Local 2041 Acoustic & Drywall Pension Trust Fund Pension Plan Effective January 1, 2004
Local 2041 Acoustic & Drywall Pension Trust Fund Pension Plan Effective January 1, 2004
Important note The purpose of this outline is to explain briefly the main features of this Pension Plan. This outline does not create or confer any contractual or other rights. The Trust Agreement and Plan Document of the Local 2041 Acoustic & Drywall Pension Trust Fund and any governmental regulations govern all rights and obligations with respect to the Plan. Registration Financial Services Commission of Ontario The Plan is registered with the Financial Services Commission of Ontario. The Certificate of Registration, number 0493114, was issued pursuant to meeting the requirements of the Pension Benefits Act. Canada Customs and Revenue Agency The Plan is also registered with the Canada Customs and Revenue Agency (CCRA) Registered Plans Division. The Certificate of Registration, number 0493114, was issued pursuant to meeting the requirements of the Income Tax Act.
Local 2041 Acoustic & Drywall Pension Plan Board of Trustees Union Trustees Donald Guilbeault François Malette Venance Mallais Maurice Potvin Management Trustees Bob Delaney Jack Donovan Bernie Normand Don Sutherland Auditors Collins Barrow Ottawa LLP Consultant and administrator Street address Mailing address 333 Preston Street P.O. Box 3517, Station C Suite 200 Ottawa ON K1Y 4H5 Ottawa ON K1S 5N4 Telephone: (613) 231-2266 Fax: (613) 231-2345 e-mail: WEBMASTER@coughlin.ca Investment managers Bissett Investment Management AIM Funds Management Inc./Trimark Investments Custodian TD Canada Trust (for Bissett Balanced RSP Trust Account) Royal Trust (for Trimark Income Growth Fund) Legal counsel Jewitt Morrison & Associates
Table of contents Definitions... 7 Define the role of:... 15 Summary of the provisions of the Plan... 16 Purpose... 16 Effective date... 16 Eligibility... 16 Enrolment/beneficiary designation... 17 Participation... 17 Contributions... 17 Vesting... 20 Credited interest or investment earnings (losses)... 20 Locking-in... 21 Unlocking locked-in funds... 21 Benefits on termination... 22 Retirement dates... 23 Retirement... 24 Forms of pension... 25 Life annuities... 26 Life Income Fund... 28 Locked-in Retirement Income Fund (LRIF)... 33 Estimated purchasing power... 34 Government programs... 35 Death benefits... 35 Credit splitting on divorce, annulment or separation... 36 Spousal waivers... 37 Assignment... 37 Investment... 37 Rights to information... 38 Administration... 40 Respecting your privacy... 40 Change of address... 41
Pension Plan Definitions Act: means the Pension Benefits Act of Ontario, RSO 1990 and the regulations thereunder, as amended. Administrator: means the Board of Trustees of the Local 2041 Acoustic & Drywall Pension Trust Fund. Beneficiary: means a person or the estate of a member, entitled to receive pre-retirement or post-retirement survivor benefits on the death of the member. Under the Pension Benefits Act of Ontario, a spouse or common-law partner at the time of death is automatically the beneficiary, unless the appropriate waiver has been filed with the administrator prior to the death of the member. Cessation of membership or termination in the Plan: means having ceased employment in the industry for a company under collective agreement with the Local 2041, or for any other participating employer, for a continuous period of at least two years or more. Nevertheless, a disabled member who qualifies for Weekly Indemnity benefits under the Local 2041 Acoustic & Drywall Health and Welfare Trust Fund is considered active or employed while in receipt of such benefits. Furthermore, a member for whom contributions are made to the Local 2041 Acoustic & Drywall Health and Welfare Trust Fund Benefit Plan under the collective agreement applicable to residential workers is considered active for the purposes of this section during the months for which such contributions are made regardless of whether or not contributions are payable to the Pension Plan. 7
Local 2041 Acoustic & Drywall Collective agreement: means the collective agreement between The Carpenters Employer Bargaining Agency and the Carpenters District Council of Ontario, United Brotherhood of Carpenters and Joiners of America together with any appendix, modification or amendment thereof, by the terms of which the employer agrees to make contributions to the Plan, which the Trustees have agreed to accept. Continuous: means, in relation to membership in the Plan or to employment, without regard to periods of temporary interruption of membership or employment; and subject to government pension legislation, shall include any period of paid or unpaid absence from work if consented to by the employer, provided that any unpaid absence