while back in the DIN email system.   I did quite a bit of research on them overseas, and recently had a brief on them at the unit, which was pretty thorough.

To clear up some misconceptions about both I've poached some info from a DND site as well as put in both URLs where you can get information.   It's pretty important stuff, for anyone in the military or thinking of joining the reserves or reg force.  

Pension Reform

Key changes include:
"¢ Two-year vesting
"¢ Twenty-five-year pension
"¢ De-linking pension eligibility from Terms of Service
"¢ Portability of pension credits
"¢ Pension coverage for Reserve Force
"¢ Greater administrative flexibility

The proposed amendments would provide greater flexibility for CF members by allowing breaks in service and transfers between components without adversely affecting pension credits earned. As well, members would be able to know well in advance of retirement or of reaching a particular Terms of Service gate what their pension benefit would be.

Changing needs and expectations are behind the introduction of unreduced pensions for members after they have served at least 25 complete years of paid CF service (regardless of their age). In a recent survey, serving CF members-like other Canadians-indicated an interest in job security for longer periods of time than under current Terms of Service. At the same time, members also expect the pension plan will continue to recognize the lifetime implications of long years as an active member of the CF. This 25-year pension scheme meets these needs and also provides a balanced way to accommodate both current retention pressures and the continuing requirements for maintaining the core capability of a modern military.

Members who have served for 10 years or more and who are released because their health no longer allows them to carry out their military duties would be entitled to an immediate pension.

Retiring members who are not entitled to receive their pension until age 60 would be able to choose to receive their pension at any time between ages 50 and 60. In such cases, there would be a reduction in the monthly amount to take into account the fact that the pension would be paid over a longer period.

Members who qualify for deferred pensions when they leave the CF would, in specified circumstances, be able to transfer the actuarial value of their pension into another prescribed retirement savings vehicle.

These provisions, along with the lower vesting period (i.e., the minimum period required to qualify for a pension-type benefit) of two years and the greater portability of pension credits to other pension plans (authorized under earlier pension reform legislation) would give members more control and choice over their career paths and their financial and retirement planning.

Providing appropriate pension coverage for Reserve Force members is another important element of the overall pension modernization effort. As a result of the 1999 pension reform, regulations are being developed that would implement pension arrangements for the vast majority of Reservists who serve part-time or for limited periods of full-time service. These pension arrangements, however, are not suitable for Reservists who serve on a full-time basis for extended period of times.

Pension reform http://www.forces.gc.ca/hr/cfpn/engraph/7_03/7_03_cfsa_e.asp   This link also has some case scenarios if you scroll to the bottom.

Terms of Service

Career model

At the beginning of their careers, CF members would serve a variable, occupation-specific initial engagement of three to nine years with the length being determined by the responsible Managing Authority. (A Managing Authority is the organization responsible for an occupation, i.e., Army, Navy, Air Force or - for occupations common to all three - the Canadian Forces Recruiting, Education and Training System.) Occupations requiring lengthy or expensive training would have a longer initial engagement so the CF would realize a better return on investment.

After this initial engagement, members may be offered one of three TOS options, depending on the needs of the occupation and the

Managing Authority's policy:

an indefinite period of service until retirement age;
an intermediate engagement of service to 25 years; or
one or more continuing engagements.
Option one - an indefinite period of service to retirement - could enhance retention and improve the member's sense of security. An indefinite period of service would be offered based on the requirements of the occupation, determined by annual military occupational reviews. The use of this option would be up to the applicable Managing Authority.

Option two - expanding the initial engagement to 25 years - is advantageous for officers who currently, if they service past 20 years, have to continue to 28 years' service to get an immediate unreduced annuity. This option is also preferred by non-commissioned members, who indicated to project researchers that they were too young to retire at 20 years' service and would rather serve to 25 years. After the intermediate engagement is completed at 25 years, members may be kept on through one or more continuing engagements or an indefinite period of service until retirement age, depending on the needs of the Managing Authority and the wishes of the member.

Option three - a series of continuing engagements after the initial engagement - will enable the environments to keep a person for a few more years, or cater to individual requests for short extensions.
The three options provide flexibility for management and a broader array of options for member.

For example the infantry is keeping the system they have in place right now.   Two 3 year BE/VIEs, followed usually by an IE offer.   The only change is the IE is now 25 years for a full unreduced 50% pension.

