Are you sick pretending to be Boadicia or her heir or her Hadrian Grendel son in the 21st century? Pensions are based on employee contributions from employee salaries and are the property of the employee. This includes the 401k. Based on a Quistclose Trust, the employer is holding the funds in trust for the employees and may take reasonable fees for the management. It could quite a bit of interest in the management of the employer. However, the funds must payback the employee as the funds are constructively a loan as funds held in trust as the property of the employee and must be accounted for accordingly before there is an allegation of corporate manslaughter in addition to fraud and breach of fiduciary duty. How can you join your workplace pension plan? Click here.

 

How can you join your workplace pension plan?

Joining your workplace pension plan is a no-brainer. Even if you are part-time, you shouldn’t pass on joining and contributing now towards your retirement. Ask your employer or human resources representative if/when you can join your workplace pension plan and if it’s possible to join early so you can begin contributing towards your retirement as soon as possible. If you have a job offer on the table, try to negotiate the ability to join the workplace pension plan as early as possible.

If you are a full-time employee with a company that offers a pension plan and in a class of employees for whom the plan is maintained (e.g. salaried employees, managers, employees who work at a specific location), you are entitled to apply to participate in the pension plan any time after completing 24 consecutive months of continuous full-time employment.

If you are a part-time employee, you are eligible to participate in your workplace pension plan if in each of the two consecutive prior years, you meet the lesser of the following conditions:

1. at least 700 hours of employment with the employer, or
2. earnings of at least 35% of the year’s maximum pensionable earnings (YMPE). The YMPE is set by the Canada Revenue Agency (CRA) to determine your maximum contributions to your Canada Pension Plan and it changes yearly. Visit CRA’s website  to see what the current YMPE is and then calculate if you make 35% of it.

When you join a defined benefit pension plan, you may be offered the ability to buy back service from the years you were not a member. You should consider this option carefully as you may be able to retire earlier and with a larger pension.

How are pension plans regulated in Ontario?

In Ontario, the Financial Services Commission of Ontario (FSCO) is responsible for the administration and enforcement of the Ontario Pension Benefits Act (PBA)  and its supporting regulations. The PBA sets minimum legal standards for registered pension plans in Ontario. If you work in a federally regulated industry such as banking, telecommunications or airline transportation, your pension plan is covered by federal law and regulated by the Office of the Superintendent of Financial Institutions.

FSCO’s responsibilities relating to pension plans include:

• Registering new pension plans and pension plan amendments.
• Monitoring pension plans and pension funds to ensure they are being administered, invested and funded in compliance with legislated requirements.
• Processing required filings and applications from plan administrators.
• Investigating alleged breaches of the PBA and taking enforcement action  when required.
• Administering the Pension Benefit Guarantee Fund (see below) and collecting PBGF assessments.
• Responding to inquiries and complaints  from pension plan members.

Pension Benefit Guarantee Fund: what you need to know

In the event that your employer becomes insolvent or bankrupt, there may not be enough money in the pension fund to pay out the defined benefit pension that was promised to you. The Pension Benefits Guarantee Fund (PBGF) is a special fund established by the Government of Ontario to provide pension benefits coverage in the event of a funding shortage for privately sponsored single-employer defined benefit plans that are wound up. The PBGF is funded by yearly contributions from employers who sponsor defined benefit pension plans and qualify for this coverage. In 2018, the maximum benefit the PBGF provided was $1,500/month.

Important players

You should know the important players in your pension plan:

• Pension plan administrator: a registered pension plan must be administered by a person authorized by the Pensions Benefits Act (PBA)  such as the employer. A pension plan administrator must ensure that the pension plan and the pension fund are administered in accordance with the plan terms and the PBA.
• Pension plan sponsor:  the pension plan sponsor is responsible for designing your pension plan, setting the benefit structure, and for establishing, amending and/or ending the pension plan. The plan sponsor is often your employer.
• Pension fund trustee: the pension fund trustee is responsible for administering the pension fund maintained to provide benefits under or related to the pension plan.
• Service providers: the individual or entities who are contracted by pension plan administrators to provide a range of services such as record keeping, collecting contributions, preparing reports and member annual statements, preparing tax calculations and organizing member education sessions