Retirement Services - Federal Pension Legislation
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Federal Government of Canada
Pension Benefits Standards Act, 1985
Original: October 1, 1967
Reform: January 1, 1987
Year last amended: 2001
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Index
Benefit Splitting
Cash availability at Termination of Employment
Definition of Spouse
Early Retirement
Eligibility
Employee Excess Contributions
Flexible Pension Plan
Indexing of Pensions
Integration with Governmental Plans
Minimum Employer Contribution – 50% rule
Minimum Interest Rate on Employee Contributions
Normal Retirement
Options Available on Pre-Retirement Death
Portability at Termination of Employment for a member entitled to a Deferred Annuity
Post-retirement Death Benefits
Postponed Retirement
Pre-retirement Death Benefits
Sex Discrimination
Vesting and Locking-In
Vesting at Normal Retirement Date
Disclaimer
Benefit Splitting
(Breakdown of marriage or of conjugal relationship)
- Benefits may be split in accordance with provincial laws or with agreement on assignment of pension benefit entitlement.
- The sum of the value of pension benefit entitlement assigned to the former spouse or common-law partner and of the member’s residual benefit must not exceed the value of the pension benefit entitlement the member would have received if breakdown had not occurred.
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Cash Availability at Termination of Employment
Plan may provide for refund of:
- 25% of commuted value of deferred pension (pre-1987 benefits); and
- Commuted value of pension if total annual pension is less than 4% of YMPE.
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Definition of Spouse
On the date of the member’s retirement or on the day of the member’s death, if earlier:
The person who is cohabitating with the member in a conjugal relationship at the relevant time, having so cohabitated with the member for a least 1 year (i.e. common-law partner); or if there is no common-law partner, the person who is married to the member or who is party to a void marriage with the member.
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Early Retirement
Within 10 years of normal retirement date.
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Eligibility
Full-time employees: 2 years of continuous service.
Part-time employees: 2 years of continuous service and annual earnings of at least 35% of YMPE in each of 2 consecutive calendar years immediately preceding membership.
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Employee Excess Contributions
- Used to increase pension or to purchase an immediate or deferred life annuity
- Transferred to another pension plan, a locked-in RRSP or LIF
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Flexible Pension Plan
As defined in the Canada Customs and Revenue Agency’s Newsletter No. 96-3. Plan text must specifically describe benefits available and optional ancillary contributions required.
Plan text must specify how optional ancillary contributions (OACs) will be invested. OACs are not subject to the 50% minimum employer contribution rule.
OACs need not be locking-in. OACs considered additional voluntary type contributions requiring the return of contributions as necessary under common law fiduciary standards (e.g. return guaranteed outside plan).
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Indexing of Pensions
(Defined Benefit Plans)
Voluntary indexing of deferred pensions on the basis of increases of at least 75% of CPI less 1% or any other formula approved by OSFI (alternative to 50% rule).
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Integration with Governmental Plans
(Defined Benefits Plans)
Allowed. No requirement provided with respect to the calculation of this reduction.
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Minimum Employer Contribution-50% Rule
(Defined Benefit Plan)
- At least 50% of commuted value of pension benefits accrued from January 1, 1987; this rule does not apply if the plan provides for indexing of deferred pension on the basis of increases of at least 75% OF CPI less 1%
- Applicable to past service benefit improvements
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Minimum Interest Rate on Employee Contributions
Defined Contribution Plan: fund rate of return based on market value of investments
Defined Benefit Plan: fund rate of return or the average yield on personal 5-year term deposits with chartered banks over a recent period not exceeding 12 months.
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Normal Retirement
Earliest age at which an immediate pension becomes payable to a member without reduction and without need of administrator’s consent (pensionable age).
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Options Available on Pre-Retirement Death
Spouse
- not locked-in funds: RPP, LI-RRSP, LIF, annuity
- locked-in funds: RRP, LI-RRSP, annuity
Dependent child/grandchild: cash, fixed term annuity to age 18
Other beneficiary: cash
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Portability at Termination of Employment for a Member Entitled to a Deferred Annuity
More than 10 years before normal retirement date (or less, if the plan so provides).
Options:
- Transfer to: another pension plan, a locked-in RRSP, a LIF.
- Purchase of a life annuity contract.
Transfer out of plan may be required by plan rules, if value of benefits is less than 10% of YMPE.
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Post Retirement Death Benefits
Joint pension at 60% after death of either spouse or common-law partner. Possibly to waive joint pension by spouse or common-law partner before pension commencement.
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Postponed Retirement
(At the latest December 31 of the year in which the member reaches age 69)
Membership must continue except if the member is receiving a pension.
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Pre-Retirement Death Benefits
Pre-1987 benefits: return of member’s contributions with interest (not locked-in).
Post-1986 benefits: if surviving spouse or common-law partner, 100% of commuted value of vested benefits. Locked-in if deceased member’s right to a deferred pension was vested and locked-in. If death after being eligible to early retirement, surviving spouse or common-law partner is entitled to a life annuity equal to not less than 60% of the annuity the member would have received (locked-in); in the case of a Defined Contribution Plan, the surviving spouse or common-law partner is entitled to the full account balance (locked-in).
If no surviving spouse or common-law partner, member’s contributions with interest to the designated beneficiary, or failing that, to the estate (not locked-in).
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Sex Discrimination
Sex discrimination required - annuity rate based on sex
Sex discrimination prohibited - unisex annuity rate
Sex discrimination allowed - annuity rate based on sex or unisex annuity rate
Defined contribution plans: discrimination prohibited.
Defined benefit plans: discrimination allowed.
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Vesting and Locking-In
(Excluding voluntary contributions and optional ancillary contributions)
Benefits accrued from 01/10/67 to 31/12/86: : age 45 plus 10 years of continuous service or plan membership.
Post-1986 benefits: 2 years of plan membership.
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Vesting at Normal Retirement Date
Entitlement to a pension vests at normal retirement date only if minimum vesting and locking-in requirements are met.
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Disclaimer
The information contained in this summary applies only to single employer Registered Pension Plans (RPPs). In addition, this information states the minimum rules provided under the pension legislation that governs RPPs. However it does not state the maximum rules under the Income Tax Act (Canada) and its Regulations that also apply to RPPs.
The legislation and the regulations of this jurisdiction prevails over this summary. While every effort has been made to ensure the accuracy of the information, no warranty or guarantee is expressed or implied as to the accuracy, adequacy or completeness of the information, and the CUMIS Life Insurance Company is not responsible for any errors, omissions, or from the results from the use of such information.
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