AS A WAY OF SUMMARLZTNG OUR LOOK AT pension
plans in Canada today, let us look at a pension plan statement issued by one of the
largest pension plans in the country to one of its members.
The statement is divided into six sections
plus notes, as follows:
Section One entitled "Personal
Information" contains basic personal information about the contributor as well as
such important information as: (a) the date the contributor joined the plan; (b) the date
that her contributions became vested within the plan and consequently the period of time
over which employer contributed benefits (if any) have been accumulating; (c) the
normal retirement date which under this plan is the last day of the month in which the
contributor turns 65 years of age; (d) the earliest date of retirement at which time she
will be able to collect an "unreduced pension". To qualify for this provision,
if the contributor has been with the plan for thirty years she can begin to collect
benefits in the month after she attains her 55th birthday, or if she has been a plan
member for a minimum of only two years this benefit becomes available in the month after
she reaches her 60th birthday; and (e) information as to whom benefits will be payable
should the contributor die prior to reaching retirement.
Section Two describes "Contributions,
Earnings and Service". This is a "defined contribution" pension plan and
all contributions to the plan are maintained in a separate account on the
contributors behalf. This section summarizes the status of her account as at the
statement date. It commences with the account balance at the beginning of the year and
describes her contributions during the year as well as the interest that has accrued to
her account over the preceding twelve months.
Since benefits can be accessed partly
through years of service, this section also outlines her years of service, on an annual
basis, since joining the plan.
Section Three describes "Benefits on
Retirement". This section explains the dates at which the contributor will be
entitled to receive her full pension (at ages 55, 60, and 65) and the estimated
monthly benefit that she is likely to enjoy when she comes to collect.
The statement indicates that contributors
will receive pension benefits, when they retire, based upon "the highest average of
their annualized earnings during any five consecutive years of plan membership".
Annualized earnings are defined as the contributors salary during the year,
excluding certain bonuses and overtime pay that she may have earned. Since benefits are
ultimately to be paid out based upon the contributors "average annualized
earnings", this section indicates the current calculation of this amount as at the
The plan recognizes that many within its
membership work only part-time during the year and requires a contributor to work a
minimum of only seven weeks before contributions can be made.
Sections Four to Six describe how the plan
treats the contributions of members under certain conditions. These include voluntary
termination, death and disability.
Finally, the notes to the statement
indicate that the projections outlined throughout the statement are pretax estimates only,
based upon information supplied by the employer(s) and the actual terms of the Pension
Plan as outlined in the official by-laws. It is only in this volume that the member will
be able to get information as to plans funding target and the actuarys
assumptions about how much money will be needed to meet the promised payouts to the