How a DB Plan Works
If you're new to pensions, especially a defined benefit plan, this is a helpful page that walks you through what you're really getting with your pension and how vesting works.
Understanding the Value of Your Pension Plan
When you signed your contract and joined the ranks of the teaching community here in Alberta, you also joined their defined benefit pension plan, administered by ATRF.
The simplest way to understand a defined benefit plan is by comparing it to a defined contribution plan. A defined benefit plan provides a known lifetime income payment in retirement, whereas a defined contribution plan helps individuals accumulate retirement savings during their active career, but the retirement income is unknown.
The pension payable from a defined benefit plan is calculated based on your years of service and salary. It is not affected by market fluctuations, so you can count on this money when you retire. Depending on the pension option you choose, the pension will cover you for your lifetime and could also cover your pension partner for their lifetime as well.
The pension payable from a defined contribution plan is based on how much money has been paid into your pension, including interest earned through investments. This means you assume all the risk and your future pension is subject to market fluctuations. If the markets don’t do so well, this can affect the amount that is sitting in your retirement fund and vice versa.
Are You Vested?
In order to be eligible to receive a defined benefit pension at retirement, you must be vested. According to our plan rules that means having at least five years of pensionable service in most cases.
How you acquire this service looks different for everyone. There is, of course, your contract time, but it can also have additional types of service including purchasing substitute service, leave service, or previously refunded service (you worked as a teacher for a few years, took your pension out of the plan but are working again and want to buy back that service). You may also be able to transfer service from one registered pension plan to another.
It’s a good idea to familiarize yourself with the rules around vesting, especially if you are not currently on a permanent contract with your school board or you plan to make a career change.
If you have any questions about defined benefit plans or how the Teachers’ Pension Plans work, we are here to help. You don’t need to wait until you’re ready to retire to reach out to us. Contact us at any time, or join us for webinars on a variety of topics you may be interested in.