(Part 2) GROUP RETIREMENT AND INVESTMENT PLANS (Chapter 8)

Question 1

FILL IN THE BLANK!

Pension credits are created in account plans every year except in__________, _____________, and ____________ .

Answer 1

GRRSPs, PRPPs and group TFSAs.

Question 2

What is a Pension credit?

Answer 2

A measure of the value of the benefit the member earned or accrued during the year.

Question 3

Pension credits for DBPPs, DCPPs and DPSPs are calculated to……

Answer 3

….Determine a member’s pension adjustment (PA) for the year

Question 4

What is the formula for an RRSP or PRPP maximum contribution? (for a DBPP, DCPP or DPSP member)

Answer 4

Contribution based on previous year’s earned income (to annual maximum) - pension adjustment = this year’s contribution limit

Example;
Ahmad’s maximum contribution limit for his RRSP this year is 18% of his previous year’s earned income.

His earned income for the previous year is $48,000, so his maximum RRSP contribution is $8,640 ($48,000 × 18%).

His pension adjustment for last year was $3,300 due to the contributions made to his DCPP at work.

Therefore, he can contribute $5,340 ($8,640 – $3,300) to his RRSP this year.

Question 5

FILL IN THE BLANK!

Employees may initiate _____________ by terminating membership in the pension plan and transferring benefits to an RRSP.

Contribution room to an RRSP and PRPP can be increased by __________ .

Answer 5

Pension adjustment reversal
(PAR)

Question 6

TRUE OR FALSE?

If too much has been taken as a pension adjustment (PA) in a year – for instance, due to the plan member retiring or being terminated during the year – then the PA is recalculated.

Answer 6

TRUE

Question 7

In regards to pension adjustments, can a sponsor increase the benefits of a plan? If so how?

Answer 7

YES

By crediting all members with additional years of employment or by retroactively increasing the benefit formula.

This creates a past service pension adjustment (PSPA) for the member. A PSPA reduces RRSP contribution room. The
administrator must calculate and report PSPAs.

[Ref. 8.4.3]

Question 8

A group application is completed first by…

Answer 8

…The administrator on behalf of the group

Question 9

TRUE OR FALSE?

In regards to group plans applications, members may not enroll until their waiting period has been completed.

Answer 9

TRUE

Question 10

TRUE OR FALSE?

In regards to group plans applications, a leave of absence form can be provided to the plan member to accommodate a suspension of contributions for reasons specified by the plan.

Answer 10

TRUE

• Using this form also means the member does not need to satisfy another waiting period to rejoin the plan after he returns to work.

Question 11

TRUE OR FALSE?

In regards to group plans application, at retirement, the plan member must provide a notification of intended retirement two weeks before retirement actually occurs.

Answer 11

FALSE

At retirement, the plan member must provide a notification of intended retirement some months before retirement actually occurs.

[Ref. 8.5.1.1]

Question 12

TRUE OR FALSE?

Members with locked-in pension contributions may be required to transfer the value of their pension plan when they no longer work for the plan sponsor, due to retirement or a change in employers

Answer 12

TRUE

Question 13

TRUE OR FALSE?

A member from a DBPP who quits cannot transfer the commuted value of his pension into the pension plan of the new employer.

Answer 13

FALSE

A member from a DBPP who quits can transfer the commuted value of his pension into the pension plan of the new employer and be recognized for years of service under the new plan only if there is an agreement transfer between the two plans.

[Ref. 8.5.2.1]

Question 14

What are some plan administrator responsibility when member leaves his employer or retires?

Answer 14

Question 15

Agents may initiate the process of implementing a group savings and investment plan by…

Answer 15

• Identifying potential sponsors
• Meeting with them to illustrate the advantages of such a plan.

Question 16

A claim from a group member is initiated to receive the funds in his plan, how do they make a claim?

Answer 16

In order to make a claim, a group member needs to provide the group name and certificate or identification number to the insurer.

Question 17

Withdrawals cannot usually be made by the group member when savings are locked in however, in some cases, it is possible. How?

Answer 17

Fundamentally it is possible to unlock funds when:

• Life expectancy of the contributor is shortened;
• Financial hardship is proven;
• The member is no longer a Canadian resident;
• The balance of the account is less than a specified sum;
• Funds are being transferred to a life income fund (LIF) or restricted life income fund (RLIF for federal pensions) and a partial withdrawal is available.

Claims being made under any of these circumstances require that the necessary forms be completed by the group plan member.

[Ref. 8.7.1]

Question 18

Seg-funds terminology

Yearly Maximum pensionable earnings (YMPE)

Answer 18

The maximum pensionable earnings on which the employer and employee are required to contribute to the CPP in a year for their employment with that employer