ReinfoRcingLinks

Reinforcing Links

BENEFIT INFORMATION FOR RODWORKER MEMBERS OF LOCAL 721

INSIDE THIS ISSUE

Welcome to this issue of ReinforcingLinks, the newsletter for the Local 721 Rodmen Benefit and Pension Funds.

Our feature article explores the question that we all must face at some point in our working lives: When to retire? The whole concept of a "normal" retirement age has been getting more complicated these days, with some people taking early retirement, others postponing retirement to a later date, and more pensioners taking on jobs after they retire. With health and lifestyle improvements, more people are staying healthy longer and can expect to live longer. Attitudes about what retirement looks like are also changing.

To help you consider your own retirement plans, this article discusses recent changes to the rules for starting government benefits, and reviews the retirement date and return-to-work provisions of the Rodmen Pension Plan. It also mentions some other sources of retirement income and seniors' benefits. And since this is a major life change, various non-financial points are also raised for your consideration.

See the 2012 Government Plan Limits & Rates charts for a handy summary of current levels and deadlines under government programs that provide retirement income or help you build up tax-sheltered savings.

Finally, this issue includes an official Notice of Election that explains the Trustees' decision to opt out of a new "Grow-In" rule under Ontario pension law.

We hope you find this issue of ReinforcingLinks informative and helpful. We encourage you to share it with your family.

Sincerely, The Board of Trustees

The Big Question: When to Retire?.................................................... 2 2012 Government Plan Limits & Rates.............................................. 4 Pension Fund Notice........................................................................... 4

OCTober 2012 vol 10, #02

Union Trustees: Darren J. Mahoney (Co-Chair) Luiz Barros Mike Dix

Employer Trustees: Sam Costa (Co-Chair) Alan Dover Pat Kilkenny

Pension Benefits: Vera Boichevski vera@ Nina Tran nina@

Claims: Amy MacDonald amy@ Jen Delos Santos jen@ Zuzana Mockovciakova zuzana@ Gurmit Ruprai gurmit@

Disability Benefits: Monika Sone monika@

This newsletter provides only some information on the Benefit and/or Pension Plans. For more complete information, you should check the documents governing the Plan (the Insurance Policy, the Fund documents, the Pension Plan and the Trust Agreement). If there is any discrepancy between information presented in this newsletter and the Plan documents, the Plan documents will govern.

We welcome your feedback! Please send your comments or questions to Michael Melvin, Managing Director, Administration at mmelvin@ or call 416-223-0383 (in Toronto area) or 1-800-387-8075 (from anywhere in Canada).

The Big Question:

When to Retire?

Years ago, people worked as long as their health permitted, out of financial necessity. Then pension plans were introduced, making it possible for workers to retire while they were still healthy and able to enjoy the fruits of their labours. A fixed age ? typically 65, or sometimes 60 ? came to be considered the "normal" retirement age. Some pension plans allowed members to retire early with a subsidized reduction, or even no reduction. The dream of "freedom 55" was born ? at least as an advertising slogan, if not always a reality! More recently, retirement ages have begun to shift in the opposite direction: upward. Mandatory retirement is no longer allowed. People are living longer and staying healthy longer ? which is a good thing. But pension plans need to face the cost implications of paying pensions for many more years, so the age for retiring on a full pension has started to go up. And some people are simply choosing to postpone their retirement.

Canadians are living longer. The average life expectancy has increased about two years every decade over the past 50 years.

What is the right time for me?

Choosing the best time to retire is a major life decision and a very personal choice. People may wonder whether their retirement benefits and savings will be enough to carry them through the years ahead. And some people may wonder if they are ready to leave the world of work ? they may like being actively employed, either in their regular line of work or doing something new. So how does one go about making such an important decision? First of all, it helps to know the facts. Here is some information about the different sources of pension income you can expect to receive when you retire, and how they may be affected by your choice of retirement age:

Rodmen Pension Plan

The Rodmen Pension Plan has a normal retirement age of 65, but unreduced pensions are available as early as age 60 or when your age plus years of membership total 85 points (subject to certain eligibility conditions). A reduced pension is available

from age 55. If you retire after age 65, the rate used to calculate your monthly pension keeps going up until you reach age 71. Of course, when you work longer, you also build up more pension benefits from additional employer contributions.

Please see your Rodmen Pension Plan booklet for more details about early and postponed retirement. You can request a retirement quote anytime by contacting the Administrator.

Canada Pension Plan

The Canada Pension Plan also uses age 65 as the normal age for starting benefits. Reduced benefits are available as early as age 60, and increased benefits as late as age 70.

New formulas for reducing or increasing the CPP benefit are being phased in to the following levels (somewhat lower rates apply during the phase-in period): By 2016, starting your CPP pension at age 60 instead

of 65 will reduce your monthly payment by 36%.

By 2013, starting your CPP pension at age 70 instead of 65 will boost your monthly payment by 42%.

Note: The differences may be even bigger if you don't qualify for the maximum benefit; working more years may enable you to get closer to the maximum.

Old Age Security

This retirement benefit is currently available at age 65. From April 2023 onward, the earliest starting age will gradually be increased to age 67. People born between April 1958 and January 1962 will qualify at some point between age 65 and 67.

Effective July 1, 2013, it will be possible to apply for your OAS benefit to start up to 5 years later than the normal qualifying age, with a corresponding increase in the amount of benefit. For example, someone turning age 65 in December 2013 can postpone starting the OAS pension until age 70 and receive a pension amount that is 36% higher. There is no provision for starting earlier than the normal age.

