DEFERRED PROFIT SHARING PLAN FOR THE EMPLOYEES OF MCDONALD'S RESTAURANTS OF CANADA LIMITED INFORMATION GUIDE IMPORTANT NOTICE

Transcription

1 DEFERRED PROFIT SHARING PLAN FOR THE EMPLOYEES OF MCDONALD'S RESTAURANTS OF CANADA LIMITED INFORMATION GUIDE IMPORTANT NOTICE While every effort has been made to ensure the accuracy of this Information Guide, errors, omissions, changes to laws or legislation and/or changes to the Official DPSP Text by McDonald s Canada may be made. The operation of the McDonald s Canada DPSP is governed by law and the Official DPSP Text as well as the policy issued by Standard Life each of which will always prevail over information contained in this Information Guide. Employees may request to read the Official DPSP Text by contacting McDonald s Regional HR team. McDonald s Canada reserves the right to amend the DPSP Information Guide or the Official DPSP Text or cancel the DPSP at any time, at its sole discretion and without prior notice. Updated January 2018

2 INTRODUCTION McDonald s Restaurants of Canada Limited ( McDonald s or the Company ) is pleased to sponsor a Profit Sharing Arrangement for the benefit of eligible Canadian employees. The Profit Sharing Arrangement provides members with an opportunity to save for their retirement by sharing in the successful growth and profitability of McDonald s which is the result of the hard work and dedication of all Canadian employees. Entitlements earned under this Profit Sharing Arrangement are primarily distributed to all members as contributions to a registered Deferred Profit Sharing Plan (DPSP or the Plan ) sponsored by the Company. Any excess Profit Sharing entitlements (if any) above the Canada Revenue Agency s (CRA) allowable contribution limit are distributed to members by way of: a Retirement Allowance Plan (RAP) which is automatic for eligible members; or taxable cash for those not eligible for RAP. DPSP participation provides our employees with an excellent opportunity to save for their future retirement needs in a tax-deferred way. As a member of the DPSP, your share is sent to the Trustee (currently Manulife Trust Services Limited) who in turn deposits the money into your account and invests it according to your instructions. This Information Guide is intended to provide you with an overview of: The purpose of the DPSP; How the Plan works; The features and benefits of participating in the DPSP; and The DPSP rules. Employee participation in the DPSP is mandatory once you meet the eligibility requirements explained below. McDonald s encourages you to take an active interest in managing your DPSP money to save effectively for your future. PURPOSE OF THE DPSP The purpose of the DPSP, over the long term, is to provide members with a source of post termination or retirement income. While the financial rewards available are not as predictable as traditional pension plans, members are expected to be able to accumulate savings over time to contribute towards their future retirement needs. By law, only the Company is permitted to make contributions to the DPSP. As a result, you are encouraged to also join the McDonald s Group Registered Retirement Savings Plan (RRSP) where you can make additional personal contributions to supplement the savings accumulated in the DPSP to meet your personal retirement goals. Please refer to the Official DPSP Plan Text or contact your regional HR team for complete plan details. These provisions are subject to change without notice. In the event of a discrepancy this document and the Official Plan Text, the Plan text will prevail. Page 2

