REGISTERED RETIREMENT PLANS (PG. 120-131)

Question 1

PENSION BUYBACK

Answer 1

An agreement to purchase a period of prior service to increase a planholder’s defined contribution plan (DC)

Question 2

BUYBACK COST

Answer 2

The amount that must be contributed to make up for missed contributions

Question 3

COST-BENEFIT ANALYSIS

Answer 3

The actuarial value of the expect future benefit (cost) vs. the present value of the additional expected benefit (benefit)

Question 4

PAST SERVICE PENSION ADJUSMENT

Answer 4

Made any time a past service event occurs, which is defined as a transaction or event that results in an increase to a member’s post-1989 benefit

Question 5

DEFINED BENEFIT PENSION PLAN (DB)

Answer 5

Provides pension benefits based on a defined formula (the benfit is known before a participant’s retirement)

Note: The formula is based on:

1) Employee’s final/best average earnings
2) Employee’s career average earnings, or
3) Flat benefit

Question 6

PLAN SPONSOR

Answer 6

Fund the cost of the pension benefits beyond any employee contributions

Question 7

MINIMUM PRESCRIBED AMOUNT

Answer 7

A value equal to the member contributions plus interest, or greater (ensures that members retain the right to their own contributions plus interest, less any benefits paid from the plan)

Question 8

PRESCRIBED AMOUNT

Answer 8

The maximum value that an individual can commute from a DB plan to another registered plan

Question 9

MAXIMUM TRANSFER VALUE (MTV)

Answer 9

Applies where a DB plan is transferred to one of the following:

1) RRSP
2) LIRA
3) DPSP (Deferred Profit Sharing Plan)
4) RPP

Note: Based on client’s age and present value factor
MTV = Present Value Facotr X Annual Benefit

Question 10

COMMUTED VALUE

Answer 10

The lump sum present value of the estimated monthly lifetime pension payments a former plan member was entitled to receive from their plan.

Question 11

TAXABLE PORTION OF COMMUTED VALUE

Answer 11

Any amount greater than the maximum prescribed amount or maximum transfer value is taxable as income in the year that it is received

Question 12

NORMAL RETIREMENT DATE (NRD)

Answer 12

The first of the month that follows or is coincident with the plan member’s 65th birthday. By law, the plan’s normal retirement date or age cannot be later than 66 years of age.

Question 13

SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS (SERPs)

Answer 13

A non-registered (non tax deduction at the time of contribution) plan designed to supplement an executive’s registered retirement savings or pension plan (designed for highly paid employees)

Note: Supplemental describes the fact that this plan provides additional pension income above the maximums that can be accumulated in an RRSP or pension plan due to contribution or payment limits in the ITA

Question 14

VESTING

Answer 14

The entitlement to receive a pension benefit equal to the value of an individual’s defined contribution account. This includes the contributions made (if any), and employer’s contributions, plus the interest or investment return credited to the contributions.

Question 15

RETIREMENT COMPENSATION AGREEMENT (RCA)

Answer 15

A plan under which an employer, former employer, or an employee who makes contributions to a truestee, who holds the funds in trust for the purporse of eventually distributing a benefit to the employee (provides supplemental pension

Question 16

LETTERS OF CREDIT

Answer 16

An irrevocable credit letter is prepared by the employer’s bank and provided to the executive, promising to pay a deferred income at a future date (letter is secured against company’s assets)

Question 17

INSURANCE ARRANGEMENTS

Answer 17

The company can use current cash flows to fund an insurance policy that will pay an income to the employee in retirement

Question 18

PARTIES OF SERP

Answer 18

1) Employer - Provides and funds the SERP
2) Trustee - Intermediary between the employer and employee
3) Beneficiary - Current employee that will receive the benefits from the SERP only in the future

Question 19

SALARYU DEFERRAL ARRANGEMENT (SDA)

Answer 19

Any SERP that the CRA considers to pay unreasonable benefits (subject to annual taxation, rather than tax upon receipt of the benefits)