See page 4 for current CPP and OAS maximum benefit levels. To learn more about these benefits, visit servicecanada.gc.ca or contact your Service Canada office (listed in your telephone directory).

Registered Retirement Savings Plan

If you have savings in an RRSP, you may make withdrawals at any time (for example, if you decide to retire early and want to start using some of your savings).

The tax rules require your RRSP to "mature" no later than the end of the year in which you turn age 71. At that time, you must either withdraw your RRSP savings or transfer the funds to another type of governmentapproved plan that will provide you with a continuing retirement income.

All withdrawals or income payments are taxable income for the year in which you receive them.

Tax-Free Savings Account

You may accumulate tax-sheltered savings in a TFSA to save for retirement or other personal goals. There is no age limit on making contributions or withdrawals. You do not pay income tax when you make withdrawals.

Other Sources of Income or Benefits

In addition to the retirement and savings plans mentioned above, you may have other financial resources when you retire, such as personal savings and the equity built up through home ownership. Your spouse may have retirement income from a pension plan at work, as well as from the Canada Pension Plan and Old Age Security ? and may also need to decide when to retire!

Seniors are eligible for a variety of tax breaks and discounts that can help make your income go further. Some of these only start at age 65 while others start earlier.

The Rodmen Benefit Plan provides valuable coverage to eligible retirees, for supplementary health expenses, vision care and dental care (see your booklet for more details). Also, some additional government health benefits, such as prescription drug coverage, become available when you reach age 65.

Not Just about the Money!

Financial security is certainly a major factor in deciding when to retire, but it's not the only one. Other considerations include such things as what to do with your time, how retirement may affect your relationship with your spouse, and how you may feel about leaving a career in which you have become very competent and useful.

Then again, you may welcome the opportunity to spend more time with friends and family, do more of the things you enjoy, and explore interests that you never had enough time for before.

What if I return to work after I retire?

Working after retirement is becoming increasingly common, either for financial reasons or for the social contact, stimulation and sense of being productive ? or all of the above.

The Rodmen Pension Plan's rules for returning to the same kind of work after retirement depend on the type of pension you retired on and how many hours you work. In some cases, you can work up to a certain number of hours and still receive your Rodmen pension, while in other situations your pension payments stop until you retire again. Taking on a new kind of job or becoming self-employed in a different kind of work has no impact at all on your Rodmen pension.

Your CPP and OAS pension benefits continue if you return to work after retirement. However, the extra employment income may raise your total income to the point where you have to repay some of your OAS benefit.

For more details about returning to work after retirement, please see your Rodmen Pension Plan booklet or contact the Administrator.

Need Some Help?

Since choosing when to retire is such a big decision, you may find you could use some help. You may wish to discuss this important matter with a personal financial advisor who can review your total financial situation and take you through different scenarios, so you can make the choice that's right for you.

Government Plan Limits & Rates

Government Plans

2012 Rates & Limits

Canada/Quebec Pension Plan

Maximum pensionable earnings

$50,100 per year

Employer/employee contribution rates & maximum contributions

4.95% each up to a maximum of $2,306.70 per year

Maximum retirement benefit at age 65

$986.67 per month

Old Age Security

Full pension (July 2012) $544.98 per month

Tax-Shelterd Savings Plans

2012 Limits & Deadlines

Registered Retirement Savings Plan (RRSP)

Contribution limit (plus any previous unused limit)

18% of earned income less the PA*, maximum $22,970

Deadline for 2012 contributions

March 1, 2013

Tax-Free Savings Account (TFSA)

Contribution limit

Deadline for 2012 contributions

$5,000 plus any unused limit or withdrawals from previous years

December 31, 2012

* The PA (Pension Adjustment) takes into account the fact that you earned registered pension plan benefits during the previous year. Your RRSP contribution room, after deducting the PA, is shown on your Notice of Assessment from last year's tax return.

The following notice is provided to keep you informed and to comply with the Ontario Pension Benefits Act and Regulations:

Notice of Election to opt out of "Grow-In" Rule

Dear Member:

Under Ontario pension law, a special "grow-in" rule may apply if a pension plan member's employment is terminated by the employer. The pension regulatory authorities have recognized that this rule may not be appropriate for multi-employer pension plans such as the Local 721 Rodmen Pension Plan and have provided an opportunity for such plans to opt out. We wish to notify you that we have requested to opt out of this rule effective July 1, 2012 and our request has been accepted.

What does the "grow-in" rule do? This rule is intended to protect a former member's right to receive an early retirement pension under the same terms as if the member's employment and plan membership had continued until the plan's early retirement eligibility age. The rule only applies if the member's years of age plus service add up to 55 or more at the termination date, and if the member's termination was involuntary and not a result of willful misconduct or certain other circumstances.

Why doesn't this rule apply to our Plan? In a multi-employer pension plan, each employer is only responsible to make the contributions required in the collective agreement. There is no advantage for the employer to terminate an employee just before the person qualifies for early retirement benefits in order to save on pension costs (the practice that the "grow-in" rule is meant to discourage). Also, it is common for construction workers to be terminated simply because the employer does not have enough work available.

Why did the Trustees elect to opt out? This rule would significantly increase the costs of the Plan, leaving fewer funds available for regular pension benefits.

Does electing to opt out affect my accrued benefit? No.

If you have any more questions or require any additional information regarding this election, please contact the Administrator at the address listed on the front page of this newsletter.

Sincerely, BOARD OF TRUSTEES

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