The Pension Puzzle Your Complete Guide to Government Benefits, RRSPs, and Employer Plans

by Cohen, Bruce; Fitzgerald, Brian

• ISBN13: 9780470839539
• ISBN10: 0470839538
• Edition: 3rd
• Format: Paperback
• Copyright: 2007-01-19
• Publisher: Wiley

Summary

The topic of pensions has never been hotter. High-profile news stories of companies such as Air Canada and Stelco being pushed to the brink of bankruptcy by rising pension costs point to a broader pension funding crisis. In fact, a growing number of companies are reducing the benefits they will eventually pay out to retiring employees, or switching from defined benefit to defined contribution plans in an effort to cut expenses. What does this mean for the average Canadian? How well are we covered by government pensions anyway? Will you have enough to retire on? Millions of Canadians are covered by pension plans in one form or another-whether that's CPP, a company plan, or personal RRSPs. Understanding pensions is crucial to every Canadian's financial security in retirement, but they are the benefit least understood by employees.

Author Biography

Bruce Cohen (Port Perry, ON) established himself as one of Canada's top personal finance writers when he was personal finance columnist for the Financial Post. He is a freelance writer for financial companies and the author of the bestseller, The Money Adviser.
Brian FitzGerald (Toronto, ON) is a prominent actuary and expert in retirement program design and operation. He recently retired as a principal from one of Canada's leading pension and benefits consulting firms.

