Page 136 - A Canuck's Guide to Financial Literacy 2020

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Integrated Pension Plans

Keep in mind that there are also defined benefit plan sponsors that incorporate the amount
that an individual would receive from CPP/QPP into the final retirement benefit. This is
known as an "integrated plan". If a plan member does retire before 65, the "normal
retirement age”, the pension benefit will likely be reduced to reflect CPP/QPP benefits.

Employer/Employee Contributions

Employer Contributions – Vesting Period
Keep in mind that the employer's contributions are a tax-deductible expense and are not
a taxable benefit to the employee. The employer contributions are kept separate from the
employee contribution for investment purposes. When an employer contributes to the plan,
their contributions have to "vest" meaning that they're not available until after a period of
time, usually two years in most provinces.

However, keep in mind that, in most jurisdictions, defined benefit and defined contribution
plans may be automatically vested which will entitle the plan member to receive both the
contributions of the employer and their own. Make sure you refer to your pension
documents.

Employee Contributions
Employee contributions are tax-deductible during the year they are made. In
comparison to a DC plan, employees are NOT responsible for making their own investment
decisions.

Leaving the Defined Benefit Plan

Leaving the Plan Before Retirement

Before an employee can reap in the benefits of the employer's contribution to the plan, they
must make sure that the benefits have been "vested". Once vested, the contributions are
locked and can only be used for retirement purposes.

Leaving Before Vesting Period
If a plan member leaves or quits the plan before the vesting period has ended, they would
be refunded all their contributions plus interest.

Leaving After Vesting Period
If a plan member leaves or quits after the vesting period, they have three options

o Take the deferred pension at their "normal" retirement age (65)