CHML Pension Briefing

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Cochrane Highway Maintenance Limited Pension Plan Briefing Document

Date: October 26, 2023 (Based on document filename)

Subject: Review of Cochrane Highway Maintenance Limited Pension Plan Booklet (Amended effective July 1, 2012)

Purpose: To provide a detailed overview of the key themes, important ideas, and facts presented in the “Pension Plan for the Employees of Cochrane Highway Maintenance Limited” member booklet. This briefing is designed to help employees understand their pension plan benefits, options, and responsibilities.

Sources:

  • “66286 Cochrane 2019 02 15 – ON RPP Booklet_231026_093011.pdf” (Amended effective July 1, 2012)

Executive Summary:

This document outlines the features of the defined contribution pension plan offered to employees of Cochrane Highway Maintenance Limited, in partnership with Great-West Life and London Life Insurance Company. The plan is governed by Capital Accumulation Plan guidelines and applicable legislation. It details eligibility, contribution structure, investment options, retirement income options, and what happens during various life events (termination, death, etc.). The booklet emphasizes the employee’s responsibility for making informed decisions about their retirement savings.

Key Themes and Ideas:

  1. Defined Contribution Plan: The plan is a defined contribution pension plan, meaning that the retirement income amount is not fixed, but depends on contributions and investment performance. “The exact amount of your retirement income can only be determined when you retire.” The booklet stresses the importance of employee involvement in managing their retirement savings.
  2. Eligibility:
  • Full-time employees are eligible to join the plan “on the first day of any month after you’ve completed two years of Continuous employment with your employer.”
  • Part-time employees are eligible to join the plan “on the first day of any month if you’ve completed two years of continuous employment with your employer,” as long as they meet certain earnings or hours worked thresholds.
  1. Contributions:
  • Employee Contributions: Employees are required to contribute “five per cent of your earnings (your basic salary including commissions, but excluding overtime, bonuses & fringe benefits).”
  • Employer Contributions: “Your employer will match your required contributions.”
  • Voluntary Contributions: Employees can make voluntary contributions, subject to Canadian Income Tax Act limits, to further increase their retirement savings.
  • Contributions, both required and voluntary, are tax-deductible up to specified limits.
  • Transferred funds from other registered plans are treated as voluntary contributions.
  1. Investment Options:
  • The plan offers a choice between guaranteed investments (interest rate guaranteed) and variable investment funds (returns not guaranteed).
  • Employees are responsible for selecting their investment options. “As a member of the plan, you’re responsible for selecting the investment options for the contributions, reviewing them regularly and making changes you feel are needed.”
  • A Daily Interest Account is the default investment option if no selection is made. “If you don’t make a decision, we’ve chosen the Daily Interest Account as the default investment option. This investment option generally isn’t appropriate for medium- or long-term investing.”
  • Information about investment options and returns is available on www.grsaccess.com and in quarterly statements.
  1. Retirement Income Options:
  • Normal retirement date is the first day of the month following the 65th birthday, with early retirement possible up to 10 years prior. Postponement is allowed up to December 31st of the year the employee turns 71.
  • Locked-in funds must be used to fund a retirement income and cannot be received as a cash payment.
  • Retirement income options include annuities (life annuity, life annuity with guarantee, joint and last survivor annuity) and Life Income Funds (LIFs).
  • “If you have a spouse when you’re ready to receive retirement income, you must use the funds in your account to purchase a joint life and last survivor annuity,” unless a spousal waiver is completed.
  • A Locked-in Retirement Account (LIRA) is available if the retiree is not ready to start receiving income. “If you’re ready to retire but aren’t ready to start receiving an income, a LIRA is a locked-in RRSP which contains locked-in funds from a pension plan and the money in the LIRA is allowed to grow on a tax-deferred basis.”
  1. Life Events:
  • Temporary Absence: Contributions cease during temporary absences, but may continue during maternity/parental leave or work-related injury leave with employer contributions.
  • Termination of Employment: Contributions are immediately vested and locked-in. Locked-in amounts can be transferred to another registered pension plan, an insurance company for a life annuity, or a prescribed retirement savings arrangement (LIRA, LIF). Voluntary contributions can be received as a cash payment or used to increase retirement income.
  • Death Before Retirement: The plan beneficiary (spouse, designated beneficiary, or estate) is entitled to the value of the vested contributions. “Your plan beneficiary is entitled to the value of these vested contributions along with the value of your required contributions and any voluntary contributions.”
  • Marriage Breakdown/Relationship Breakdown: Benefits may be affected; legal consultation is advised.
  • Plan Termination: Employees are entitled to their contributions and employer contributions as permitted by applicable legislation. “If the plan terminates, you’ll be entitled to the value of your contributions and the contributions we made on your behalf, as permitted under applicable legislation.”
  1. Access to Information:
  • Great-West Life provides tools and resources, including quarterly statements, GRS Access website (www.grsaccess.com), and Access Line (1-800-724-3402).
  • The booklet mentions “Your retirement guide” and “Your planning guide” that include materials from the smartPATH retirement education program.
  1. Vesting and Locking-In: Effective July 1, 2012, both vesting and locking-in are immediate. Vesting means the employee is entitled to the employer’s contributions. Locking-in means the funds must be used for retirement income and cannot be withdrawn as cash.

Important Considerations:

  • Employees are responsible for actively managing their investments and making informed decisions.
  • Understanding the implications of various retirement income options is crucial.
  • Contacting Great-West Life or the payroll department is encouraged for questions and assistance.
  • The document mentions that changes to the plan, including the addition or removal of investment options, may occur at any time.
  • The document explicitly states that using pension benefits as collateral for a loan is not permitted.

Glossary Highlights:

  • Applicable legislation: Refers to the Pension Benefits Act, Income Tax Act (Canada) and other relevant laws.
  • Connected Person: Defined according to ownership percentage in the employer’s stock or a non-arm’s length relationship with the employer under the Income Tax Act. Affects rules related to contributions during leaves of absence.
  • Year’s maximum pensionable earnings (YMPE): The maximum earnings amount on which contributions to CPP/QPP are made.

Contact Information:

  • GRS Access: www.grsaccess.com
  • Access Line: 1-800-724-3402
  • Payroll Department

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