from work shall be limited to 24 consecutive months. Corporate trust agreement: means the agreement or contract entered into between the Trustees and the financial institution appointed by the Trustees for the purposes of the investment of the Fund established under this Plan. Credited interest or investment earnings (losses): means interest or investment earnings (losses) credited at rates determined by the Trustees at the end of each Plan year, having regard to the actual net rates earned or lost by the Fund on the basis of the audited financial statements. To determine the rate of investment earnings to be credited on an interim basis for refunds, death benefits and retirement benefits payable during the Plan year, the administrator will establish an interim rate based on the actual net rates earned or lost by the Fund after applicable expenses and capital appreciation and depreciation, realized and unrealized. When information or data is unavailable to determine the present monthly net rate, the administrator will refer to the most recent month(s) of the fiscal period where information is available and project the year to date return or loss on a pro-rata basis to the end of the month prior to the settlement date. 8
Pension Plan Deferred pension: means a pension benefit, payment of which is deferred until the first of the month following the 60 th birthday of the person entitled to the pension benefit, or such other date as may be specified. Employee: means a person who is: a) a member of the union and who is employed by a participating employer; and b) an employee of the union or of a participating employer employed in a class of employment to which participation in the Plan has been extended by the administrator. Employer: means: a) the union; and b) any participating employer who is party to the collective bargaining agreement or a participation agreement established between the union and such employer(s). Flat rate contributor: refers to the salaried personnel working for a participating employer or union as determined by the administrator. Former Plan member: means a Plan member for whom no contributions are being made by an employing company, but who continues to retain a right to benefits under the Plan. Fund or Trust Fund: means the Fund established in accordance with the Trust Agreement from the contributions of each employing company and from the investment earnings arising therefrom, and from which all benefits and administrative costs arising under the Plan are payable. 9
Local 2041 Acoustic & Drywall Government pension legislation: means the Ontario Pension Benefits Act, RSO 1990, the Income Tax Act, and any other similar provincial or federal legislation. Immediate pension benefit: means a pension benefit that is to commence within one year of the member becoming entitled to it. Inactive member: means an individual who is a member of the Plan, is no longer an employee, and is still entitled to benefits under the Plan. Insurer: means any corporation authorized to underwrite life insurance business in Canada. Investment counsel: means one or more organizations providing professional services in the pension fund investment field, as may be selected by the Board of Trustees from time to time, and responsible for investment decisions arising from the investment of the Pension Fund. Life Income Fund (LIF): means a life income fund that meets the requirements for a Registered Retirement Income Fund (RRIF) under the Income Tax Act. Locked-in: a member with two years of Plan membership may not receive his/her pension benefit in a lump sum cash settlement. On retirement he/she must accept a monthly benefit as stipulated by the Ontario Pension Benefits Act. Locked-In Retirement Account (LIRA): means a Locked-In Retirement Account as defined in the Income Tax Act. Locked-In Retirement Income Fund (LRIF): means a RRIF that meets the requirements set out in Schedule 2 of Regulation 144/00 of the Ontario Pension Benefits Act. 10
Pension Plan Member: means: a) a person shall become a member on the first day of the month following the establishment of his/her membership in the union. A person who is employed by the union or a participating employer in a class of employment to which this Plan has been extended, shall become a member on the first day of the month following his/her commencement of qualified employment by the union or participating employer. A member shall remain a member while employed by a participating employer. A member who ceases employment with one participating employer to become an employee of another participating employer shall continue to be a member of the Pension Plan without interrupting the continuity of his/her participation in the Plan. b) a former member entitled to a pension benefit under the Plan. Normal retirement date: means the first day of the month coinciding with or next following the attainment of age 60. Participant: means a member, former member, or pensioner, as required. Participating employer: means an employer who has been accepted by the administrator to participate in the Local 2041 Acoustic & Drywall Pension Plan and Trust Fund. Pension: means a pension benefit that is in payment. 11
