News Room

Acadia University Ditches Stand-Alone Pension Plan

In the end, it was just too much of a struggle for Acadia University to resist the lure of joining the much larger public service pension plan of the province of Nova Scotia.

Plan members voted in late February on the proposed transfer and 88% of the 400 members were in favour. The vote was made possible because of the province’s decision to open the public service pension plan to non-civil service members.

The $140 million Acadia plan was facing difficulties including a 25% funding shortfall and high administration costs. By joining the $5 billion public service plan and changing the benefit structure, Acadia will eliminate the funding shortfall.


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Are You Aware of the 2015 Canada Pension Plan and Old Age Security Benefit Rates?

For those already receiving CPP benefits, their rate will increase by 1.8%. The maximum CPP benefit for new recipients age 65 is now $1,065 per month. The amount you receive is based on your average yearly maximum pensionable earnings for the five years prior to retirement, plus whether or not you took early benefits. Speak with your financial planner to calculate your possible benefit and best retirement age.

The OAS rate for the first quarter of 2015 (January to March) is $563.74 per month.

NOTE: The Old Age Security (OAS) benefit is paid to qualified Canadian citizens regardless of income during their working years. The Canada Pension Plan (CPP, or the Quebec Pension Plan in Quebec) is based on contributions and income during your working years and also offers disability, death, survivor and children’s benefits.


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Disclosure, Not Prescription: ESG is Coming to Ontario DB Plans

As of January 1, 2016, all occupational defined benefit pension plans in Ontario will be required to disclose any environmental, social and governance (ESG) factors that are incorporated in the pension fund’s investment policies and procedures.

This requirement is a first for Canada and was approved by the Ontario legislature in late 2014, after first being proposed in 2011. The UK, Germany, Sweden, France and Belgium also have similar regulations.

The amendment to the Ontario Pension & Benefits Act is supported by Ontario’s largest pension funds including the Ontario Teacher’s Pension Plan and OMERS, both of which have actively disclosed ESG since the 2000’s.

This new regulation is not prescriptive and does not require pension plans to adopt or promote any special ESG policies, but we expect that pension trustees will consider ESG investments more closely as a result of this requirement, as has happened in other jurisdictions. Several other provinces in Canada including BC, Alberta and Nova Scotia are considering following suit.


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Withdrawals from Pension Plans Due to Financial Hardship or Medical Disability Costs

In Canada, did you know that you (or members of your pension plan – if registered under the Pension Benefits Standards Act, 1985) may be able to make one or more withdrawals from your pension plan for financial hardship or disability?

For financial hardship, the amount that can be unlocked depends on your expected income. If your income is projected to be zero, you can make a withdrawal up to 50% of the YMPE (Year’s Maximum Pensionable Earnings). In 2015, the YMPE is $53,600.

Note that you can make more than one withdrawal for financial hardship in a calendar year, but you only have 30 days after the first withdrawal to make another withdrawal.

If your projected income is 75% of the YMPE, you are not eligible to unlock or withdraw for financial hardship.

You can also unlock for medical or disability costs, if those costs are expected to be 20% or greater of your expected income in the calendar year. If they are, you can withdraw an amount up to the full medical disability cost, to a maximum of 50% of the YMPE. The YMPE for 2015 is $53,600, so you can withdraw a maximum of $26,800.

There are a number of forms to fill out to make a withdrawal for financial hardship or medical costs. Please contact your Penad administrator for more information.


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Has Your Pension Plan Filed U.S. Form W-8BEN-E?

That’s right, there is now another filing for Canadian pension plan sponsors, this time having to do with American tax rules.

American citizens, unlike citizens of most other countries, are required to pay taxes on all income worldwide, regardless of where it is earned and regardless of where the citizen was living at the time. To track and enforce compliance, Uncle Sam passed the Foreign Account Tax Compliance Act (FATCA) as of July 1, 2014, which requires financial institutions worldwide to report on investment income credited to any of their clients who are US citizens.

As an aside, many financial institutions in Europe and elsewhere find this requirement so onerous that they have actually closed the accounts of US customers. Fortunately, registered pension plans in Canada are exempt from the requirement, but they are NOT exempt from filing exemption forms with EACH financial institution holding pension fund assets, where that institution is itself a “foreign financial institution” under FATCA.

Pension plan administrators must file Form W-8BEN-E with each such financial institution, including financial institutions located outside of Canada (such as investment managers based in France, for example). In addition, if any of the filing information changes, the plan administrator must notify all financial institutions where it has filed Form W-8BEN-E of any such changes within 30 days.

