Chapter 8 Flashcards
(16 cards)
Define clawback
a required repayment of old age security benefits by wealthier to the government
Define credit splitting
a plan by which each spouse of a divorcing couple gets an equal share of pension credits accumulated during their time together.
What is a defined benefit (DB) pension plan?
state how much an employee can expect to earn in retirement based on a formula that takes into account years of service and highest salary; the company guarantees the benefit based on this formula
what is a defined contribution (DC) pension plan?
state how much a person will pay into his or her pension account (often matched to some degree by the company); this plan defines the contribution but does not guarantee the outcome; this plan defines the contribution but does not guarantee the outcome’ the outcome in retirement will depend on how well the employee’s investments do over time
What is the great pension debate?
the debate in the 1980s over how to fund public pensions for older Canadians in the future
what is an income maintenance program?
the Canada pension plan and Quebec pension plan are income maintenance programs that help people maintain their pre retirement income and lifestyle
what is an income security program?
he old age security pension and the guaranteed income supplement help people meet their basic needs in retirement
define indexation
a method of increasing pensions linked to increases in the cost of living
what is a “pay-as-you-go” plan?
today’s retirees receive their CPP pensions from workers’ contributions today; workers today will receive their CPP pensions from workers’ contributions in the future; this type of plan requires that each younger generation pay for the pensions of the older generation
What is a portable pension?
a pension that moves with workers when they change jobs
what is a registered retirement savings plan (RRSOs)?
a government plan that allows people to save money for their future pension without paying income tax on the money protected within the RRSP–the savings are taxed when they re withdrawn in retirement; the taxes are deferred to a time when the person has lower income and is in a lower tax bracket
What is a savings plan?
a payment plan to which each person contributes a percentage of his or her salary each month; in the case of the CPP/QPP, the payments are credited to individual workers and when they retire, their pension will depend on how much they paid into the plan
What is a tax-free savings account (TFSAs)?
program that allows Canadians age 18 or over to put up to $5,500 a year (2017 limit) into a savings account; these dollars will be allowed to grow tax-free and will not be taxed when taken out
what is a transfer plan?
(also called a pay-as-you-go plan) money paid into the plan goes to pay the pensions of retired plan members today; the CPP/QPP also works like a transfer plan
define universality
the idea that everyone in Canada has a right to a public pension regardless of his or her income
define vesting
workers with awfully vested pension have credit for their total pension contributions (their own and their employer’s contributions) even if they move from one employer to another