Local 2041 Acoustic & Drywall Pension benefit: means a periodic amount to which a member or former member, or the spouse, other beneficiary or estate of a member or former member, is or may become entitled. Pension Benefits Act: means the Ontario Pension Benefits Act and any regulations thereunder. It may be amended from time to time and include other applicable acts of a substantially similar nature adopted by any other province or the government of Canada. Pensioner: means a person who receives a pension from the Plan or from an insurance company. Plan: means the Local 2041 Acoustic & Drywall Pension Plan provided for in the Trust Agreement and in the collective agreement. The terms and provisions of the Plan are outlined in this document and may be amended from time to time. For the purpose of the Income Tax Act (ITA) the Pension Plan is recognized as a Specified Multi-Employer Pension Plan (SMEPP) of the Defined Contribution or Money Purchase type. Plan year: means the four-month period from September 1, 1983 to December 31, 1983 in the case of the first Plan year, and each 12-month period from January 1 to December 31 in the case of subsequent Plan years. Prescribed: means pursuant to the requirements for registration of the Plan under any government pension legislation. Retire or retirement: means termination of employment with the employer and collecting a pension benefit from the Plan or from an insurance company. 12
Pension Plan Retirement Savings Plan: means a retirement savings plan registered under Section 146 of the Income Tax Act. Spouse: in relation to a member or former member means: a) a person, of the opposite or of the same sex, who co-habitates with the member or former member in a conjugal relationship for at least three years, or who is in a relationship of some permanence, if the person and the member or former member are the natural or adoptive parents of a child, as defined in the Family Law Act, 1986; or b) if there is no person described in paragraph a), a person who is married to the member or former member or who is party to a void marriage with the member or former member. Superintendent: means the Superintendent of Pension of the Financial Services Commission of Ontario. Termination of membership: means a member who ceases to be a member or participant. Termination is confirmed only at the first occurrence of the following events: a) if the member dies prior to retirement; b) if the member becomes a pensioner under this Plan; c) if the member ceases employment in the industry, other than for reasons of disability which render him/her eligible for Weekly Indemnity benefits under the Local 2041 Acoustic & Drywall Health and Welfare Trust Fund, for any company under collective agreement or participation agreement with the Local 2041 for a continuous period of at least two years or more; or d) if the member is expelled from the Local 2041 and satisfies c) above. 13
Local 2041 Acoustic & Drywall Total and permanent disability: means suffering of a physical or mental impairment that prevents an individual from engaging in any employment for which he/she is reasonably suited by virtue of his/her education, training or experience, that can reasonably be expected to last for the remainder of the individual s lifetime. Trust Agreement: means the agreement that spells out the methods of receipt, investment and disbursement of funds of the Plan and Trust Fund. It contains: provisions for investment powers of Trustees; irrevocability and non-diversion of trust assets; payment of legal, Trustee and other fees relative to the Plan; exculpatory clauses pertaining to the liability of Trustees; periodic reports to the employer or union by the Trustees; records and accounts to be maintained by the Trustees; conditions for removal, resignation or replacement of Trustees; benefit payments under the Plan; and the rights and duties of the Trustees in case of amendment or termination of the Plan. Trustees: means the Board of Trustees of the Local 2041 Acoustic & Drywall Pension Trust Fund and Plan. Union: means the United Brotherhood of Carpenters and Joiners of America, Local Union 2041. Vesting: means a member s right to receive a present or future pension benefit. Yearly Maximum Pensionable Earnings (YMPE): has the same meaning as under the Canada Pension Plan Act. The YMPE for 2004 is $40,500. Reference in the Plan Document to the singular shall include the plural, wherever appropriate. Reference to the male or female gender will include the female or male gender respectively, unless the context requires otherwise. 14
