4.5 Retroactive Pay (Retro)
- Olga Allen
- Thomas Stachowicz (Deactivated)
Important
HOOPP contributions on retroactive pay settlements are based on the contribution rates that were in effect for each of the years to which a settlement applies, not on the contribution rates in effect for the year in which the settlement is paid.
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, in section 4.1 Employee Required Contributions (Click Here), that shows 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 (e.g. a settlement paid in 2024 pertaining to 2023 and 2022). 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 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:
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
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 Retroactive contributions should be remitted to HOOPP as soon as they are deducted from the employee's pay. 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 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 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, 2024, a member receives a $5,000 retroactive pay settlement in respect of the years 2021 to 2023, and an adjustment to the current year. Of the $5,000, $1,100 applies to 2021, $1,300 applies to 2022, and $1,600 applies to 2023. The remaining $1,000 applies to 2024, 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 payment that applies to this year | What the member contributes | What the member’s employer contributes |
|---|---|---|---|
2021 | $1,100.00 | 9.2% (high rate) of $1,100 or $101.20 | 126% of $101.20 or $127.51 |
2022 | $1,300.00 | 9.2% (high rate) of $1,300, or $119.60 | 126% of $119.60 or $150.70 |
2023 | $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 (2024) 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 2024 for a total of $92. The employer’s contribution for the 2024 portion would be 126% of what the member contributes, or $115.92.
Example 2: Annualized Earnings Below YMPE
On August 1, 2024, a member receives a $3,000 retroactive pay settlement in respect of the years 2022, 2023, and 2024. Of the $3,000, $900 applies to 2022, $1,100 applies to 2023, and $1,000 applies to 2024. 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 2024. 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 payment that applies to this year | What the member contributes | What the member’s employer contributes |
|---|---|---|---|
2022 | $900.00 | 6.9% (low rate) of $900 or $62.10 | 126% of $62.10, or $78.25 |
2023 | $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 (2024) were also below the YMPE both before and after the retroactive pay settlement. The member would contribute at the 2024 low rate of 6.9%, on the $1,000, for a total of $69. The employer’s contribution for the 2024 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, 2024, a member receives a $3,000 retroactive pay settlement in respect of 2021 and a $2,000 salary adjustment for 2024.
The member’s annualized earnings in 2021 were $50,000.
The member’s annualized earnings in 2024 before the settlement were $68,000.
In this example, the member’s annualized earnings for 2021 were below the YMPE. For 2024, the annualized earnings were below the 2024 YMPE of $68,500 before the settlement, but moved above the YMPE after it.
Because the member’s annualized earnings for 2021 were below the YMPE of $61,600, regardless whether the settlement pushed their annualized earnings above the YMPE in 2024; contributions are made at the low rate for 2021. Because the settlement moved the member’s annualized earnings from below to above the YMPE in 2024, contributions on the 2024 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.
In this example, the member had 44 weeks reported and paid a total of $3,970.12 at the low rate as of November 1, 2024. 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 2024 to which the settlement applies.
The maximum low contribution for 2024 is $90.89 per week ($68,500 x 6.9% ÷ 52), which equates to $4,726.50 for a full-time member for the entire year ($68,500 x 6.9%). On November 1, 2024, the member had 44 weeks reported therefore the maximum low contributions for 44 weeks equates to $3,999.16 for a full-time member (44 weeks x $90.89).
This means that $29.04 is payable on the retro settlement amount at the low rate ($3,999.16 - $3,970.12), which corresponds to $420.87 of the $2,000 settlement for 2024 ($29.04 ÷ 6.9%).
The balance of the $2,000 salary adjustment for 2024, $1,579.13 requires contributions at the high rate of 9.2%, which equates to $145.28 in high contributions.
Year covered by retro payment | Amount of payment that applies to this year | What the member contributes | What the member’s employer contributes |
|---|---|---|---|
2021 | $3,000.00 | 6.9% (low rate) of $3,000 or $207.00 | 126% of $207.00 or $260.82 |
2024 | $420.87 (portion of settlement up to the YMPE) $1,579.13 (portion of settlement above the YMPE) | 6.9% (low rate) of $420.87 or $29.04, and 9.2% (high rate) of $1,579.13 or $145.28 | 126% of $29.04 or $36.59, and 126% of $145.28 or $183.05 |
Total | $5,000.00 | $381.32 | $480.46 |
Current as of May 17, 2024