A Glimpse of the PPEMO 2018

Are you familiar with the main provisions of your pension plan?

The Pension Plan of Elected Municipal Officers (PPEMO) is a defined benefit plan. Defined benefit plans guarantee a basic pension of an amount that is set using the established calculation formula. Such plans are advantageous because the variations in the rate of return do not affect your benefits.

Created in 1989, the PPEMO is offered to elected municipal officers who decide to become members. Although a municipality can choose whether it will become a member, if it chooses to do so, the elected officials of the municipality are required to become members of the plan. The municipality also makes contributions to the plan. The contributions of elected officials and municipalities are deposited in a fund managed by the Caisse de dépôt et placement du Québec (CDPQ). The contributions and the returns generated by the CDPQ cover the administration costs and benefits, with retirement pensions being the main benefit.

Eligibility for a retirement pension

You will be entitled to a retirement pension under the PPEMO when you are no longer a member of a council of a municipality, provided you meet the following conditions:

1. You have at least two years of credited service.

If you have under two years of credited service, you will not be eligible for a pension, but you can request to have your contributions refunded, with interest.

1. You are at least 50 years of age.

Depending on your age, you will be eligible for an unreduced or reduced immediate pension:

• If you are 60 years of age, you will be eligible for an unreduced immediate pension (a pension usually payable the day following the date on which you stop participating in your pension plan) according to the indexed pension credits you have accumulated. (Consult the section entitled "Calculation of your retirement pension".)
• If you are 50 years of age or older (but under 60 years of age), you will be eligible for a reduced immediate pension, that is, a pension usually payable the day following the date on which you stop participating in your pension plan, but that is permanently reduced by 0.25% for each month (3% for each year) prior to the date of your 60th birthday.

Please note, however, that your retirement pension is payable no later than December 31 of the year of your 69th birthday, whether or not you are still a member of a council of a municipality, and you will no longer contribute to the plan as of that same date.

Moreover, if you stop participating in the PPEMO before you are eligible for an immediate pension, you may, depending on your situation:

• be entitled to a refund of your contributions with interest, regardless of your age, if you have under two years of credited service;
• choose between a refund of your contributions with interest or a deferred indexed pension payable at
  age 60, if you are under 50 years of age and have over two years and under eight years of credited service;
• be entitled to a deferred indexed pension payable at age 60, if you are under 50 years of age and have at least eight years of credited service.

You may also choose to receive a deferred pension starting on your 50th birthday or at any time between your 50th and 60th birthday, in which case, a permanent reduction of 0.25% for each month (3% for each year) of early retirement will be applied to your pension.

Calculation of a retirement pension

For every year of service accrued, your plan allocates an amount, called a pension credit. Your basic pension will be equal to the total amount of those pension credits. For service accrued since 1 January 1992,^[1] the amount of the pension credit allocated for a given year is equal to 2% of the pensionable salary on which contributions were made during the course of that same year.

The pensionable salary is used to calculate contributions and determine the pension credit. It corresponds to the total remuneration, including directors' fees, received by a member who is participating in the plan in the capacity of a member of a council of a municipality, of a mandatary body of the municipality or of a supramunicipal body. It does not include expense accounts and severance pay.

The examples below present the calculation of pension credits according to the annual pensionable salary of three different individuals elected in November 2014.

Example 1: Annual pensionable salary of $3000

Therefore, this individual accumulated, between November 2014 and 31 December 2017, a total yearly pension credit of $186.86, which is indexed.

Example 2: Annual pensionable salary of $10 000

Therefore, this individual accumulated, between November 2014 and 31 December 2017, a total yearly pension credit of $623, which is indexed.

Example 3: Annual pensionable salary of $20 000

Therefore, this individual accumulated, between November 2014 and 31 December 2017, a total yearly pension credit of $1246, which is indexed.

Indexation

Each of your pension credits is indexed annually, from January 1 of the year following its allocation to January 1 of the year preceding the date on which you begin to receive your retirement pension. The indexation rate varies according to the rate of increase in the Pension Index (RIPI), which is determined annually under the Act respecting the Québec Pension Plan based on the Consumer Price Index. Your retirement pension therefore corresponds to the total amount of indexed pension credits you are allocated. When you retire, your pension will be indexed annually on January 1 of each year according to the RIPI, minus 3%. For example, if the RIPI is 1.50% in 2018, your pension credits would be indexed by 1.50%, but your retirement pension would remain unchanged (1.50% - 3% = 0).

Example of a pension indexation in 2018 with a RIPI of 1.50%

Other available benefits

Under certain conditions, your plan also provides for other benefits in addition to your retirement pension, in particular, supplementary benefits and survivors' benefits. To find out more about such benefits, consult Le RREM  on the Retraite Québec  website. This French-language publication contains key information concerning your plan.

A 9.2% return in 2017

The PPEMO members' fund generated a 9.2% return in 2017. The amounts in the fund are invested with the Caisse de dépôt et placement du Québec (CDPQ), in various asset categories such as real estate, bonds and shares. The weighting of each of these asset categories is indicated in the PPEMO investment policy, which is established jointly by the PPEMO pension committee and the CDPQ.

Over the past ten years, the PPEMO fund at the CDPQ has increased by over $90M, from $172.8M as at 31 December 2007 to $263.3M as at 31 December 2017. During this ten-year period, the average annual return of the PPEMO fund was 5.8%, whereas it has been 10.5% over the past five years.

Returns from 2008 to 2017 (percentage)

It's never too early to start planning for retirement

The Retraite Québec  website contains a wealth of information to help you prepare financially for your retirement.
It presents, in particular, the provisions of the Québec Pension Plan and the PPEMO, as well as useful information on supplemental pension plans, VRSPs and other savings vehicles. The following financial planning tools are of particular interest:

Pension committee members

Members of the PPEMO pension committee (as at 1 June 2018)