Pension Plan Define the role of: Administrator The party appointed by the Board of Trustees responsible for the collection of contributions, payment of benefits and provision of other administrative services such as recordkeeping, trust accounting and communicating with Plan members. Auditors The firm appointed by the Trustees to conduct a systematic investigation of procedures or operations to determine conformity with prescribed criteria. The auditors certify the accuracy of the financial statements on an annual basis. Consultant The party appointed by the Board of Trustees responsible for advising on the general management of the Fund, ensuring that the Plan is in compliance with the government regulations, drafting of the Plan s policies, reviewing and maintaining contracts and providing any other services required by the Board. Investment manager A professional money manager appointed by the Trustees to make the decisions relative to the asset mix and security selection of the Fund s portfolio. Trustee The Board of Trustees makes significant policy decisions to direct the Fund. The Board does not run the Fund in an operational sense. It delegates the day-to-day administration to a professional administrator. 15
Local 2041 Acoustic & Drywall Summary of the provisions of the Plan Purpose Q. What is the purpose of the Pension Plan? A. The primary purpose of the Pension Plan is to provide retirement benefits to union members and other participants on their retirement. As well, the Plan provides benefits on the termination of Plan membership or the death of a member prior to retirement. Effective date Q. When did the Plan become effective? A. The effective date of the Plan is September 1, 1983. This booklet includes all Plan revisions to January 1, 2004. Eligibility Q. Who is eligible? A. A person shall become a member of the Plan on the first day of the month following establishment of his/her membership in the union. A person who is employed by the union or a participating employer in a class of employment to which this Plan has been extended by the administrator, shall become a member on the first day of the month following commencement of qualified employment by the union or participating employer. 16
Pension Plan Enrolment/beneficiary designation Q. How do I enrol or submit a change of address, marital status or beneficiary? A. You must complete an enrolment card and submit it to the administrator. Cards are available from the union and the administrator s offices. Completing an enrolment card when you first enrol and every time there is a change in your personal information, marital status or beneficiary designation will ensure that your file is handled properly. Participation Q. Is participation in the Plan mandatory? A. Yes. As a condition of employment, all eligible members must become members of the Pension Plan. Contributions Q. How is the Plan funded? A. The employer calculates an amount based on the hours worked by each employee who is a member of the union. The rate is stipulated in the collective bargaining agreement between the employer and the union and covers the period for which the contribution is made. In the case of a flat rate contributor, the employer shall contribute on behalf of each employee at such rates as may be specified by the administrator. This contribution shall be limited to the amount, which will not exceed in aggregate the maximum Pension Adjustment applicable to the member for that year. Q. Can I make voluntary contributions? A. Yes. You may elect to increase your retirement benefits by making Additional Voluntary Contributions, provided they conform to the Income Tax Act. 17
Local 2041 Acoustic & Drywall Additional Voluntary Contributions may be paid either in one single sum or annually, or may be paid by regular deductions from basic wages. They may be discontinued at any time on your written instructions to your employing company. Contributions may commence or be changed once in any 12-month period. Upon application, your Additional Voluntary Contributions shall be refunded to you. Q. Will pension contributions continue to be made on my behalf if I collect short-term disability benefits? A. No. With the exception of the one-year extension while you are on Workplace Safety and Insurance Board (WSIB) benefits, pension benefits will not accrue during the period of disability. Q. If I go on WSIB, will pension contributions be made on my behalf? A. Under Bill 162, your employer must continue to provide pension benefits while you are on WSIB to a maximum of one year. To facilitate this, all employers party to the collective agreement contribute to a