Pension Plan Coverage Trends

Pension Plan Coverage Trends - Pension Plan Coverage...

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Pension Plan Coverage Trends -smaller % of workers receive company pensions today as compared to 1992 (38% in 2008 vs 45% in 92) -in 92’, 85% of people with PP were DB plan members while 15% had DC or other types of plans. The % covered by DB plans fell to 77% by 2008 and rose to 23% for DC plans -while public sector coverage hasn’t changed much , the private sector shows a significant shift toward DC plans Pension plans review: -all plans have terms and conditions that must be included in plan document (eligibility, pension formula, credited service, ee contribution, retirement age, termination, disability benefits etc) -all plans subject to legislation including a) federal and provincial pension benefits act (min standards to protect interest of plan members b) income tax act: sets limits for max tax sheltered amount -plans can be contributory or non, contributory more common in Canada *union-greater % of non contributory plans *public sector: contributory plans *private sector: about evenly split -all registered plans tax sheltered (contributions deductible, ees taxed only when they draw money out) -C/QPP consideration in plan design: can be explicit and can have benefit and contribution integration. OAS can only be implicitly considered Retirement Planning Pillars 1) Government Pensions a) OAS and GIS -most Canadians are entitled to OAS at 65 -current payout max is 522, claw backs for those with high income -GIS and income for the survivor are needs based b) CPP/QPP -monthly pension for those that contributed to CPP (age 60-70 start date) -benefit depends on work/salary history, current monthly maximum is 934 2) Company pensions and other programs -pensions primarily DB or DC -other programs would include group RRSPs, prfit sharing plans 3) Private savings: -includes registered and non registered savings Several initiatives ongoing to address concern that Canadians will not have sufficient income at retirement Defined Benefit Plans -about 50% of total plans, 85% of total pension benefit assets in Canada -Benefits are established in advance by a formula -employer contributions are variable but employee contributions are clearly defined -max annual accrual benefit is: min [2% earnings, ITA max (2492 in 2010] -significant number of DB plans are in underfunded positions Types of DB plans 1) Flat benefit (15-20$ of DB plans) -$$ per year of service or month of service -popular with unions (can negotiate increases) -no earnings recognition
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-generally simple -well understood 2) Career Average (now less than 30%) -% of final average earnings X years of service -final average could be last 5 ,best 5, final 3, best 5 of last 8
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Pension Plan Coverage Trends - Pension Plan Coverage...

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