Question 20

INDIVIDUAL PENSION PLAN (IPP) OR EXECUTIVE PENISON PLAN

Answer 20

An employer-sponsored, defined benefit registered pension plan created for the benefit of qualifying individuals in response to the unique constraints imposed by retirement savings legislations

Question 21

DESIGNATED PLANS

Answer 21

A DB pension plan that is not maintained pursuant to a collectinve bargaining agreement and where more than 50% of the pension credits or pension adjustments ofr plan members are for either connected indivduals or persons whose income exceeds 2.5 times the year’s maximum pensionable earnings established by CPP

Question 22

CONNECTED INDIVIDUALS

Answer 22

Individuals whose collective interest in any class of shares of a particular corporation reaches 10% or more or who do not deal at arm’s length with the employer

Question 23

ACTUARIAL VALUATION

Answer 23

An analysis performed by an actuary that compares the assets and liabilities of a pension plan.

Question 24

IPP MINIMMUM AMOUNT

Answer 24

FMV of plan assets as at Januayrt 1 X Age-based prescribed factor

Question 25

QUALIFYING SURVIVORS/QUALIFIED BENEFICIARIES

Answer 25

1) Deceased annuitant’s spouse/common-law partner
2) … dependent child/grandchild
3) … dependent child/grandchild who has a mental/physical disability

Question 26

UNMATURED RRSP

Answer 26

Has not started to pay retirement income to the annuitant

Question 27

REFUND OF PREMIUMS

Answer 27

Some or all of an amount paid out of an RRSP to a qualifying survivor as a result of the annuitant’s death. A refund of premiums includes an amount paid as an RRSP benefit, but it does not include a tax-paid amount.

Question 28

MATURED RRSP

Answer 28

RRSP legally matures on Dec. 31 of the year in which the plan participant reaches age 71. At that time, a matured RRSP can be converted into any mature option or a combination.

Question 29

LIFE-ONLY PENSION

Answer 29

Benefits will cease at the member’s death with nothing futrher payable to this/her spouse or beneficiary

Question 30

LIFE INCOME WITH A GUARANTEE/JOINT AND SURVIVOR OPTION

Answer 30

Benefit amount will continue as a payment to the surviving spouse (or beneficiary with a guarantee)

Question 31

POOLED REGISTERED PENISON PLANS (PRPPs)

Answer 31

A pension plan that is similar to a defined contribution plan; however, employer contributions are not mandatory. A PRPP pools contributions together to achieve lower costs in relation to investment management and plan administration.

Question 32

DEFERRED PROFIT-SHARING PLAN (DPSP)

Answer 32

A registered plan that allows an employer to share the company’s profits with employees. It is employer-sponsored and registered as a trust with the Canada Revenue Agency (CRA).

Question 33

LOCKIND-IN RETIREMENT ACCOUNTS (LIRA)

Answer 33

A special type of registered retirement savings plan (RRSP) into which a person can transfer the amounts that are in a supplemental pension plan or a life income fund (LIF). Unlike a regular RRSP , the amounts in a LIRA are locked-in and can only be used for retirement income.

Question 34

REGISTERED RETIREMENT INCOME FUND (RRIFs)

Answer 34

A RRIF is a registered account that provides income drawn from the investments and savings in a Registered Retirement Savings Plan (RRSP). RRIFs are similar to RRSPs in that they offer multiple investment options, allow for tax-deferred growth of qualified investments and funds are taxable as income when withdrawn. Unlike RRSPs, however, new contributions cannot be made to a RRIF – only transfer funds from an RRSP or another RRIF.

Question 35

SPECIFIED PENSION PLANS (SPPs)

Answer 35

A pension plan or similar arrangement that has been prescribed under the Income Tax Act as a “specified pension plan” for purposes of the Income Tax Act (currently the Saskatchewan Pension Plan is the only arrangement prescribed to be a specified pension plan).