special fund which is used to credit disabled members. You are required to provide proof of WSIB entitlement to the administrator every month for which funding is requested. Q. What happens if I return to work after retirement? A. If, after retirement, you return to work for a participating employer, you shall be considered a new member of the Plan. Your new account will be subject to the same provisions regarding locking-in and portability on termination of employment or death that apply to non-retired members. Q. How do I know how much I can contribute to my RRSP if I participate in the Plan? A. The Canada Customs and Revenue Agency (CCRA) issues each taxpayer a special notice indicating his/her RRSP contribution limit for the taxation year. It uses the member s earnings and the Pension Adjustment for the previous year. 18
Pension Plan Effective January 1, 2003, the Money Purchase limit for Defined Contribution plans was increased from $13,500 to $15,500. The dollar limits for both RRSPs and Defined Contribution plans for the next three years are as follows: Year RRSP limit DC plan limit 2003 $14,500 $15,500 2004 $15,500 $16,500 2005 $16,500 $18,000 2006 $18,000 $18,000 x AIW* increase *AIW = Average Industrial Wage Q. What is a Pension Adjustment (PA)? A. The Canada Customs and Revenue Agency (CCRA) has introduced measures to equalize the amount that each individual can save for retirement in a given year, regardless of his/her Pension Plan. The Pension Adjustment is the amount by which your RRSP contribution limit is reduced in recognition of the value of benefit accruals under your pension plan. The higher the value placed on your accrued pension benefits each year, the lower your RRSP contribution room and vice versa. Your PA is reported in Box 52 of your T4 each year. Q. How is my Pension Adjustment (PA) calculated? A. The PA is calculated in accordance with the terms of the Income Tax Act. For a Specified Multi-Employer Plan (SMEP), such as this one, the PA is equal to the total employer-required contributions and any Additional Voluntary Contributions made by you or on your behalf for the taxation 19
Local 2041 Acoustic & Drywall year. The Pension Adjustment shall not exceed the lesser of the money purchase limit applicable to Registered Pension Plans for the year or 18 per cent of your prescribed compensation for the year. Vesting Q. Do employer contributions made on my behalf belong to me? A. Yes. The Plan provides for full and immediate vesting of all required and Additional Voluntary Contributions. Employer contributions made on your behalf must be used to provide a monthly pension at retirement. Credited interest or investment earnings (losses) Q. What kind of interest or investment earnings (losses) are credited on my account balance? A. Your account is credited with investment earnings (losses) at rates determined by the Trustees at the end of each Plan year, based on the actual net rates earned or lost by the Fund as reported in the audited financial statements. To determine the rate of investment earnings or losses to be credited on an interim basis for refunds, death benefits and retirement benefits payable during the Plan year, the administrator will determine the interim rate based on the actual net rates earned or lost by the Fund after allowing for applicable expenses and for all capital appreciation and depreciation, whether realized or unrealized. When information or data is unavailable to determine the present monthly net rate, the administrator will refer to the most recent month(s) of the fiscal period where information is available and project the year-to-date return or loss on a pro-rata basis to the end of the month prior to the settlement date. 20
Pension Plan Locking-in Q. When do the required employer contributions become locked-in under the legislation? A. All required contributions that have been made by the employer become locked-in once you have two years of membership in the Plan. The locking-in provision also applies to investment earnings accumulated in respect of required contributions. This means that on termination or retirement, you must accept a deferred or immediate annuity that provides a monthly pension for life. The accumulated funds cannot be withdrawn in a lump sum cash settlement unless the amount of pension that can be acquired with your account balance is less than two per cent of the Yearly Maximum Pensionable Earnings as defined yearly by the Canada/Quebec Pension Plans. In 2004, this is an amount of $67.50 of monthly benefit or less ($40,500 x 2% / 12). Unlocking locked-in funds In the event that you suffer from an illness or physical disability that is likely to shorten your life expectancy to less than two years, you may apply to unlock your pension funds. Application must be made on the