4.5 Retroactive Pay (Retro)

4.5 Retroactive Pay (Retro)

As well, the YMPE for the year to which the settlement applies should be used to calculate the contributions to be deducted on the retro amount. See the table, later in this section, that shows historical contribution rates and YMPEs.

For HOOPP purposes, only payments relating to prior years are considered retroactive payments. This means that any payment received in the current year, for prior years, is considered to be retro (i.e. a settlement paid in 2020 pertaining to 2018 and 2017). Any payment received in the current year, for the current year, is considered an adjustment to current year contributions, and is not considered retro.

The Retro Calculator feature allows the user to calculate the required contributions on any retroactive salary adjustment paid. This tool is a standalone tool which can be used by the employer throughout the year to calculate retroactive salary contributions. Retro contributions will be calculated for members who contributed to HOOPP in the years covered by the retroactive salary adjustment. The retro contributions will be based on the member’s annualized earnings for the year(s) of retro and based on the contribution rates in effect for those years.

To calculate contributions on retro:

If at the date for which the retro amount applies, the member’s annualized earnings are under the YMPE for that calendar year, contributions are deducted using the low rate in place for that year

If at the date for which the retro amount applies, the member’s annualized earnings are equal to or are higher than that year’s YMPE, contributions are deducted using the high rate in place for that year

Retroactive contributions should not be deducted for a calendar year when a member was not contributing to HOOPP and did not accrue contributory service. If a member receives retro for a year that they were not contributing to HOOPP or a period of time when they were receiving free accrual, do not deduct contributions. If contributions are deducted in these scenarios they will need to be refunded.

You may encounter a situation where there is “retro on retro,” meaning that a settlement is made for a year for which an earlier retro settlement had previously been made. If the first settlement moved the member’s annualized earnings from below the YMPE to above it, when calculating contributions, remember to use the member’s higher annualized earnings figure (the annualized earnings immediately before the second settlement).

Not all Retro Pay is Pensionable
Remember that not all retro pay may be pensionable. Pension contributions are not required on any portion of a payment that relates to:

A period of time when the member was not a member of HOOPP or was not contributing to HOOPP
Overtime premium (an additional amount paid above the regular hourly rate)
Premium pay for working shifts, a statutory holiday, weekend pay, or an unscheduled extra shift (an additional amount paid above the regular hourly rate)
Ad hoc bonuses
Sick leave payouts
Payments in lieu of vacation, or pay in lieu of benefits

While retroactive salary adjustments are usually the result of delayed contract settlements, they also can be caused by other adjustments, such as a pay equity award. A one-time payment that does not result in a change in the member’s rate of pay is not generally considered to be a retroactive salary adjustment. Such a payment is not pensionable and therefore HOOPP contributions should not be deducted. If you are uncertain whether contributions are required, contact HOOPP.

Remitting and Reporting Retro
It is necessary to provide HOOPP with details of the member contributions deducted for each year of the retro payment. Contributions on any retro payment will need to be reported separately from regular current year contributions.

Retroactive contributions should be remitted to HOOPP as soon as they are deducted from the employees payroll. Member retro contribution data is reported along with the retro contribution payments via the HOOPP Insight remittance process.

You will also need to provide this additional information for any member who receives a retro settlement in the last 12 months before termination, retirement, or death that has not already been reported to HOOPP. If retro is paid for years prior to 2004 when different contributions were in place, it will be necessary to report contributions in respect of any retroactive pay for these years separately from your regular monthly contributions.

Retired Members Receiving Retro
Retroactive payments received by a member after they have retired and begun receiving a HOOPP pension are considered pensionable earnings and are subject to pension contributions.
HOOPP will recalculate a retired member’s pension to include the retroactive settlement. However, the pension benefit option originally selected by the member when they retired and commenced their pension will continue to apply.

Retroactive contributions can only be accepted for retired members for a prior year when the member was contributing and accruing contributory service.

Retro for Deceased Members or Members Who Have Terminated Employment
Contributions are not deducted from retroactive settlements that are paid on behalf of deceased members or members who terminated employment with their HOOPP employer before receiving the settlement.

HOOPP will not recalculate a member’s termination benefit to include retroactive adjustments that were not reported when the final termination information is submitted to HOOPP. The amount of contributions and retroactive pay reported on this notice is final and cannot be adjusted.

Examples

The following examples demonstrate how to deduct contributions from retro pay.

Example 1: Annualized Earnings Above the YMPE

On June 1, 2020, a member receives a $5,000 retroactive pay settlement in respect of the years 2016 to 2018, and an adjustment to the current year. Of the $5,000, $1,100 applies to 2016, $1,300 applies to 2017, and $1,600 applies to 2018. The remaining $1,000 applies to 2020, which means that an adjustment to the member’s current year contributions will have to be made. In each of the years covered by the settlement, the member’s annualized earnings prior to the retroactive pay settlement were above the YMPE. Because of this, contributions are made at the high rate in effect for each year, as follows:

Year covered by retro payment	Amount of paymnet that applies to this year	What the members contributes	What the member’s employer contributes
2016	$1,100.00	9.2% (high rate) of $1,100 or $101.20	126% of $101.20 or $127.51
2017	$1,300.00	9.2% (high rate) of $1,300, or $119.60	126% of $119.60 or $150.70
2018	$1,600.00	9.2% (high rate) of $1,600, or $147.20	126% of $147.20 or $185.47
Total	$4,000.00	$368.00	$463.68

In this case, the member’s annualized earnings in the current year (2020) were also above the YMPE prior to the retroactive pay settlement. The member would contribute at the high rate, 9.2%, on the $1,000 in respect of 2020 for a total of $92. The employer’s contribution for the 2020 portion would be 126% of what the member contributes, or $115.92.

