The Alberta Teachers’ Association

Question: My employer is offering me a retirement option plan that would allow me to retire and start my pension on January 31, 2011, but allow me to continue working until the end of June. Should I consider the offer?

Answer: Some employers offer teachers an opportunity to earn more in their last year of teaching by allowing them to start their pension early. This means that in the 2011 calendar year, the teacher would earn 11 months of pension and 8 months of salary. The following concerns about this offer come to mind:

1. What type of contract will you sign? In most cases, the contract from February to June is a temporary contract. With a temporary contract, an employer only has to give 30 days’ ­notice to terminate your contract. Although such a termination is rare in these circumstances, it is still a ­possibility.
2. Will sick leave be available to you? Do you maintain your 90 days, or do you have only ­statutory sick leave that you earn at the rate of one sick day for every nine days worked? Check your collective agreement.
3. If you get sick or hurt after January 31, will you still be financially secure? You may not have any sick leave or you may have only 90 days. If you’re on a pension, you are not eligible for disability benefits. If you need this additional salary to survive, or if there is any possibility that you will need disability in the near future, this isn’t a retirement option plan for you.
4. What is the effect on your taxes? Both payers (your board and Alberta Teachers’ Retirement Fund (ATRF)) will assume you have a personal deduction, so you may well end up owing $4,000–$5,000 at tax time, depending on your ­personal circumstances.
5. What is the effect on your pension? Ask ATRF for a pension estimate based on both the January 31 retirement date and the June 30 date. A teacher with 30 years of service will notice over $125 per month difference.

Since you were planning to work until the end of June anyway, the additional amount you receive under this plan is the pension you will be paid from February–June (five months) minus any additional tax you may owe. Does this make up for the lower amount of pension you’ll earn for the rest of your life?

You have much to consider before making a final decision. If you require assistance with this matter, please contact Teacher Welfare staff in Edmonton. ­Telephone: 780-447-9400 in Edmonton and area); 1-800-232-7208 (toll free from elsewhere in Alberta).

Questions for consideration in this column are welcome. Please address them to Gordon Thomas at Barnett House (gordon.thomas@ata.ab.ca).