prescribed form (Form 5 issued by the Financial Services Commission of Ontario) and filed with the Plan administrator. The province of Ontario also allows members who are experiencing financial hardship to apply to the Superintendent of Financial Services for consent to withdraw money from an Ontario Locked-in Retirement Account (LIRA), Life Income Fund (LIF) or Locked-in Retirement Income Fund (LRIF). It is important to note that this option is not available while your funds are in the Local 2041 Acoustic & Drywall Pension Plan. You must first terminate your membership in the Plan, transfer your account balance to an Ontario LIRA, LIF or LRIF, and then make application to the Superintendent on the prescribed form (Form 6). For information regarding withdrawal for reasons of financial hardship, contact the Financial Services Commission of Ontario directly at (416) 226-7889 or toll-free (800) 668-0128, extension 7889. 21
Local 2041 Acoustic & Drywall Benefits on termination Q. When can I terminate my membership in the Plan? A. Termination or cessation of membership in the Plan is permitted once your employment in: the industry; a company under collective agreement with the Local 2041; or any other participating employer, ceases for a continuous period of at least two years or more. If you qualify for Weekly Indemnity benefits under the Local 2041 Health and Welfare Trust Fund, or if contributions are made to the Health & Welfare Trust Fund while you are on WSIB or while working under the collective agreement applicable to residential workers, you are considered actively employed during the months for which such contributions are made, regardless of whether or not contributions are payable to the Pension Plan. Q. What are my options on termination? A. On termination of membership or on death, you or your surviving spouse, are entitled to transfer your accumulated contributions and interest to either: a) the Pension Fund related to another Pension Plan, if the administrator of the other Pension Plan agrees to accept the payment; or b) a Locked-In Retirement Account (LIRA); or c) a Life Income Fund (LIF) or a Locked-in Retirement Income Fund (LRIF); or d) purchase a deferred or immediate Life annuity. Q. If I terminate my membership in the Plan, may I leave the accumulated contributions and investment earnings in the Plan until retirement? A. Yes, if you leave the industry, you may leave your accrued pension benefit in the Plan until you are ready to retire or transfer the funds to another locked-in plan. 22
Pension Plan Q. How do I go about making application for a transfer of funds from the Plan? A. To apply for a transfer of funds, contact the Plan administrator and complete the following form(s): 1. T2151 - Direct Transfer of a Single Amount under Subsection 147(19) or section 147.3 supplied by the Canada Customs and Revenue Agency; and 2. Lock-in Agreement Concerning Transferred Pension Fund Proceeds making reference to the Ontario Pension Benefits Act and Section 146 of the Income Tax Act. Both forms are available from the Plan administrator or from any financial institution offering registered retirement savings plans. Retirement dates Q. What is the normal retirement date? A. Normally, you will retire on the first day of the month coincident with or next following your 60th birthday. This is referred to as your normal retirement date. You must advise the Trustees or administrator of your normal retirement date no later than 30 days prior to your retirement. Q. What is the early retirement date? A. You may retire on the first day of any month following or coincident with your attainment of age 50. Q. What if I am totally and permanently disabled prior to my early retirement date? A. You may retire on a Disability Pension at any time prior to age 50, providing a qualified medical doctor, licensed to practice under the laws of a province of Canada or of the place where you reside, has certified that a condition of total and permanent disability exists. The administrator may also request that you furnish proof of application and acceptance for Canada Pension Plan or Quebec Pension Plan Disability benefits. 23
