Staff Pension Plan glossary

GLOSSARY OF PENSION TERMS

A

B

C

D

E

F

G

H

I

J

K

L

M

N

O

P

Q

R

S

T

U

V

W

X

Y

Z

A

Accrual rate – The rate at which pension rights accumulate for each year of credited service.  See Retirement for information about accrual rates in the plan.

Active plan member – A plan member who is making (or deemed to be making) regular contributions to the plan.

Actuarial equivalent- a benefit of equivalent value when computed at the rate of interest and on the basis of the mortality or other tables.

Actuarial valuation -  an assessment of the financial position of the pension plan.  The valuation provides information on the adequacy of the employee and employer contribution rates; it is also to be used for filing purposes with the regulatory authorities, and for accounting purposes in the plan’s financial statements.  An actuary prepares a plan valuation at least once every three years.

Actuary – a business professional who analyzes the financial consequences of risk.  Actuaries use mathematics, statistics, and financial theory to study uncertain future events, especially those of concern to insurance and pension plans.

Amended pension adjustment - A pension adjustment that has been amended after it has been reported to Canada Customs and Revenue Agency.  Amended pension adjustments are only reported if there is a difference of +/- $50 from the last reported amount.

Annual member statement – a statement that is sent to active and inactive plan members every year that contains information about the member’s status in the plan.  The information includes the member’s accumulated contributions plus interest, early and normal retirement dates, credited service, benefit earned to date, and projected benefit to normal retirement date (active members only).  The statement also provides general information about the plan, including funding.

Average YMPE – the arithmetic average of the YMPE for the applicable year and for the four immediately preceding years.

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B

Beneficiary – a person who, on the death of a plan member or pensioner, may become entitled to a benefit under the plan.  Your spouse is automatically your designated beneficiary unless they waive their entitlement.  If you do not name a beneficiary and do not have a spouse, your estate is your beneficiary.

Benefit – any form of payment (pension, commuted value) that a member, limited member, or beneficiary may become entitled to under the terms of the plan.

Benefit formula – the method under the provisions of the pension plan for calculating the benefit, using the accrual rates, years of credited service, and the highest average salary.

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C

Canada Pension Plan – The federal pension plan administered by Human Resources Development Canada.  It applies in all provinces and territories of Canada except Quebec, where the equivalent Quebec Pension Plan applies.

Commuted value - the lump sum amount of money that needs to be set aside today, at current market interest rates, to provide enough funds to pay for a pension when a plan member retires.  The lower the current interest rates, the higher the commuted value will be, because it is assumed that the amount today will earn less from now until retirement; and, conversely, the higher the current interest rates, the lower the commuted value.

Consumer price index - a measure of the average price of consumer goods and services purchased by households. A consumer price index measures a price change for a constant market basket of goods and services from one period to the next.  At the end of each full calendar year, pensions in the Staff Plan are adjusted in response to movements in the Consumer Price Index.  There is a limit on adjustments of 3% upwards or downwards in any one year but pensions will not be reduced below their initial amount.  If funds permit, a supplementary index account is used to bridge or partially bridge any gap between the automatic adjustment and the actual increase in the Consumer Price Index.  This supplementary account is available to pensioners who have reached age 66.

Contribution – money paid into the pension plan by the member and employer.

Contributory plan – a pension plan that requires contributions by employees, usually through payroll deduction.

Contribution rate– the percentage of salary that the member and employer pay into the pension plan.

Credited service – the time period you are credited with as being an active member of the pension plan, based on actual time worked.  For example, if you work part-time at 75% FTE, you would receive .75 years of credited service in a full year.

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D

Deferred pension– a pension benefit that is not payable until a later date, either because the member has terminated employment prior to earliest retirement age, or because the member chooses to defer the pension in order to receive an unreduced pension.

Defined benefit pension plan – a pension plan in which the benefit that the member receives is based on a set formula, and in which the plan sponsor bears the investment risk.  The Staff Plan is a defined benefit plan and the formula is based on salary, the accrual rate, and years of credited service.