3 OVERVIEW OF HOW THE DPSP WORKS McDonald s Canada has a contract with Manulife Trust Services Limited, the Trustee of the DPSP, who in turn has appointed The Manufacturers Life Insurance Company and Manulife Assurance Company of Canada (collectively Manulife ) to administer the DPSP. The Plan operates under Manulife Policy RS S0431. Manulife provides trust, administration and recordkeeping services, member communication tools and services, and various investment options to invest your money. Employees who meet the eligibility criteria of the DPSP are required to participate in it and must complete their enrolment with Manulife. Enrolment is most easily accomplished through the secure Online Enrolment portal operated through the Manulife VIP Room. Once eligible, Manulife will send a letter to your home with your personalized User ID and PIN to access the eenrolment site. If you cannot enroll online, you may request a hard- copy paper kit from Manulife. When you enroll, you will need to provide your personal information (including a beneficiary) and how you want to invest your money. When Manulife receives the annual contribution (subject to approval) from McDonald s Canada, the money will be invested in your account according to the investment instructions you provided during enrolment. DPSP participants can select investments from a variety of market related funds or guaranteed interest investments available under the Plan. It is the employee s responsibility to select and manage their investments, which can be changed at any time within the program. If a member fails to select a personal investment mix, their contributions or account balances will be invested in the Default Investment choice as determined by McDonald s. Every quarter, you will receive an account statement showing your financial activities under the Plan. You can also access the Manulife Member VIP Room using the same User ID and PIN you received from Manulife. The VIP Room is a secure website you can use to view and manage your account; make investment changes; obtain updated investment rates of return; access a variety of retirement income projection tools; access retirement and investment education material; and a host of other useful decision making tools. You are encouraged to use these tools as they are designed to help you make the most of your DPSP savings. Please refer to the Official DPSP Plan Text or contact your regional HR team for complete plan details. These provisions are subject to change without notice. In the event of a discrepancy this document and the Official Plan Text, the Plan text will prevail. Page 3

4 FEATURES AND BENEFITS The DPSP offers a number of features and benefits many of which are not available to individual investors as outlined below: Volume Buying Power o With over 3000 Canadian employees participating in both the McDonald s DPSP and Group RRSP, a significant volume of assets have been accumulated. This creates tremendous volume buying power with our plan administrator, resulting in very low investment management fees compared to retail investment fees. o How does this benefit you? The overall fees on your portfolio of funds will be much lower than the retail rate paid for the same investments. In some cases the investment management fees are less than half the retail rate. o In addition, you will have access to institutional quality investment managers that may not be accessible through regular retail distribution channels. DPSP Contributions are not subject to Payroll Tax o The annual contribution is deposited directly into your account and you do not pay income tax on this amount. However, note that the government requires that your annual DPSP contribution be subtracted from your allowable RRSP contribution room the following tax year. o Similar to an RRSP, the money in your DPSP is allowed to grow on a tax-deferred basis allowing your money to grow faster. You only pay income tax on cash withdrawals from the account. Consolidated accounts simplify your life o If you are a member of the McDonald s Group RRSP, your DPSP account will be consolidated on the same statement each quarter. o You will also have access to all account information online through the Manulife Member VIP Room providing you with a single access point to manage your money. Flexibility o When you invest in market-related funds within the DPSP, there are no front-end (buying) or back-end (selling) charges with any of the funds. These types of fees are often associated with retail mutual funds that result in limiting your ability to move money somewhere else if you decide. o You are allowed to transfer DPSP money (subject to vesting rules) for the purpose of participating in the Home Buyers Plan (HBP) or Lifelong Learning Plan (LLP) to your Group RRSP or personal RRSP account. Please refer to the Withdrawal section for further details. Excellent Tools and Resources at your fingertips o The Manulife Member VIP Room is an excellent source of retirement and financial planning tools to help you understand and achieve your goals. The website also has a great deal of educational material and online learning modules to help you better understand investing and saving for your retirement. Please refer to the Official DPSP Plan Text or contact your regional HR team for complete plan details. These provisions are subject to change without notice. In the event of a discrepancy this document and the Official Plan Page 4 Text, the Plan text will prevail.

