If you work for any school board in Ontario, you have probably heard of the Ontario Teachers Pension Plan. To no one’s surprise, this is a pension plan that is designed specifically for Ontario Teachers. But there’s a lot of questions that come along with OTPP.
Let’s address some of the most frequently asked questions regarding the Pension Plan and how it works for Ontario teachers.
What is a Pension Plan?
Before we dive into the Ontario Teachers Pension Plan specifics, why don’t we start with the basics – what exactly is a pension plan? To put things simply, a pension plan is a plan that helps you to invest in your future. It allows you to set aside a certain amount of money each paycheck, which you can then use to live on when you retire.
What is the Ontario Teachers Pension Plan?
The Ontario Teachers Pension Plan then, is a pension plan that is designed specifically for teachers in Ontario. Under OTPP, each dollar that is contributed to the pension is matched by the Government and participating employers. All contributions are tax-deductible and are reflected on your yearly T4 slip.
The OTPP is a defined benefit pension plan. This means that you can predict the amount that you will receive in retirement ahead of time. The amount you receive will be determined based on your years of credit and your salary; your years of credit are equivalent to the amount of time you have contributed to the plan.
Do I have to contribute to the Ontario Teachers Pension Plan?
Yes. If you are an eligible member of the OTPP, participation is mandatory. Those eligible include anyone who holds a teaching certificate and works in a publicly funded school in Ontario. This consists of all teachers, principals, vice-principals, and supervisory officers. You can see a complete list of those who are eligible and who must contribute on the Ontario Teachers Federation Website.
How much do I have to contribute to the Ontario Teachers Pension Plan?
How much you contribute to your OTPP will depend on your salary level. For example, if your annual salary is $30,000, your yearly contributions to OTPP will be $3,120 (as of 2021). If you earn $100, 000 annually, your annual contributions will be $11, 014. The more you make, the more you will contribute to the plan.
These calculations are based on your annual salary up to the Canada Pension Plan contributions and benefits limit and your salary above the CPP limit.
If you don’t want to spend the time calculating your contributions, you can also find out how much you contribute by signing into your Ontario Teachers Account or by checking your annual T4 slip.
Can I increase my OTPP contributions?
Yes. You can contribute as much as you like to your OTPP. With that being said, the Government does have a cap on how much they will match. The government will match up to 15% of the base earnings above the CPP limit (Canada Pension Plan limit). This limit changes each year. After that, the government will no longer match your contributions.
If you are unhappy with your current contribution rates, you can contact your affiliate pension representative of the Ontario Teachers Federation.
What if I take a leave or a break from work?
If you take approved time off of work for 1-5 consecutive days, deductions and contributions will be made as they usually would. If you take an approved leave of absence for more than 5 days, you have the option of buying back your credit. This means that your pension will continue to build despite your absence.
There are two different ways that you can buy back credit. The first option is to continue to pay into your pension during your absence. You can do this by signing into your Ontario Teachers Account and sending automatic bank withdrawals or post-dated cheques.
The second option for buying back credit is to pay it back once you begin working again. You have five years from the time of your leave to pay back any lost credit. However, in this case, interest will start to incur as soon as your leave of absence ends.
If you fail to pay back the credit for your leave of absence within five years, you will forfeit the opportunity to pay it back.
In conclusion, the Ontario Teachers Pension Plan, or OTPP, is a mandatory pension plan for anyone with a teaching certificate job in Ontario. The plan is beneficial because the Government will match your funds up to a certain amount for each dollar that you pay into it.