What happens if I change careers or no longer work through Local 8?
If vested, you will be entitled to termination benefits. Termination occurs after two consecutive calendar years pass where you have less than 350 hours of contributions paid to the Pension Plan. When you are eligible for termination benefits, you will automatically be mailed a Statement of Disclosure in February.
The Statement of Disclosure will explain the option to either:
Please Note: Termination benefits can only occur if the Plan receives less than 350 hours in
two consecutive calendar Plan years (January to December), and not before. This is in accordance with Pension Legislation and the Plan Text.
What is Commuted Value?
The Commuted Value, also known as CV, of an earned pension benefit is an actuarially-determined amount that represents the present value of the member's future retirement pension. It represents the lump sum payment equal to the amount of money that would have to be set aside today, to generate a future pension.
Calculations are only performed following a particular service event such as;
Commuted Values are very sensitive to interest rates at the time of the calculation and vary from one member to another because they use the individual's age, pension earned and expected retirement date.
Pursuant to the legislation passed by the Government of Alberta, beginning April 1, 2020, the funding assumptions used for the valuation and funding of the Plan must be used for the calculation of a CV. This change will align CV calculations with the funding valuation of the Plan.
Transferring the commuted value to a LIRA means giving up your right to a monthly pension from the plan. This decision is irreversible and also means forfeiting other benefits like survivor benefits and supplementary pension.
How a commuted value is calculated for a Multi-Employer Target Benefit Plan?
How a commuted value is calculated for multi-employer target benefit plans is set by legislation and depends on many factors, including interest rates and mortality rates. The interest rate used to calculate the commuted value is based on the factors used to fund the Plan on the going concern valuation (the plan continues indefinitely) that is filed with Federal/Provincial regulators. The previous filed valuation (January 1, 2020) the going concern rate of return was 3.48%. Pension Plans are required to file a valuation every 3 years. The January 1, 2023 valuation, the going concern rate of return increased to 4.99%.
When interest rates increase, the commuted value will decrease (and vice versa). A higher interest rate means you would have to set aside a lower present value today to earn the same amount of monthly pension in the future. In other words, what sum of money is required today in order to provide the same amount of monthly lifetime pension on retirement based on an investment return of 4.99% until retirement age (how many years of investment growth until retirement).
Other factors that will impact the commuted value is your age at the time of the calculation. For example, if you were 10 years older today, the commuted value amount would have been higher due to less years of investment growth.
What is a "Locked-In Retirement Account (LIRA)?
A Locked-In Retirement Account (LIRA) is a Canadian investment account designed specifically to hold locked-in pension funds for former plan members or former spouses or common-law partners. Funds held inside a LIRA will normally only become available (or "unlocked") to holders upon retirement.
If I am eligible to transfer my commuted value, does it have to go to a LIRA?
Yes, if your commuted value on termination is more than 20% of the current YMPE (Year's Maximum Pensionable Earnings) you must transfer to a LIRA.
2024 YMPE = $68,500 (20% = $13,700)
2023 YMPE = $66,600 (20% = $13,320)
2022 YMPE = $64,900 (20% = $12,980)
2021 YMPE = $61,600 (20% = $12,230)
2020 YMPE = $58,700 (20% = $11,740)
2019 YMPE = $57,400 (20% = $11,480)
2018 YMPE = $55,900 (20% = $11,180)
2017 YMPE = $55,300 (20% = $11,060)
How come someone I know received a "Cash Settlement"?
Legislation changed September 1, 2014. Prior to the change if a terminating member had a small earned pension benefit (less than 4% of the YMPE) the fund was allowed to pay the commuted value in cash. As of September 1, 2014 that was eliminated. The size of your earned benefit does not matter. You can only receive a cash settlement if the commuted value of your earned benefit is less than $13,700 (in 2024). Therefore, if your commuted value is more than $13,700 your must transfer to a LIRA. A cash settlement can only be made if your commuted value is less than $13,700 and is subject to tax deductions.
What is the difference between a LIRA and RRSP?
The distinction between a LIRA and an RRSP is that, where RRSPs can be cashed in at any time, a LIRA cannot. Instead, the investment held in the locked-in account is "locked-in" and cannot be withdrawn until either retirement or a specified age as outlined in the applicable pension legislation (though certain exceptions exist). Another important distinction between regular RRSPs and LIRAs is that once funds have been transferred from a company pension plan to a LIRA, further contributions cannot be made into said LIRA. Any monetary investment growth in LIRA is considered locked-in.
100-8905 51 Avenue NW
Edmonton, AB T6E 5J3
Telephone: 780-466-1999
Fax: 780-466-2095
Email: info@absheetmetalpension.com
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