5 Q&A SUMMARY MEMBERSHIP When do I become eligible to join the DPSP? You are required to join the DPSP, and therefore be eligible for the Company s Profit Sharing Arrangement, on the first day of the month following completion of two consecutive 12 month periods, during each of which you have completed at least 1,700 hours of work. How do I enroll? Once you are eligible to join, Manulife will send you a letter with instructions on how to enroll in the Plan using their e-enrolment website. The e-enrolment website guides you step by step as you provide your personal information, beneficiary designation and investment instructions. If you cannot enroll online or did not receive your access codes from Manulife, please contact Manulife at Can I cancel my membership in the DPSP? No. Once you join, you must remain a member until your employment terminates (either voluntarily or involuntarily) or you retire from McDonald s. If your employment terminates and you are then re-hired within 12 months, you must join the Plan on the first day of the month following your re-employment. If your employment terminates and you are then re-hired after 12 months, you must complete a new two-year eligibility period before you can join the Plan. How long can I participate in the DPSP? You can stay a member of the Plan until the end of the year in which you reach maturity age as specified by Canada Revenue Agency (CRA) which is currently age 71 (at which time CRA requires that you start your retirement income) or until you terminate or retire from the Company whichever comes sooner. If you terminate or retire from McDonald s Canada, CRA rules state that you must remove your money from the DPSP within 90 days of your last day worked. After your termination Manulife will send you a letter explaining what you must do and the options available to you. If you do not remove your money, your account balance will be transferred to an RRSP account with Manulife, as permitted. Official Plan Text, the Plan text will prevail. Page 5

6 CONTRIBUTIONS Can I make personal contributions to the DPSP? No. Contributions can only be made by the Company in accordance with the annual profit sharing amount declared by the Canadian Executive Team of McDonald s. How much will the Company contribute each year? McDonald s Canada is required to contribute to the DPSP an aggregate minimum of 1% of Canadian consolidated profits (as determined by the Company in its sole discretion) and allocate the total amount to eligible plan members. Notwithstanding the 1% minimum, the Company targets the annual Profit Sharing Arrangement entitlement to be 6% of eligible earnings plus an additional discretionary amount ranging between 0% and 4% of eligible earnings above the Yearly Maximum Pensionable Earnings (YMPE), which is determined by Canada Revenue Agency (CRA). You must be an employee and on the payroll December 31 of each year to be eligible for a Company contribution for that year. If you terminate at any time prior to December 31, you will not receive a Company contribution for that year (with the exception of retirement at age 65+, total disability or death). Your vested monies will continue to appreciate/depreciate until they are withdrawn from your account or transferred to a tax-deferred plan. If you terminate prior to your vested date, any unvested monies will be forfeited. The maximum contribution allowed to be made to any employee s account each year is determined by the CRA, which establishes each year s registered plan contribution limits. The maximum contribution to the Plan is the lesser of 18% of your earned income or the given year s DPSP contribution limit specified by CRA. To see the current DPSP contribution limits, please visit the CRA website at the following link: Any part of the annual Profit Sharing entitlement which exceeds the maximum contribution allowed to the DPSP is; 1) allocated automatically to your RAP account if you are a member of that program, or 2) paid to you in cash as Excess Profit Sharing subject to normal taxation. Can I transfer money from other plans into the DPSP? No, the DPSP is only allowed to hold contributions made by the Company. However, if you have a McDonald s Group RRSP account, the Income Tax Act allows you to transfer any amount from another registered plan into the Group RRSP, tax-free. Details on how to arrange such a transfer are available from Manulife by calling Do I receive any tax receipts for the DPSP? No, you will not receive any tax receipts. The annual Plan contribution amount you receive is reflected on your annual T4 earnings slip as a Pension Adjustment. The amount of the Pension Adjustment is used by CRA to reduce your next year s RRSP contribution limit. Please refer to your CRA Notice of Assessment to determine your RRSP limit. Official Plan Text, the Plan text will prevail. Page 6