Example 2: Annualized Earnings Below YMPE

On August 1, 2020, a member receives a $3,000 retroactive pay settlement in respect of the years 2017, 2018, and 2020. Of the $3,000, $900 applies to 2017, $1,100 applies to 2018, and $1,000 applies to 2020. An adjustment to the member’s current year contributions will have to be made due to the $1,000 portion of the retro that applies to 2020. In all of the years covered by the settlement, the member’s annualized earnings prior to the retroactive pay settlement were below the YMPE. Because of this, contributions are made at the low rate, as follows:

Year covered by retro payment	Amount of paymnet that applies to this year	What the members contributes	What the member’s employer contributes
2016	$900.00	6.9% (low rate) of $900 or $62.10	126% of $62.10, or $78.25
2017	$1,100.00	6.9% (low rate) of $1,100, or $75.90	126% of $75.90, or $95.63
Total	$2,000.00	$138.00	$173.88

In this example, the member’s annualized earnings in the current year (2020) were also below the YMPE both before and after the retroactive pay settlement. The member would contribute at the 2020 low rate of 6.9%, on the $1,000, for a total of $69. The employer’s contribution for the 2020 portion would be 126% of what the member contributes, or $86.94.

Example 3: Earnings Below and Above YMPE (Retro for current and previous year)

On November 1, 2020, a member receives a $3,000 retroactive pay settlement in respect of 2018 and a $2,000 salary adjustment for 2020.

In this example, the member’s annualized earnings for 2018 were below the YMPE. For 2020, the annualized earnings were below the 2020 YMPE of $58,700 before the settlement, but moved above the YMPE after it.

Because the member’s annualized earnings for 2018 were below the YMPE, regardless whether the settlement pushed their annualized earnings above the YMPE; contributions are made at the low rate for 2018. Because the settlement moved the member’s annualized earnings from below to above the YMPE in 2020, contributions on the 2020 portion of the settlement must be made at both the low and high rates as this payment for current year is considered an adjustment to current year.

The adjustment to the current year’s low contributions will be the difference between what the member had already paid at the low rate, and the maximum low contributions for the number of weeks in 2020 to which the settlement applies. The maximum low contribution for 2020 is $77.89 per week.

If the member was full-time, the maximum low contribution at Nov. 1 would have been 44 weeks × $77.89
= $3,427.16.

Year covered by retro payment	Amount of paymnet that applies to this year	What the members contributes	What the member’s employer contributes
2018	$3,000.00	6.9% (low rate) of $3,000 or $207.00	126% of $207.00 or $260.82
2020	$838.26 (portion of settlement up to the YMPE) $1,161.74 (portion of settlement above the YMPE)	6.9% (low rate) of $838.26 or $57.84 9.2% (high rate) of $1,161.74 or $106.88	126% of $57.84 or $72.88 126% of $106.88, or $134.67
Total	$5,000.00	$371.72	$468.37

To calculate the amount of high contributions, it is necessary to first calculate how much of the settlement amount requires contributions at the low rate. In this example, the member had only contributed $2,400 at the low rate for 2020 prior to the settlement. This means the member is making an additional low contribution of $57.84. Divide this amount by .069 (the low contribution rate), and this equals $838.26 – the amount of earnings which is applicable to the additional low contributions. The balance of the $2,000 adjustment, $1,161.74 requires contributions at the high rate of 9.2%.

Example 4: Earnings Below and Above YMPE (Retro for previous year only)

On November 1, 2020, a member receives a $3,000 retroactive pay settlement in respect of 2018.

In this example, the member’s annualized earnings for 2018 were below the YMPE. This retro settlement pushed their annualized earnings for 2018 above the 2018 YMPE.

Because the member’s annualized earnings for 2018 were below the YMPE, regardless of if this settlement pushed their annualized earnings above the YMPE; contributions are made at the low rate for 2018.

Year covered by retro payment	Amount of paymnet that applies to this year	What the members contributes	What the member’s employer contributes
2018	$3,000.00	6.9% (low rate) of $3,000 or $207.00	126% of $207.00 or $260.82
Total	$3,000.00	$207.00	$260.82

Member and Employer Contribution Rates
The HOOPP member and employer contribution rates have remained consistent since 2004. Contribution rates are reviewed by the Board of Trustees on an annual basis and communicated in advance of the next calendar year.

Member Contributions
Low: 6.9% of pensionable earnings up to the YMPE
High: 9.2% of pensionable earnings above the YMPE

Employer Contributions
Employers contribute at a rate of 126% of member contributions.