Local 2041 Acoustic & Drywall Totally and permanently disabled means suffering from a physical or mental impairment that prevents you from engaging in any employment for which you are reasonably suited by virtue of your education, training or experience, that can reasonably be expected to last for the remainder of your lifetime. Q. May I postpone my retirement date beyond age 60? A. Yes. The Canada Customs and Revenue Agency requires that all pensions commence payment by the end of the year in which you attain age 69. In the event that you make application for your pension after your normal retirement date, your Pension will not commence retroactively. You must advise the Trustees or the administrator of your postponed retirement date not later than 30 days prior to such date. Retirement Q. How do I apply for my pension? A. Once you have decided on a retirement date, you should notify the administrator at least one month in advance. The administrator will send you the appropriate forms for completion and will at your request, provide any data you may require to select the appropriate pension option. Q. Must I submit proof of age or marital status? A. Yes. You are required to furnish proof of your date of birth before any pension payments are made to you. If you elect a type of pension which depends on the survivorship of your spouse, you are required to furnish proof of age of your spouse as well as a copy of your marriage certificate, if applicable. A Declaration of Marital Status form will also be required. Q. Can I make arrangements to discuss my retirement options with the administrator? A. Yes. Arrangements may be made by contacting the administrator and making an appointment. Spouses are encouraged to attend the retirement counselling session. 24
Pension Plan Q. Can I make arrangements to discuss my retirement options and other financial matters with a financial advisor? A. Yes, the administrator has an Individual Financial Consultant on staff who is available to assist you. There is no consultation fee. You may contact the administrator to arrange an appointment to discuss your retirement, financial planning, estate planning, investments, life insurance and other financial matters. Forms of pension Q. What is the normal form of pension? A. The normal form of pension depends on your marital status at retirement. If you do not have a spouse at retirement, the normal form of pension is a Single Life annuity with a 10-year guarantee. The benefit is paid for your lifetime. Should you die within 10 years of your effective date of retirement, payments will continue to your designated beneficiary or estate, until a total of 120 monthly payments have been made. If you have a spouse at retirement, pension laws require that you take a reduced pension which continues to your spouse or common-law partner at a minimum level of 60 per cent on your death. The normal form of pension under this Plan is a Joint and Last Survivor annuity, reducing to 60 per cent on primary death, with a 10-year guarantee. This means that your pension is payable for as long as you live. Should you pre-decease your spouse within the first ten years, the payments will continue to your spouse at 100 per cent until the end of the guarantee period, at which time, they reduce to 60 per cent and continue for your spouse s lifetime. In the event that you and your spouse die within the guarantee period, the payments continue to the designated beneficiary or estate until the end of the guarantee period. If you wish, you can provide more than a 60 per cent pension income to your spouse. Up to 100 per cent is possible, but you cannot provide less. 25
Local 2041 Acoustic & Drywall The only exceptions to this rule are: 1. if you do not have a spouse; or 2. your spouse agrees to waive his/her rights to a survivor pension. This can only be done by your spouse completing a special spousal waiver form which is available from the Plan administrator. Q. What other forms of pension are available? A. The Plan provides for other optional forms of pension in cases where the mandatory form of pension does not apply. Life annuities 1. Single Life annuity Under this form of payment, you will receive a monthly income for as long as you live. The monthly income will cease upon your death and no death benefits will be payable to a spouse, beneficiary or estate. This type of pension may suit you if you are single and have no dependants. 2. Single Life annuity with a minimum guarantee period Under this form of payment, you will receive a monthly income as long as you live. In addition, should you die before a specified number of payments have been made (usually 5, 10 or 15 years), the balance of the payments will continue to your designated beneficiary or estate. The amount of pension income you would receive under this option is less than the Single Life annuity only option as there is a guarantee that payments will be made for a specified period. Example: If you choose a Single Life annuity with a 15-year guarantee, you will receive a monthly payment as long as you live, with the provision that if you die before receiving 180 monthly payments, your named beneficiary or estate will continue to receive the balance of your monthly payments until a total of 180 payments have been made. The present value of the remaining 26
