Section 2, Module 6

Question 1

What is registered pension plan

Answer 1

a Trust, registered with CRA or provincial agency established by a company to provide pension benefits for its employees when they retire

Question 2

What is defined benefit plans (DBP)

Answer 2

benefits are predetermined based on a formula including years of services, income level and other variable

Question 3

What is defined contribution plans (DCP)

Answer 3

Contributions to the plan are predetermined and the benefits, at retirement, will depend on how the contributions were invested

Question 4

(DBP) What is flat benefit plan

Answer 4

It is a monthly pension that has a specified dollar amount of pension for each year of service. Ex: 15$ per month per yr of service. After 30 yrs -> 15x30 = 450$

Question 5

What are the advantage and disadvantage of flat benefits plans

Answer 5

Advantage: -Funded entirely by the employer
-Lvl of benefits usually increase
-Formula easy to understand
-flat pension paid is in addition of OAS and QPP
Disadvantage: -does not differentiate among earnings lvl
- must be renegotiated to keep pace with
inflation

Question 6

(DBP) What is career average plans

Answer 6

Pension that is calculated as a percentage of an employee’s earning over the course of her career
Ex: If an employee makes an avg of 48000 before deduction over his 30yrs careers:
28,800 per yr (48000x2%x30) or 2400 per month

Question 7

What are the advantages and disadvantages of career average plan

Answer 7

Advantage : -Easily integrated with CPP/QPP benefits by
providing a lower % of benefits onearningup
to the avg max under the QPP plans.
- gives equal weight to the employee’s earnings
- Many companies update the benefits by u updating the pension formula
Disadvantages: It may eroded by inflation if regular updates are not made

Question 8

(DBP) What is Final average plans

Answer 8

Average earning of the best five consecutive years of earnings in the last 10 yrs of employment or the avg of the best three consecutive yrs of earnings over the last five yrs of employment

Question 9

What are the advantage and disadvantages of final average plans

Answer 9

Advantage:- Easily intergrated with QPP
- Provides better protection against inflation
- Usually pays higher than a career average plan
Disadvantage: If earnings decline as retirement approaches,
then lower pension may result