Terms of service changes http://www.forces.gc.ca/site/newsroom/view_news_e.asp?id=254

I'll see if I can dig up the powerpoint presentation I was shown last week.   Breaks this down into very simple terms.  

Cheers
 

pbi

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Thanks-extremely useful. Well done MJP. Cheers.
 
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Zauster

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This is definitally needed and I appreciate you posting it.   I'll be printing it off so I can now have somewhat of an upderstanding when ppl come to me.

Thanks
 

m_a_c

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MJP, thanks for the information.  I am curious what about buying back previous time in, reserve and regular force?  Do you know how that works?  Does the pension reform change this option?  Does buying back time change the amount you have to serve or do you still have to serve 25 years in accordance with the new pension?  Thanks again for the information.
 

rounder

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I am in the middle of a component transfer right now and want to know if i'll still be required to do 25 yrs of service. Does anyone know how this works for reservists?
 

Yeoman

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from what I understand now; anyone that joins, or transfers to the regs has to do a first engagement of 5 years, and 25 years of service. anyone that is regular force, has to sign a contract stating that they're already in so then that way they only do 20 years.
that was what I was told, wether or not that's true. I don't know.
Greg
 
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Storm

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m_a_c said:
MJP, thanks for the information.   I am curious what about buying back previous time in, reserve and regular force?   Do you know how that works?   Does the pension reform change this option?   Does buying back time change the amount you have to serve or do you still have to serve 25 years in accordance with the new pension?   Thanks again for the information.

Good question. I'm about as clueless as anyone could be about this buying back thing. I've heard the phrase thrown around, but really have no idea what it means. If anyone has some knowledge of the process I'd appreciate the education.
 

MJP

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I am curious what about buying back previous time in, reserve and regular force?   Do you know how that works?

Well I know a little about buying back time, as I did it when I joined the Reg force in 2001.   Simply put all "buying back time" is using your reserve force service as pensionable time.   My files are packed right now so I don't have the calculation sheet in front of me, so I'll go off of memory.   When you CT over to Reg force they do a time credited to promotion(TCP), based on your class A, B, and C days.   Basically they add up the total time you've been in the reserves.   They then add all Class B & C time and subtract it from the total time you've been in reserves.   They take that number and divide by four(don't ask me why four I think they assume you do parade on a regular basis) and then add on the Class B & C days to get your total TCP.  

Example

Total days in reserves = 100 days
Total Class B & C =         20 days

So
100 - 20= 80 days
80/4=20 days
20+20= 40 days or Time credited to promotion

They now take this number and allow you to "buy back" that many days/years for pension purposes(IMHO the smart decision).   So after 3 years of service you would have 3 years and 45 days of pensionable time.   The buy back part is you have to make your contributions to the pension plan, but that is the simplest part as you can lump sum it or do it monthly installments right from your pay.

Now I give this info but remember I did this in 2001 and it may have changed since then.   Koach may be able to answer more clearly as he is a clerk that probably deals with this on a fairly regular basis.   The other thing is I don't know how this affects new CTs after the pension changes come into effect.

Does buying back time change the amount you have to serve or do you still have to serve 25 years in accordance with the new pension?

Terms of service are delinked from the pension plan under the changes.   If you come in with 4 years TCP and you buy it back, you still have to serve 25 years total (so 21 years + 4 years "buy back"), as I understand it.   The best source of info is your units chief clerks, harass them till they get you the answers.

from what I understand now; anyone that joins, or transfers to the regs has to do a first engagement of 5 years, and 25 years of service. anyone that is regular force, has to sign a contract stating that they're already in so then that way they only do 20 years.
that was what I was told, whether or not that's true. I don't know

How it's working... the managing authority for a MOC sets the initial engagement length.   Occupations requiring lengthy or expensive training would have a longer initial engagement so the CF would realize a better return on investment.   After that initial VIE or as we know it BE there are three options;

an indefinite period of service until retirement age;
an intermediate engagement of service to 25 years; or
one or more continuing engagements.

For serving members,

If you want to get on your IE before the new terms of service takes effect you can with some limitations.   Serving members who have 48 months of service or more(so BE + a year), can ask to be put onto a EI.   Members under the 48 month mark can ask but it is suppose to be only under special circumstances and in both cases you need CO's approval.   There are some units out there that have pretty much offered everyone their IE if they want it, and others have been stingy in some regards.   I don't really think there is policy that is set across the CF so some people are interpreting "special circumstances" rather loosely, while others are following it to a "T".

