faqs and other pension information

this page provides some general definitions, frequently asked questions and other pension information resources.  this information is for educational purposes only and should not be used for any other purpose.  if you have a question that isn't answered here, please reach out to the pension services office. 

definitions:

  • defined benefit (db) plan – a pension plan that defines the ultimate pension benefit to be provided in accordance with a formula, usually based on years of service, earnings, on a flat rate, etc. a db plan may be a contributory or non-contributory plan.
  • defined contribution (dc) plan (or money purchase plan) – a pension plan that defines the amount of contributions (including required member contributions, if any) to the pension plan. the member's pension benefits are based on contributions from the member and employer, plus investment income on these contributions. at retirement, the amount of pension that can be bought is based on the accumulated contributions and investment return in the member's account. a dc plan may be a contributory or non-contributory plan.
  • additional voluntary contributions (avcs) – a pension fund contribution that is made by a pension plan member, and that is in excess of any amount that the member is required to contribute.
  • life annuity (or annuity) – in the pension context, periodic payments (usually monthly) are provided by the terms of an insurance contract that will be paid for the lifetime of a person (the annuitant), or the person and his or her designated beneficiary. annuities are normally purchased from insurance companies.
  • life income fund (lif) – a particular form of registered retirement income fund (rrif) offered by financial institutions. a lif may be purchased with money transferred out of a pension plan when a member's employment ends. a lif is used to provide a regular retirement income and is subject to minimum and maximum annual income payment limits. lifs are governed by ontario's pension benefits act and the federal income tax act.
  • locked-in retirement account (lira) – a particular form of a registered retirement savings plan (rrsp) offered by financial institutions. a lira is usaaaed to hold money that is transferred out of a pension plan when a member's employment ends. liras are governed by ontario's pension benefits act and the federal income tax act.
  • pension benefits act (pba)– the ontario legislation that establishes minimum standards for registered pension plans in ontario.
  • pension benefits guarantee fund (pbgf) – a special fund that was established by the government of ontario (under the pension benefits act) to cover pension benefits up to a specific amount, for certain defined benefit pension plans when they are wound up and there is a funding shortage. to learn more, refer to fsco's web page on the pension benefits guarantee fund.
  • pension fund – the fund that holds contributions, accumulates investment income and from which pension benefits are paid to members.
  • plan sponsor – the individual, entity or entities that are responsible for designing the pension plan, setting the benefit structure, and for establishing, amending and/or ending the pension plan. the plan sponsor is often the employer, but other parties may take on this role (e.g., the corporate parent or a union).
  • single employer pension plan (sepp) – a pension plan sponsored by a single employer or a group of related employers within a corporate group.
  • multi-employer pension plan (mepp) – a pension plan in which two or more unrelated employers participate and contribute to the same pension plan. often, mepps are sponsored by the union that represents the employees of unrelated employers in a specific industry. it can be a defined benefit plan or defined contribution plan — or a combination of both types of plans.
  • jointly sponsored pension plan (jspp) – a jspp is a special type of pension plan in which decision making and funding of the benefits is shared jointly by both employees and their employer(s). a jspp provides defined benefits to plan members and contributions are always made by both plan members and their employers.
  • small pension rule – the commuted value of a pension may be taken as a taxable lump sum, or it may be transferred (entirely or partially) to a registered vehicle on a tax-deferred basis, if:
    • the annual pension is less than four per cent of the year's maximum pensionable earnings (ympe); or
    • the lump sum or commuted value of the pension (or account balance for a defined contribution plan) is less than 20 per cent of the ympe on the member's date of termination.
  • statement of investment policies and procedures (sipp) – a document required by pension legislation that sets out the investment policies and procedures for a pension plan.
  • year's maximum pensionable earnings (ympe) – a term used in the canada pension plan (cpp) that refers to the earnings on which cpp and quebec pension plan (qpp) contributions and benefits are calculated. the ympe is re-calculated each year according to a formula based on average wage levels. the ympe is published annually by the bank of canada.

faqs:

q. what is a jointly sponsored pension plan (jspp)?

a. a jspp is a pension plan that offers defined benefits and is jointly sponsored, governed, and funded by the employers and plan members. a member’s retirement benefit under a jspp is based on a pre-set formula, typically with reference to years of pensionable service and earnings. there are several large ontario pension plans which are jspps, including: the ontario teachers’ pension plan, the upp, opseu pension plan, hoopp (healthcare), omers (municipal), and caat (colleges).

q. why would an employer consider joining a jspp rather than managing their own pension plan?

a. there are some advantages to joining a jspp:

  • joint plan governance by employers and employees, which will give pension plan members a greater voice in governance than in the past,

  • contributions for both the employers and employees will be more stable and predictable, due to an exemption from solvency funding obligations;

  • transparency into plan operations, funding and decision-making, due to a role for plan members in plan sponsorship and governance; and

  • efficiencies and economies of scale that are achievable in a much larger plan, involving multiple universities rather than single university pension plans

*this faq is a work in progress and if you have a question you feel should be addressed here, contact the office of pension services.

other resources: