Defined Contribution And Defined Benefit

Question 1

Vesting

Answer 1

Individuals right to receive pension benefits that have accrued to them over and above personal contributions they made

Question 2

Who regulates federal pension plans

Answer 2

Pension benefits standards act

Question 3

Who regulates majority of pensions in Canada

Answer 3

Provincial jurisdiction

Question 4

Solvency ratio of pension plan measures

Answer 4

Assets over liabilities

Question 5

What are considered assets of pension plan

Answer 5

Investment of employer and employee contributions over plans lifetime

Question 6

What are considered liabilities of pension plan

Answer 6

Combination of obligations owed to current retirees, future retirees and estimate of current employees who will leave and take commuted value

Question 7

What does it mean if a pension plan is non-contributory

Answer 7

The plan does not require employees to contribute

Question 8

Maximum amount employee may contribute to a contributory defined benefit plan

Answer 8

Lesser of

• 9% employees annual income
• $1k plus 70% of employees pension adjustment for current year

Question 9

Maximum legislated amount for combined employer/employee contributions to defined contribution

Answer 9

Lesser of

• 18% of earnings
• current money purchase contribution limit

Question 10

What happens if pension plan is being wound up and employee does not exercise transfer rights by deadline

Answer 10

Annuity bought on their behalf

Question 11

Who are the 4 parties involved in RPP

Answer 11

Plan members
Plan sponsor
Plan administrator
Plan committee

Question 12

Who is the plan sponsor of a RPP

Answer 12

Employer

Question 13

Who is typically the plan administrator of RPP

Answer 13

Employer, deducts contributions from payroll

Can also be committee, insurance company

Fiduciary position

Question 14

Who is typically the committee on RPP

Answer 14

Active, retired members

10 - 15 people

Reviews and provide recommendations

Question 15

Allowable contributions to DB

Answer 15

Actuarial calculation

Question 16

Allowable contributions DC

Answer 16

18% of earned income or annual legislative * lowest

Question 17

Vesting benefits fit DB

Answer 17

Based on formula

Question 18

Vesting benefit for DC

Answer 18

Contributions by employer, employee and earnings

Question 19

Organization that works to harmonize pension across Canada

Answer 19

Canadian association of pension supervisory authorities

CAPSA

Question 20

Determining jurisdiction of RPP 3

Answer 20

Residence of employee
Jurisdiction where work completed
Jurisdiction where pension plan HO is

Question 21

Who is eligible for federal pension

Answer 21

Full time after 2 years

Part time after 2 years and 35% years maximum pensionable earning for this 2 years

Question 22

Who is eligible for Ontario pension

Answer 22

Full time with 2 years

Part time with 35% of YMPE for those 2 years
OR if worked 700 hours in 2 years

Question 23

For pension plans, Are all provinces definition of early, normal and postponed retirement the same

Answer 23

No

Question 24

Taxation of DB contributions

Answer 24

Deductible by employer, not taxable to employee

Question 25

Pension solvency rate

Answer 25

Measures pension plans assets over liabilities

Question 26

pension reforms

Answer 26

DB is considered fully funded if 85%

Question 27

For DB Maximum pension benefit is

Answer 27

2% annual earnings for each year of service up to a maximum $3025.56

Question 28

Money purchase limit

Answer 28

Maximum earned income x 18%

$151,278 x 18% = $27,230

Question 29

How to calculate maximum pension benefits

Answer 29

Maximum earned income ($151,278) x 18% = $27,230 ( money purchase limit)

$27,230 / 9 = MPB

Question 30

What are ancillary benefits in DB

Answer 30

Disability benefits, bridging benefits, death benefits and early retirement

Financial services commission of Ontario requires this of all DB

Question 31

Formulas for DB contributions 3

Answer 31

Flat benefit

% of pensionable earnings

Fixed dollar based on years of service

Question 32

In DB contributory plans, employees are restricted to the lower of 2 amounts for contributions

Answer 32

9% of annual salary

$1k plus 70% of members pension adjustment

Question 33

DB pension adjustment formula

Answer 33

Pension benefit entitlement x 9 - $600

This is recorded on line 206 and reduces RRSP deduction limit