Retirement plans Flashcards
Main types of plans:
- Individual Registered Retirement Savings Plans
- Group RRSP
- Pensions
- Defined contribution
- Defined been
- CPP
- Pooled Registered Pension Plan
RRSP Advantages:
- not subject to pension legislation
- doesn’t require same level of govt’ supervision
- non-lockedin is possible
- more flexibility
- easier to control/manager contributions
- short term tax bene
RRSP Disadvantages:
- Person may withdraw funds if not locked in
- er accountable to fiduciary prudence
- money is tax-sheltered until withdrawn
- if not withdrawn carefully, significant tax consequence to ee
Difference btw RRSPs and TFSAs
TFSA taxed at source, RRSP taxed when withdrawn
Issues to consider when choosing a retirement plan
- org type & Size of company (look at external trends)
- taxation timing
- estate issue/trust/taxation
- 10% rule
- saving for yourself
- funding source & market uncertainty
- what happens if plan is underfunded
- CPP funding
- wage differential in private (lower) vs. Public (higher)
- job security
Financial and retirement counselling (def) & advantages
Goal is to prepare ees for retirement that consist of workshops, sessions, etc.
- increases ee awareness and understanding of there own pension value
- more self-reliant
- smoother transition into retirement
- reduced risk in not meeting expectations
Financial mgmt of plans - regulations:
Regulations:
- must comply with legislation
- adhere to fiduciary responsibilities
- Prudent person rule
- prudent portfolio rule
Financial mgmt of plans - responsibilities:
Responsibilities: - Written investment policy: - plan asset mix target - investment constrains - Diversification measures Investment magr makes selection based on above.
Financial mgmt of plans - Funding:
To have sufficient funds to pay for all future anticipated payments based on actuarial computations
Who are the roles involved in retirement plans?
- Plan Administrator
- Service providers
- Actuaries & consultants
- Custodian
- Investment manager
What are the objectives of the Federal Govt in relation to tax advantages?
- establish framework to encourage saving
- eliminate inequities
- enhance timing flexibility
- dollar limits to contribution and benefits are adjusted for inflation
What are the legislative standards?
- min for overall admin of plan
- mini funding and disclosure requirements
- plan wind-ups
- reporting
- roles and responsibilities of er and overseeing body
- Remedial actions
What are the required elements for record keeping of Plans?
- detailed membership records (active, receiving benefits, contributions, length of service, earnings history)
- Processing claims in use, death, termination
- Providing info to members (annual statements, announcements, options, FAQ)
- Filing regulatory reports (fed & prov.)
What parts of the plan must be reported?
- member benefits and options available
- investment/custodial reporting/reconciliation
- actuarial valuation
- regulatory reporting (annual info, plan amendments, tax forms)
What is the goal and challenges of communicating the plan?
Help members plan for the future.
Legally required yearly statements
- Terminated or retired ees statements of plan and choices
Challenge:
- motivating ees to participate in planning their own future