Now people on their IE now or are about to sign one, can at any time up till their 18 years switch over to the "IE 25" plan, but they can't switch back to the IE 20 plan.

Something I forgot to add on my original post.

Under the new pension plan there are two parts to the pension plan. Regular force and reserve force(but you'll see in a moment that is a bit of a misnomer.)   They actually had a name, but I can't recall it right now.   Class 1 and Class 1A comes to mind or something along those lines.

Regular force members no matter what are on the reg force pension plan and contribute as designated by the treasury board(4% right now IIRC).   Reserve members that have worked Class B/C for 55 out of the last 60 months will also be included onto the regular force pension plan.   Plus once there, even if they go back to Class A they will still stay on the regular force pension plan for the duration of their career.   My wife brought up the point do they still contribute regularly? and really I have no clue as it wasn't covered in my brief seeing as we were all Reg Force there.   I foresee them only contributing when they do receive a pay cheque, but don't take my word for it.

Reserve pension- Hmm I have no clue how they are going to administer it except to say it'll probably be a % of your total earning as you go in your career.   So your pension depends on your attendance.

Best bet is look at the scenarios on the pension link on the first post.


This is definitely needed and I appreciate you posting it.   I'll be printing it off so I can now have somewhat of an understanding when ppl come to me.

Zauster,

Your adjutant should have the powerpoint I'm talking about.   If not call over to 1VP and ask the Adjutant there for it, shouldn't be a problem to send to 1 GS.


 

m_a_c

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Again MJP thanks for the information, it really helped me out.  I will take your advice and bug my chief clerk a little more.

m_a_c
 

Long in the tooth

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MJP - you seem to be in the know about this issue, so perhaps you can help me out.  I have 18 years RegF service as well as 10 years Res (with about 3 1/2 pensionable, which I'm paying for).  I just signed my IPS at age 44.  Although I've nailed down job security, does this mean I've compromised retirement plans in 2-4 years?  Should I have pushed for a CE instead?  If I have made an error, do things even out after 25 years?  Thanks in advance.
 

MJP

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I honestly don't know how this will affect you.  

I copied this scenario from the web site as it seems to be the one that applies to you.


Major Morneault, 46, is serving on an IPS, having already completed an IE 20. He decides to leave the Forces in 2007 after having completed 26 years of service with the Regular Force.

Under the current provisions of the CFSA, Maj Morneault is entitled to an immediate reduced pension. There would be a 5% penalty for every year of age Major Morneault is younger than the retirement age that applies to him â “ 10% in this case.

Under the proposed rules, and assuming that the changes come into force in 2005, Maj Morneault would be entitled to an immediate unreduced pension because he would have completed more than 25 years of CF service.

Hopefully that helps a bit.  From what I understand it seems that the new pension plan will be better for people in your situation than the old plan.
 

KevinB

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Mike,

Good job, you goofed a bit on the Reserve PFTPS
Check you math  ;D


 
 

eager

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I'm new here as you've noticed.  I spent ten years in the 1RNBR.  I got out in 1995.  Someone I know eluded to the fact that there were pensions for those that served in the reserves.  Is this true?  I'm just fact finding right now.  If there is, how do I go about "getting" it?
 

Spr.Earl

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It's a Con Job !!! :mad:
What it is,we work longer for less!!!

The Gov. never gives us anything with out a price!!!
 

Shaynelle

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Can anyone confirm if the pension reform is actually due for January 1st?  I contacted CFRC and they said most likely it will not because of the time it will take to get it in place, and the fellow I spoke with said with the holiday break coming up quickly he can't see them having it clear cut and in place for January 1st.  It made sense because if things aren't definate yet, they will need time to smooth out the wrinkles and get it policy first - which will take forever and a day - ??
 

MJP

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It will not be in place for the 01 Jan 05.  They actually don't have a firm date for either one as of yet.
 

Griswald DME

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Thank the lord!  That sure makes me feel much better.  Thanks for the information MJP.  Any idea when it may happen?
 

MJP

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They told us a few days ago that it probably won't be implemented until Aprl 05....So add six months and look at end year 05. :)
 

Jungle

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MJP said:
It will not be in place for the 01 Jan 05.   They actually don't have a firm date for either one as of yet.
BUT, people currently on a (2nd?) BE have until Jan 1st to request a change to an IE. After that date, people will be offered the new terms of service as soon as they are implemented.
 
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