Defined contribution pension plan - a pension plan that provides a pension based on contributions made by the member and employer, and by the investment earnings in the plan.

Designated former spouse - a former spouse who is entitled to a share of your pension pursuant to a court order or written separation agreement.

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E

Early retirement pension– a pension that is paid to a member who retired before being eligible to receive an unreduced pension.

F

Fiduciary – An individual or institution responsible for acting in the best interests of another party.  A fiduciary is bound by law and duty to put aside personal interests and act in good faith when making decisions for the benefit of another.

Under the Pension Benefits Standards Act (BC), “pension plan investments and financial decisions must be made in the best financial interests of plan members, former members and other plan beneficiaries.  Pension plan assets must be invested in a manner that a reasonable and prudent person would apply in respect of a portfolio of investments made on behalf of another person to whom there is owed a fiduciary duty to make investments without undue risk of loss and with a reasonable expectation of a return on the investments commensurate with the risk.”

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G

Guaranteed term– In the Staff Plan, you can choose a pension that is guaranteed for 5, 10, or 15 years.  The pension is paid for your lifetime, but if you die before the guaranteed term expires, your pension will be paid to your designated beneficiary for the remainder of the guaranteed term.  For example, if you choose a guaranteed term of 10 years and die 9 years after the commencement of your pension, your beneficiary will continue to receive the pension for the remaining year that is left on the term.  If your beneficiary is your estate, it will receive a lump-sum payment that represents the value of the remaining year’s worth of payments.

H

Highest average salary– the average of your 5 highest consecutive years of salary, based on a full-time equivalent, that is used to calculate your pension.

I

Immediate pension– a pension that is payable on the first of the month following the month in which a plan member retires.

Inactive plan member– a plan member who has terminated employment and left their funds on deposit in the pension plan to take a benefit at a later date.

Indexing– adjustments to benefits according to a formula that is based on the Consumer Price Index.

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J

Joint life – a pension option that provides for a specified percentage (e.g., 50%, 60%, 100%) of the pension to continue to the spouse for their lifetime following the death of the member.  If, at the date of commencement of the pension, the member has a spouse, the Pension Benefits Standards Act (BC) requires that the pension must be in the form of a joint life pension paying at least 60% of the pension to the surviving spouse, unless the spouse completes a Spouse’s Waiver of Entitlement.  

Joint trusteeship– a form of governance in which management of the plan is shared between representatives of both plan members and the employer.

L

Limited member– the former spouse of a plan member who has been designated, as a result of marital breakdown, as a “limited member” and is entitled to a portion of the plan member’s pension benefits.

Locked-in– refers to pension benefits that cannot be paid as cash, but must be used to provide a lifetime pension.

Locked-in registered retirement savings plan - a retirement savings plan that is registered under the Income Tax Act (Canada) and under which the benefit may be paid only as a life annuity or as a survivor benefit and that contains any additional provisions required by the British Columbia Pension Benefits Standards Act and Regulations.

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M

Member- a person who is or who has been a contributor to the pension plan, who is not receiving benefits under the plan or has not withdrawn from the plan.

Money purchase pension plan – another name for a defined contribution pension plan.

N

Normal form of pension– The normal form of the pension uses the prescribed retirement formula to come up with the basic pension amount.  In the Staff Plan, the normal form for those with no spouse at the pension commencement date is a single life lifetime pension guaranteed 10 years, and for those with a spouse it is a joint survivor lifetime pension payable at 50% to the surviving spouse.  All other forms of pension offered are calculated based on their value relative to the normal form; these are called optional forms of pension. 

Normal retirement date– the date at which the member becomes entitled to retirement benefits with no reduction or increase.  The normal retirement date specified in the Staff Plan is age 65.

 

O

Old Age Security (OAS)) – the basic federal income security program for seniors who are age 65 or older.