7 VESTING Are contributions made to my DPSP subject to vesting rules? Yes, vesting rules do apply. Being vested in your DPSP account means you have earned legal ownership over the contributions that have been made to your account. Under the Plan, your vesting date is 24 months after your DPSP enrolment date. Contributions made to a member's account shall be 100% vested after your vesting date. In other words, once you have participated in the Plan for over two years, you are entitled to keep all the money in your account (contributions and investment earnings). If you terminate (voluntarily or involuntarily) from the Company before your vesting date, the money in your account will be forfeited. A member will not be able to transfer their DPSP account money to the McDonald s Group RRSP or any other registered plan or initiate any type of withdrawal until they are 100% vested, or as specified below. Notwithstanding the two year vesting rule, your account shall become fully vested upon the following events (definitions provided in the official DPSP Text): a) The member reaching normal retirement date; b) The member incurring a total or permanent disability; c) The death of a member prior to termination of continuous employment; or d) Termination of the DPSP Plan. INVESTMENTS How are contributions invested? You are responsible for all the investment decisions with regards to how your contributions or existing balances are invested. Contributions and existing balances can be invested in one or more of the market-related or guaranteed funds available under the Plan. If you are comfortable with investing, you can select your own customized investment mix from the investment options available. Alternatively, you can choose one of the Manulife Avenue Portfolio mixes which have been created based on different investor risk profiles and the time you have before retirement. McDonald s has approved the investment options available under the Plan, which are subject to change at its sole discretion. Can I change how future contributions or existing balances are invested? You can change how future contributions or existing balances are invested at any time. Changes can be made online by logging on to the Manulife Member VIP Room. Or alternatively, you can call Manulife at and speak with one of their representatives who will help you make the changes. Official Plan Text, the Plan text will prevail. Page 7

8 There is no cost to change your investment instructions or to transfer money from one investment to another. However, if you have money invested in a Manulife Compound Interest Accumulator (GIC type) investment, and you redeem these investments before maturity, it may be subject to a market value adjustment. Note: Manulife has an excessive trading policy in place to discourage active investment trading by members. Excessive trading is generally considered to be more than two investment trades per account per month although this is subject to Manulife s discretion and may change at any time. Manulife monitors all members trading frequency and may contact you if they determine you are trading excessively. If a member continues to violate Manulife s excessive trading policy, penalties may be assessed on your account and the Company will be notified. Are there costs to invest in the DPSP? Money in your account invested in market related funds is charged an investment management fee. In general, the investment management fees charged under this Plan are significantly lower than what you would pay as a retail mutual fund investor. While the cost savings will differ from fund to fund, the low costs under the DPSP will lead to greater savings in your account. All investment management fees are disclosed by Manulife on the monthly Fund Rates of Return report (available from the Manulife Member VIP Room or the e-enrolment website).note that when obtaining the Fund Rates of Return report on the Member VIP Room, you can request that the investment returns provided be net (after) or gross (before) investment management fees are deducted from the fund. In addition, some market related funds incur Fund Operating Expenses. These expenses may be charged to a fund to pay for things such as legal and audit costs to run the fund. The Fund Operating Expenses are disclosed on the Quarterly Fund Sheets created by Manulife which are also available from the Member VIP Room or the e-enrolment website. Note that both the net and gross rates of return reported for the market related funds include any Fund Operating Expenses that may apply. What if I don t provide investment instructions? As a member of the Plan, you are responsible for enrolling in and for providing your investment instructions regarding contributions and invested amounts. You can select from any one or more investment options or choose one of the convenient Avenue Portfolio mixes created by Manulife. Either way, taking personal control of your financial affairs is the key to meeting your retirement goals. However, in the event you do not provide investment instructions, your money will be invested in the Manulife Daily Interest Savings Account which has been selected as the default investment option by McDonald s, until such time as you actively select an investment mix. Official Plan Text, the Plan text will prevail. Page 8

