Final Prep 2 Flashcards
What are the two main types of registered pension plans (RPPs) in Canada?
Defined Benefit (DB) Plans – Promise a specific retirement income.
Defined Contribution (DC) Plans – Define the contribution amount but not the benefit.
What are the key differences between DB and DC pension plans?
DB Plans: Employer bears investment risk; pension amount is known.
DC Plans: Employee bears investment risk; pension amount depends on investment returns.
What is vesting in the context of pension plans?
Vesting means the employee has an irrevocable right to their pension benefit.
In Saskatchewan, vesting occurs after 2 years of membership.
What does ‘locking-in’ mean in a pension plan?
Once vested, the benefit must be used for retirement income—cash withdrawal is not allowed (except in limited circumstances).
What legislation governs pension standards in Canada?
Federal: Pension Benefits Standards Act, 1985
Saskatchewan: The Pension Benefits Act (since 1993)
Plus, multi-jurisdictional agreement (2020) for plans across provinces.
Are employers legally required to set up pension plans under PSL?
No, but if they do, the plans must comply with minimum standards.
What are the two main methods of pension plan funding?
Going concern funding – assumes the plan will continue.
Solvency/wind-up funding – assumes immediate termination.
What is funding relief in pension law?
Temporary or permanent measures allowing employers to reduce or delay pension funding obligations during financial hardship (e.g., moratoriums, letters of credit).
What is a contribution holiday?
When an employer temporarily stops contributing to a pension plan due to a funding surplus (permitted in SK with regulator approval).
What is the legal issue with pension plan surplus withdrawals by employers?
Surplus withdrawal must be permitted by plan text and often requires court and regulatory approval. Not all surpluses are employer-owned.
What was the significance of Schmidt v. Air Products Canada Ltd.?
Supreme Court ruled surplus ownership depends on whether the plan was a trust. Employers can’t claim trust-held surplus; must follow plan wording and trust law.
What is the ‘two hats’ problem in pension governance?
In single-employer plans, the employer may act as both sponsor and administrator, creating a conflict of interest between fiduciary duty and self-interest.
What are the main federal and provincial laws governing insolvency in Canada?
CCAA – Large restructurings (min. $5 million in liabilities)
BIA – Covers most bankruptcies
PPSA – Governs secured creditors’ rights to assets.
What is the difference between insolvency and bankruptcy?
Insolvency: Financial condition (unable to pay debts).
Bankruptcy: Legal status declared by court; assets liquidated under trustee supervision.
What are the four types of insolvency proceedings?
Proposal in bankruptcy (BIA)
Bankruptcy (BIA)
Receivership (BIA/CCAA)
Restructuring (CCAA).
What is the Wage Earner Protection Program (WEPP)?
A federal program that pays unpaid wages (incl. severance/termination) to employees when employers go bankrupt—up to ~$3,800.
What is a super-priority claim under the BIA?
Limited to $2,000 for unpaid wages + certain pension contributions; ranked ahead of secured and unsecured creditors.
What are ‘legacy costs’?
Post-employment obligations like pensions and retiree health benefits. These often become large unsecured claims in insolvency.
What is the dependency ratio and why does it matter?
The ratio of active to retired employees. A high ratio means more pressure on funding pensions and legacy benefits.
What are preferred and unsecured creditors in insolvency?
Preferred creditors: Rank higher than general unsecured creditors.
Unsecured creditors: Have no collateral—often includes employees with unpaid severance, benefits, or pension deficits.