Table of Contents

Preface	p. xiii
The Pieces of the Puzzle	p. 1
How Much, How Long?	p. 3
Income Replacement Ratio	p. 4
Life Expectancy	p. 6
Relating Concepts to Cash	p. 7
Are You on a Tricycle or a Bicycle?	p. 11
The Government Wheel	p. 12
The Employer Wheel	p. 14
The Personal Wheel	p. 14
Government Benefits: Cash for Life	p. 17
Why Does OAS Exist?	p. 18
How Does OAS Work?	p. 19
How Much Can You Expect?	p. 21
What About the Clawback?	p. 21
Can OAS Be Received Outside Canada?	p. 22
Can You Count on Getting OAS?	p. 22
Low-income Supplements	p. 23
Guaranteed Income Supplement	p. 24
Spouse's Allowance	p. 24
Survivor's Allowance	p. 25
How Do These Supplements Work?	p. 25
How Much Can You Expect?	p. 26
Provincial Low-Income Supplements	p. 27
CPP: Pension Plan or Pyramid Scheme?	p. 31
Calculating Your C/QPP Pension	p. 34
But You Don't Have to Wait until 65 to Start Your Pension	p. 36
Splitting Your Pension-Voluntarily or Otherwise	p. 38
If Your Marriage Splits Up, Your C/QPP Credits May Split Up Too	p. 38
If You're Still Together at Retirement Time, There's a Way to Potentially Save Tax	p. 39
But None of This Matters If Cpp Goes Broke, Right?	p. 39
The Tax Shelter Umbrella	p. 47
Are RRSP Limits Too High?	p. 47
Pension Adjustment (PA)	p. 50
The Factor of 9	p. 51
Pension Adjustment Reversal (PAR)	p. 53
Past Service Pension Adjustment (PSPA)	p. 54
Is Your 18% Umbrella Big Enough?	p. 55
So Is the System Fair?	p. 56
Employer Plans: Overlooked Value	p. 57
Which Plan Is Best?	p. 59
Which Plan Is Easiest to Understand?	p. 59
Which Plan Offers the Greatest Security?	p. 59
Which Plan Is Best for Mobile Workers Who Change Employers?	p. 60
Which Plan Offers the Best Deal for Retirees?	p. 60
Which Plan Is Best for Your Spouse?	p. 61
Defined Benefit Plans: Promises, Promises	p. 63
Defined Benefit Structures	p. 64
Final Average Earnings Plans	p. 65
Career Average Earnings Plans	p. 65
Flat Benefit Plans-Multi-Employer Pension Plans	p. 65
Flexible Pensions	p. 67
Pension Tension	p. 67
What Is a Pension Deficit?	p. 68
How Do You Know If Your DB Plan Is in Deficit?	p. 68
How Much Should You Worry?	p. 68
So There's No Need to Worry If Your Employer Is Doing Okay, Right?	p. 70
What about Changing the Plan?	p. 71
Can Strong Stock Markets Solve the Red Ink Problem?	p. 72
Why Did This Crisis Develop So Suddenly?	p. 72
So, How Long Will Recovery Take?	p. 73
Does This Mean Anything for People Who Are Not in DB Plans?	p. 74
Is There a Better Way?	p. 75
Defined Contribution Plans: WYSIWYG	p. 77
Would a Well-Made Cap Suit You?	p. 78
Defined Contribution Registered Pension Plans (DC RPPS)	p. 79
Group RRSPs (G-RRSPS)	p. 81
Deferred Profit Sharing Plans (DPSPS)	p. 82
Is the Trend Your Friend?	p. 83
Investment Considerations	p. 84
Hybrid and Combination Plans	p. 89
Your Own Plan: RRSPs, RRIFs and Annuities	p. 93
Tips for RRSPs	p. 95
Tips for Both RRSPs and RRIFs	p. 103
Tips for RRIFs and Annuities	p. 107
Will It Be Stew for You? 7	p. 111
Not Cast in Stone	p. 113
Reasonable Returns	p. 113
Fudge It	p. 114
The Real Nitty Gritty	p. 125
Who Makes the Rules?	p. 127
Where Do You Find the Rules?	p. 128
Annual Pension Statement	p. 129
When Can You Join the Plan-and Who Pays How Much?	p. 137
Full-Time versus Part-Time	p. 137
Mandatory versus Optional Plans	p. 138
Should You Join the Plan If It's Optional?	p. 138
Who Pays?	p. 139
Defined Contribution Plans	p. 139
Defined Benefit Plans	p. 139
Past Service Contributions (Buy-Backs)	p. 141
What Happens to the Money?	p. 143
The F-Word: Fiduciary	p. 143
Pension Fund Audit	p. 146
How Do You Know You'll Get the Pension You've Been Promised?	p. 146
Who Owns the Surplus?	p. 147
Partial Plan Windups	p. 148
When Can You Retire?	p. 149
The Early Retirement "Penalty"	p. 150
Past Service Pension Credits	p. 151
Phased Retirement	p. 151
What Do You Get in Retirement?	p. 153
Defined Contribution Plan	p. 153
Purchasing a Life Annuity	p. 153
Lump Sum Transfer to Another Registered Vehicle	p. 155
Defined Benefit Plan	p. 155
Final Average Plan	p. 156
Career Average Plan	p. 156
Flat Benefit Plan	p. 156
Inflation Indexing	p. 157
Reciprocal Agreements	p. 158
Integration with C/QPP	p. 158
Bridge Benefits	p. 159
Approved Downsizings	p. 160
Pregnancy and Parental Leave	p. 160
Flexible Pension Plans	p. 160
Hybrid and Combination Plans	p. 161
What If You're Highly Paid?	p. 163
Supplementary Employee Retirement Plan (SERP)	p. 164
Documentation	p. 164
Pension Due	p. 164
Vesting	p. 165
Funding	p. 165
How Strong Are the Ties That Bind?	p. 166
Secular Trust	p. 166
Individual Pension Plan (IPP)	p. 167
What Happens If You Change Jobs?	p. 171
Vesting	p. 171
Is There Any Way Just to Take the Money and Run?	p. 172
Locking-In	p. 173
Stay Put	p. 173
Transfer the Money to Your New Employer's Pension Plan	p. 173
Transfer the Money to an Insurance Company to Buy an Annuity	p. 174
Transfer the Money to a Special RRSP or RRIF	p. 174
Job Transfers out of Canada	p. 176
LIRAs, LIFs and LRIFs	p. 179
Why Were L-Plans Created?	p. 179
Which L-Plan Rules Apply?	p. 181
Investing L-Plan Money	p. 181
LIF or LRlF?	p. 182
The PRIF	p. 182
Can You Consolidate Plans?	p. 183
How Much Can You Take?	p. 183
LIF Maximum	p. 184
LRIF Maximum	p. 184
The Gradual Unlock	p. 185
What about Early Access?	p. 187
Partial Unlocks	p. 187
Small Plans	p. 188
Shortened Life Expectancy	p. 188
Temporary Income and Financial Hardship	p. 188
Leaving Canada	p. 189
What Happens at Death?	p. 189
What about Death and Disability?	p. 191
Beneficiary Designations	p. 191
Beneficiaries and the Tax Man	p. 191
Pre-Retirement Death	p. 192
Death During Retirement	p. 192
Joint and Survivor Pensions	p. 193
Guaranteed Payments	p. 194
Cash Refund Plans	p. 196
What about Pre-Retirement Disability?	p. 196
What Happens If Your Marriage Ends?	p. 197
Can Your Employer Change the Plan?	p. 201
Conversions	p. 202
Winding Up	p. 202
What If Your Employer Is Sold?	p. 203
What If Your Employer Fails?	p. 204
Canada's International Benefits Agreements	p. 205
Who's a Spouse for Pension Purposes?	p. 207
Retirement-Related Links	p. 209
The Actuarial Report: Keeping a Defined Benefit Plan Healthy	p. 212
Glossary	p. 213
Index	p. 217
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