9 WITHDRAWALS AND TRANSFERS Can I remove money from the Plan while still an active employee? Yes. You can transfer vested money from your DPSP account into your McDonald s Group RRSP account or personal RRSP account for the purpose of participating in the Home Buyers' Plan (HBP) or Lifelong Learning Plan (LLP) which are then treated as tax exempt as per the Income Tax Act. Note that to be treated as tax exempt, all such legislated withdrawal arrangements must be carried out in strict accordance with the provisions of the Income Tax Act. If you require more details or would like to make a withdrawal please contact Manulife for assistance. TERMINATION OF EMPLOYMENT What happens if I terminate my employment (voluntarily or involuntarily)? If you terminate from the Company (either voluntarily or involuntarily), your membership in the Plan will stop and Manulife will be notified that you have terminated employment. If you are vested, Manulife will send you a letter advising you of the options you have in handling your account balance. Again, CRA rules specify that you must remove your money from the DPSP within 90 days from your termination date. If you are not vested at the time you leave the Company, your account balance will be forfeited. Terminating members are advised to move their DPSP balances into another registered retirement savings plan either with Manulife or with another financial institution. Manulife offers a special RRSP for terminating members called the Advantage Program that allows you to continue to stay invested in the same investments (except the McDonald s Stock Fund) that you enjoyed under the DPSP. Contact Manulife for details on this option to see if it is right for you. Terminated members who do not move their DPSP account out after 90 days from their termination date will automatically be moved to the Manulife Advantage Program where your money will be invested in the same investment options* that you had at the time of the transfer. Members who move to the Advantage Program continue to deal with Manulife directly. Details about the Advantage Program and the options available to you on termination of employment will be outlined in the Manulife letter or you can call Manulife. * The McDonald s Stock Fund is not an eligible investment option under the Advantage Program. Terminated members who have money invested in the McDonald s Stock Fund investment option and fail to move their account to another RRSP within 90 days will have their McDonald s Stock Fund holdings sold and reinvested in the Manulife Daily Interest Savings Account under the Advantage Program. Official Plan Text, the Plan text will prevail. Page 9

10 RETIREMENT When can I retire? While the normal retirement date under the Plan is age 65, you can really start your retirement at any time. To start your retirement income, you must transfer the money in your DPSP account to another qualified tax deferred option as described below. The value of your funds can be used to purchase an annuity, pursuant to section 146(1) of the Income Tax Act, or a Registered Retirement Income Fund (RRIF) no later than the end of the year in which you reach maturity age (presently age 71 but is subject to change). Retiring members are encouraged to seek independent investment advice to determine which retirement income option(s) is best for them. You may also contact Manulife for information. If I purchase an annuity, how is the pension payable? You can apply the value of your funds to purchase a life annuity pursuant to section 146(1) of the Income Tax Act and the terms of this plan. The pension is payable in equal annual or more frequent installments except where such installments may be increased or decreased in accordance with the Income Tax Act and the type of annuity purchased. Note that once an annuity is purchased, you cannot change the form in which your pension is paid or change your joint annuitant once you have started to receive pension payments. What forms of annuities are available? A wide variety of annuity options are available to you under the DPSP. Your options include a pension based on your life only; or a joint pension with your spouse as the joint annuitant; and with or without a guaranteed number of installments. Alternatively, you can select a term certain annuity payable until you turn 90 or, if your spouse is younger, until your spouse turns 90. Your pension can also provide for annual increases not exceeding 4% per year or it can be increased in line with the Consumer Price Index each year, if you choose. However, in accordance with the requirements of the Income Tax Act, pension payments will not increase following your death or the death of your spouse. As noted earlier, it is recommended that you seek independent investment advice when considering your retirement options or when determining if an annuity (and what type of annuity) is best for you. You may also contact Manulife for more information. Note: If purchasing an annuity from Manulife, they may require that you produce satisfactory evidence of your age and the age of any person you designate as a joint annuitant, if requested. Official Plan Text, the Plan text will prevail. Page 10