Optional forms of pension- The optional forms of pension are those over and above the normal form(s) of pension. The optional forms are specified in the plan document and allow the members to tailor to their needs the size of their benefit payments, the length of the guarantee period, and the amount of continuing survivor benefits. Generally, the longer the guarantee period and/or the greater the amount continuing to the spousal survivor, the lower the monthly/annual benefit payment.

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P

Pension – any periodic payment payable for the lifetime of a person who has become entitled to such a benefit pursuant under the terms of a pension plan.

Pension adjustment (PA) - A pension adjustment represents the value of the pension benefits you earned in the previous year from your pension plan. Canada Revenue Agency (CRA) uses the pension adjustment to calculate your RRSP contribution room, then reports this information to you on a Notice of Assessment.

Pension adjustment reversal(PAR) – a calculation done to restore RRSP room for members who have terminated employment and transferred their pension benefit out of the pension plan.

Pension Benefits Standards Act [BC] (PBSA) - The legislation that governs employment pension plans that have members in British Columbia.  The PBSA is designed to protect the interests of British Columbia pension plan members by setting minimum standards for British Columbia pension plans.  The minimum standards apply in areas such as eligibility, vesting, portability, survivor benefits, employer contributions, and disclosure to members.

Pension formula – the formula used by a pension plan to determine the amount of the pension benefit at retirement.

Pension plan - A retirement plan offered by some employers that pays a set amount each year during retirement

Pensionable salary – the portion of compensation (normally basic salary) on which pension contributions are based, and that is used to determine the highest average salary in the pension formula.

Pensioner – a retired member, beneficiary or limited member who is receiving a pension.

Plan sponsor – refers to a designated party, usually an employer, that sets up a retirement plan for the benefit of the organization's employees.

Plan valuation – See Actuarial valuation

Postponed retirement – retirement after age 65 (the age of entitlement to an unreduced pension.)

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R

Reciprocal agreement– an agreement negotiated with another pension plan that allows members to transfer pension entitlements when they move between plans.  There are currently no reciprocal agreements between the Staff Pension Plan and other pension plans.

Registered retirement savings plan (RRSP) - an account that provides tax benefits for saving for retirement in Canada. RRSP refers to a provision in the Income Tax Act that allows a person to shelter financial property from income taxes.

S

Small benefit - A pension benefit with a total value not exceeding 20% of the Year's maximum pensionable earnings ("Y.M.P.E.") under the Canada Pension Plan order may be released from the locking-in conditions imposed by the Pension Benefits Standards Act and regulation. For 2014, the threshold amount is $10,500

Spouse -  defined in the PBSA (BC) as:

(a) a person to whom you are married and not living separate and apart for the immediately preceding 2 year period; or

(b) If there is no person to whom paragraph (a) applies,

    1. a person with whom you have lived as husband and wife for the immediately preceding 2 year period or
    2. a person of the same gender with whom you have lived in a marriage-like relationship for the immediately preceding 2 year period.

    Socially Responsible Investing (SRI) - any investment strategy which seeks to consider both financial return and social good.

Surplus assets- the excess of the value of the assets of a pension plan over the value of the liabilities under the pension plan, both calculated in the prescribed manner

Survivor benefits – benefits payable under a pension plan to the surviving spouse of a deceased member or pensioner.

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T

Terminated member a plan member who has withdrawn their funds from the pension plan following termination of employment.

Trustee – Person or persons who have been entrusted with managing a trust’s assets in the best financial interests of the trust’s beneficiaries.  Trustees are fiduciaries and must abide by all laws, rules and regulations governing trustees.

U

Unreduced pension-  a pension that has not been reduced for early retirement.

V

Vesting– the entitlement to a pension benefit

W

Waive – to relinquish a right or entitlement

Y

Year's maximum pensionable earnings (YMPE)– Maximum salary limit for contributions to the Canada Pension Plan.  The YMPE is changed each year according to a formula based on average wage levels.

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Announcements

 
New rules for Pension Division upon the breakdown of spousal relationships in British Columbia were effective March 18, 2013.
 
 

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