Because the pension plan administrator is certifying required information, we strongly advise that pension plan sponsors confer with their counsel to ensure they have met the requirements of FATCA. Contact Penad for more information on how to ensure you are in compliance with this requirement.


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80 Million People in Caribbean and Latin America at Risk of Poverty in Old Age if Pension Changes Not Made

Angel Curria of the OECD launched the first edition of “Pensions at a Glance: Latin America and the Caribbean” on April 20 at the Inter-American Development Bank (IDB) in Washington DC. The Pensions at a Glance report provides detailed comparative indicators of pension structures in 26 countries.

One key finding is that 63 to 83 million people in the region will be at risk of living in poverty by 2050 due to inadequate savings and pensions, as a result of only 45 per cent of workers contributing to any kind of retirement plan.

IDB president Luis Alberto Moreno, speaking at the April 20 meeting, said that governments in the region must act now to take advantage of “a demographic dividend that cannot be missed. If we get more people to contribute to our pension systems, and if we adjust the systems to rising life expectancy, we will be able to provide adequate coverage to future generations.”

One key finding of Pensions At a Glance is that today there are eight people of working age for every person in retirement, but that rate will drop to 2.5 to 1 by 2050, which underlines the need for governments to act now to ensure that workers are steered into adequate schemes while there is still time.


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Best Year Ever? Canada Pension Plan Touts $45B Gain, but Wait ….

Assets in the CPP grew by 18.3 per cent in the year ending March 31, reported the Canada Pension Plan on May 21.

That is a $45.5 billion dollar gain, taking CPP Fund assets to $264.6 billion.

Not bad. A bottle (or two) of 1989 Louise Pommery Cuvee Brut champagne may be in order, especially since $40.6 billion of the growth came from investments, and only $4.9 billion from contributions.

While we applaud the CPP for their stellar results, we all need to remember that a large portion of CPP assets are invested outside of Canada. This means that the value of those assets rise when the Canadian dollar declines against foreign currencies where the CPP holds investments.

Since the Canadian dollar did poorly over the CPP’s 2015 financial year, this accounted for $7.8 billion of the overall growth.


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Thalidomide Survivors Finally Get Life-Long Pensions

The Canadian federal government announced on Friday May 22 that most eligible thalidomide survivors will receive payments of either $75,000 or $100,000 annually, tax-free. Those victims requiring lower levels of support will receive $25,000 in pension.

Thalidomide was an over-the-counter morning sickness drug that caused over 10,000 babies to be born with various medical problems including severely deformed limbs, blindness, deafness, cleft palate, and internal deformities in the late 1950’s and early 1960’s. Other countries such as the UK and Germany have been paying victims annual pensions for decades.

It took the Canadian government over fifty years to provide a pension (some minor lump-sum payments were made in years past). The government fought against taking responsibility for the damage to survivors, despite the fact that the government had allowed the drug onto the market amid warnings from around the world about the tragic consequences of using the drug.


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Ontario Legislation to Create Provincial Pension Plan in 2017

The Ontario government has taken steps to help the more than three million people who do not have any kind of workplace pension scheme. A bill was passed on April 29 that mandates all employees to contribute 1.9 percent of their pay to the newly formed Ontario Retirement Pension Plan, to a maximum of $1,643 per year. Employers will be required to match contributions.

Ontario has lobbied the federal government to enhance the Canada Pension Plan to mandate increased contributions (and eventual pensions) for workers who do not belong to workplace pension plans, but the federal government has refused to do so.

The new Ontario Retirement Pension Plan will be structured to be very similar to the Canada Pension Plan, as the Ontario government still hopes that the Ontario plan can eventually be assimilated into the federal plan.

Until that happens, provincial workers now have the comfort of knowing that their retirement will be a little bit more secure thanks to this new plan. Opponents of the ORPP see the employer pension contributions as a payroll tax and claim it will kills jobs and damage businesses.


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Ready for Retirement?

Some U.S. pension facts (the gist of which you may be able to extrapolate to your country) …

— 30% of workers in a 2012 study reported that they had less than $1,000 in savings and investments. (Source: Employee Benefit Research Institute)

— Nearly 75% of retirees have not saved enough and said they would save more if they could do it all over again. (Source: Health and Retirement Study)

— 56% of workers report that they have not attempted to calculate how much money they will need to have saved for a comfortable retirement. (Source: Employee Benefit Research Institute)


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