11 DEATH SETTLEMENT Who receives my benefits if I die before receiving my funds? If you die while you are employed by McDonald s, your beneficiary or estate will receive the value of your account. Subject to any applicable law, you may designate a beneficiary under the DPSP and subsequently change this beneficiary, by written notice to Manulife or in your will. W ith some exceptions related to minor children, normally only a person s legal spouse is entitled to receive your DPSP benefits tax free by rolling over the amount into their personal RRSP. Subject to regulations, if you name other individuals (other than your spouse) or your estate as beneficiary, taxes or estate settlements may apply. ADDITIONAL PROVISIONS Other costs For most members, the costs for participating in the Plan are described above. However, special situations can arise that may lead to costs being incurred for services you may require. For example, if a special report is required to fulfill the legal requirements associated with marriage breakdown, the cost will be borne by the member. When special costs may be involved, Manulife will advise you in advance before proceeding. Assignment Subject to any provision to the contrary stated in the official policy or plan text issued by Manulife, no annuity payable under the Plan is capable either in whole or in part of surrender, commutation or assignment. If the annuity becomes payable to anyone other than you or your spouse, it must be commuted. Limitation No benefits or advantages other than those described above will be provided to a member or annuitant, or to a person with whom he or she was not dealing at arm's length on account of this plan except the advantages derived from the provision of administrative and investment services, as authorized in the Income Tax Act. Official Plan Text, the Plan text will prevail. Page 11

12 Other provisions Manulife Trust Services Limited is responsible for the overall operation and administration of the Plan and entrusts McDonald s Canada to act on its behalf for the benefit of the Company's employees. Manulife Trust Services Limited has engaged Manulife to invest and manage deposits in the Manulife Pooled Funds and the Manulife Canada Guaranteed Funds described in the contract. In some situations, Manufacturers Life Insurance Company (a company related to Manulife) invests and manages deposits in the Manulife Guaranteed Funds described in the contract. Manulife Guaranteed Funds are only made available to those members whose investments in Manulife Guaranteed Funds have reached the Assuris maximum limit for registered group policies and who wish to secure additional Assuris coverage by investing in Manulife Guaranteed Funds. For more information regarding deposit insurance coverage for guaranteed investments, visit the Assuris website at All contributions made will be applied under the terms of the contract and according to the government requirements which pertain to the operation of the Plan. In addition, any contributions to the Plan and all withdrawals, transfers, or settlements from the Plan are subject to the supplementary provisions that may apply, if any. Each member is deemed to have received this Information Guide as it is posted on the Company Website McWeb; posted as part of the Manulife e-enrolment site; or on request made to the McDonald s Employee Services Department. Authority to amend this guide rests with Manulife or McDonald s Canada, as applicable. If there are any changes to this guide, the revised document will be posted on McW eb; the Manulife Member VIP Room; and/or the Manulife e-enrolment site. This DPSP has been submitted to Canada Revenue Agency for registration under the Income Tax Act (Canada). Official Plan Text, the Plan text will prevail. Page 12

13 DEFINITIONS In this Plan, the term Income Tax Act or simply, the Act, refers to Section 146(1) of the Income Tax Act (Canada) and any other applicable provisions of that Act as amended from time to time as well as any applicable provincial income tax legislation. "spouse" means anyone who is recognized as a spouse or a common-law partner in the Act. In this Information Guide, "McDonald s or the Company" or McDonald s Canada means the employer, McDonald s Restaurants of Canada Limited who acts as plan administrator and agent for and on behalf of members in respect of this DPSP. "I", "my", "you", "your" and "member" refer to any employee or retired employee of the Company of either thereof who joins the Plan. Any references to termination of employment will be construed to mean cessation of membership for retired employees. "contribution room" means the maximum DPSP or RRSP contributions allowable as reported annually by Canada Revenue Agency on the Registered Retirement Savings Plan (RRSP) Contribution Limit Statement. eligible earnings means those earnings which are defined by the DPSP Plan Text and/or current McDonald s Compensation Policies. In general, eligible earnings generally include your paid salary, paid hourly wages and/or paid bonus. "maturity age" means the age attained in the year in which the payment of retirement income provided for by the Plan, if having not commenced earlier, must commence, as prescribed under the Income Tax Act. "over-contributions" means any contributions exceeding the contribution room by an amount in excess of the allowable cumulative limit set by Canada Revenue Agency. Official Plan Text, the Plan text will prevail. Page 13