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Benefits > Retirement Plans > Flashcards

Retirement Plans Flashcards

1
Q

What are the main types of retirement income plans?

A
  • individual RRSPs
  • group RRSPs
  • pensions (defined contribution; defined benefit; CPP; PRPP)
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2
Q

What is the basic structure of financial management of plans?

A
  • contributions plus investment returns= benefit payments plus plan expenses
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3
Q

T/F: Employees like defined contribution pension plans better than defined benefit pension plans.

A

False: Employers like the defined contribution pension plan because it places all the risk on the employees

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4
Q

T/F: Employees like defined benefit pension plans better than defined contribution pension plans.

A

True: Employees like the defined benefits pension plans better. Employers have the liability to pay=more risky for the er.

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5
Q

What are the advantages of RRSP?

A
  • not subject to pension legislation
  • plan does not require the same level of gov’t supervision and compliance
  • “non-locked in” in possible
  • more flexibility
  • easier to manage/control contributions
  • short term tax benefit
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6
Q

What are some disadvantages of group RRSPs?

A
  • person may withdraw funds (if not locked in)
  • employer accountable for exercising fiduciary prudence
  • money is tax-sheltered, as are investment earnings, until dollars are withdrawn
  • if not withdrawn carefully, could be a significant tax consequence to employee
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7
Q

T/F: Mutual Funds are a good idea.

A

False:

  • consistency start to fall behind the market
  • admin fee
  • giving your money away
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8
Q

What are some issues to consider in insurance?

A
  • org. type/size
  • TFSA taxation timing vs. RRSP
  • trust issues
  • 10% rule
  • saving for yourself
  • funding
  • retirement plan under funding ( market performance; retirees, longer life expectancy; bankruptcy)
  • CPP funding
  • DB, DC, or RRSP plans from different perspectives
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9
Q

What perspective does a large private sector, publicly traded company have on DB, DC, or RRSP plans?

A
  • shifting away from DB to DC
  • future liability (unknown) vs current liability (known)
  • grandfathering, buy-outs
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10
Q

What perspective does a private sector, privately held mid-size and small firms have on DB, DC, or RRSP plans?

A
  • DC: known liability

- RRSp easier to set up and manage, less regulation

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11
Q

What perspective does a public sector company have on DB, DC, or RRSP plans?

A
  • wages and salaries may be somewhat lower than private sector
  • job security and DB pensions are effective attraction and retention tools
  • the gov’t will always have tax payers to (some) fund future liability
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12
Q

Discuss financial and retirement counselling.

A
  • goal is to enable employees to prepare for retirement
  • employers provide seminars, workshops, and one-on-one sessions
  • may offer specific sessions in relation to reductions in the workforce
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13
Q

What are the advantages for employers in terms of financial and retirement counselling?

A
  • increased awareness and understanding
  • more self-reliant workforce
  • smoother transition into retirement
  • reduced risk in not meeting expectations regarding information on plan specifics
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14
Q

Describe the regulatory environment of financial management of plans.

A
  • investments must comply with legislation
  • fiduciary responsibilities vested in= pension committee, trustee, admin, etc.
  • “prudent” person rule= exercise of care and due diligence
  • “prudent” portfolio rule= investment of assets and reasonable risk
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15
Q

What are some of the responsibilities regarding financial management of plans?

A
  • plan sponsor or pension committee provides written investment policy covering= plan asset mix target, investment constraints, diversification measures
  • investment manager makes selection of financial instruments within established guidelines
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16
Q

Describe funding of private pension plans.

A
  • “funded” generally means to have sufficient funds available to pay for all future anticipated payments based on actuarial computations
  • vs PAYG
  • are expected to be “funded”
  • variations on how “funded” is determined
  • to conform to legislative requirements, plans must be “funded”
17
Q

What is role and responsibilities of a plan administrator?

A
  • can be the employer through a pension committee
  • can be an insurance company
  • can be a board or agency approved through legislation
  • is subject to “prudent person rule”
  • if administered under a “board”, the board has final responsibility and accountability
18
Q

What is role and responsibilities of a service provider?

A
  • actuaries and pension plan consultants
  • investment manager(s)
  • custodian
  • administration of plan (if outsourced)
  • communication specialists
19
Q

What is role and responsibilities of actuaries & consultants, custodian and investment manager?

A

actuaries & consultants
- draft plan and board resolutions; review trust agreements/insurance contracts; prepare communication material for employees; select other suppliers; make regulatory submissions

custodian
- holds the plan assets and is responsible for those assets; needs to have reporting capabilities, be compatible with the investment managers

investment manager
- manages the plan assets

20
Q

What are two types of plans?

A
  • registered= must meet legislative requirements both federally and provincially
  • non-registered= requires fiscal and management prudence
21
Q

T/F: Tax sheltered contributions don’t need to be registered.

A

False: to have contributions tax sheltered, must be registered

22
Q

What are the objectives of fed. gov’t in relation to tax advantages?

A
  • to establish a tax framework to encourage savings for retirement
  • to eliminate inequities depending upon type of plan
  • to enhance flexibility in timing of retirement savings
  • to introduce a system under which dollar limits on contributions and benefits are adjusted for inflation
23
Q

What are legislative standards?

A
  • min. standards for overall admin of plan
  • min. funding, disclosure requirements
  • req in case of plan wind-ups
  • reporting reqs
  • roles and responsibilities for overseeing body and employer
  • remedial actions
24
Q

Describe record keeping.

A
  • keeping detailed membership records (active/inactive members; receiving benefits; info on contributions, length of service, earnings history)
  • processing claims (retirements, deaths, terminations)
  • providing info to plan members (annual pension statements, report, plan changes, investment options, answering questions)
  • filing regulatory reports- fed and prov.
25
Q

Describe reporting.

A
  • member benefit and options available
  • investment/custodial reporting/ reconciliation
  • actuarial valuation
  • regulatory reporting ( annual info return, plan amendments, tax forms)
26
Q

Describe communication.

A
  • legally required activity
  • goal is to help individuals plan for the future
  • challenges to obtaining goal= motivating employees to take ownership for their future (work diversity and diff communication needs; reasonably expect vs realistic assessment)
27
Q

Discuss communication in regards to compliance to legislation.

A
  • employer must provide written description of plan and any amendments as they occur
  • annual statements to plan members within 6 months of plan’s year-end
  • active members who terminate or retire receive statement of plan and potential choices
  • provide yearly opportunity for members to view plan documents
28
Q

What are some communication strategies?

A
  • most employers go beyond legal min.
  • information regarding plan changes
  • educating plan members
  • providing financial planning information
  • ongoing communication
29
Q

What are the communication phases?

A
  • awareness building
  • education= what plan is and what it means for person
  • financial planning= where this fits into person’s overall financial plan
  • regular and ongoing information
30
Q

What are some communication methods?

A
  • website, email
  • telephones
  • personal contact
  • needs to be varied and multiple= cannot rely upon a single method
31
Q

What does YMPE and YBE stand for?

A
  • Year’s Maximum Pensionable Earnings

- Year’s Basic Exemption

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