Pension Plan payments may be paid in a lump sum as an alternative to the continuation of monthly instalments. Once this provision has been met, no further payment will be made. 3. Joint and Last Survivor annuity Under this form of payment, you will receive a monthly income as long as you live. Should you pre-decease the joint annuitant (which must be your spouse), payments will continue to your spouse at the chosen percentage for your spouse s lifetime. When both you and your spouse are deceased, payments cease. Your Plan will offer a variety of survivor benefits, however, those typically allowed are 50 per cent, 60 per cent, 66 2/3 per cent, 75 per cent or 100 per cent of the amount payable immediately prior to your death. 4. Joint and Last Survivor annuity with a guaranteed payment period Under this form of payment, you will receive a monthly income as long as you live. Should you pre-decease the joint annuitant (which must be your spouse) the payments will continue to your spouse at the full amount until the end of the chosen guarantee period, at which time they will reduce according to the level of survivor benefit chosen and continue for the spouse s lifetime. When both you and your spouse are deceased, payments cease. In the event that both you and your spouse die within the guarantee period, the payments will continue to your designated beneficiary or estate until the end of the chosen guarantee period. Since there is a provision for payments to continue to a joint survivor for life, the amount of pension income you would receive under options 3) or 4) is less than the Single Life annuity with or without guarantee periods option. This type of annuity often helps married couples with their retirement planning. 5. A retirement benefit integrated with Canada or Quebec Pension Plan and payable during your lifetime. Under this form of payment, the initial retirement benefit will be an increased amount based on the assumed amount and commencement date of the Canada/Quebec Pension Plan benefits. This pension is used for integration purposes and reduces upon the assumed commencement date of the government pension. 27
Local 2041 Acoustic & Drywall 6. A Single Life annuity, with or without a guaranteed payment period, increasing by a fixed percentage not exceeding four per cent per annum. Life Income Fund A Life Income Fund (LIF) is an alternative income producing arrangement to an annuity. LIFs provide increased flexibility by enabling you to defer the purchase of an annuity to the end of the year in which you turn 80 years of age. While in the LIF, locked-in monies provide an adjustable flow of retirement income within a specified range of minimum or maximum withdrawals. At the same time, control over the balance of the locked-in capital and its investments is retained by you while investment earnings continue to accrue on a tax-sheltered basis. In essence, the LIF is like a bank account between your retirement age and the end of the year in which you turn age 80. You must draw an income from this account within the prescribed minimum and maximum payment levels. You cannot cash in the account. One advantage of the LIF is that you may time the purchase of the annuity. Your purchasing power is greatly affected by interest rates on the date of purchase. A LIF offers the potential for you to take advantage of a peak in interest rates. At death, your surviving spouse, or in the absence of a spouse, your beneficiary or estate is automatically entitled to the balance in the LIF contract. At the time of your death, the full amount remaining in the LIF can be transferred to your spouse without tax implication. This can be done using the existing LIF or by transferring the assets to your spouse s LIF or Locked-in Retirement Account (LIRA). If you do not have a spouse, the full amount becomes taxable in the hands of your beneficiary or estate. What is the minimum withdrawal formula? The minimum withdrawal formula is calculated by dividing the balance in the LIF at January 1 of each year by 90, less your age on the same date with exception between ages 71-77 inclusive for LIF s purchased after 1992. 28
Pension Plan The following table shows the minimum percentage of the LIF balance (at the beginning of the year) which must be withdrawn annually. The minimum withdrawal rates expressed as a percentage of the LIF balance (as per the table) are fixed. The dollar amount of the withdrawal must be calculated yearly based on this fixed percentage. Minimum withdrawl as a percentage Age at New Age Years to of the LIF balance start of year during year end of age 90 at the start of year 54 55 36 0.00% 55 56 35 2.86% 56 57 34 2.94% 57 58 33 3.03% 58 59 32 3.13% 59 60 31 3.23% 60 * 61 30 3.33% 61 62 29 3.45% 62 63 28 3.57% 63 64 27 3.70% 64 65 26 3.85% 65 66 25 4.00% 66 67 24 4.17% 67 68 23 4.35% 68 69 22 4.55% 69 70 21 4.76% 70 71 20 5.00% 71 72 19 7.38% 72 73 18 7.48% 73 74 17 7.59% 74 75 16 7.71% 75 76 15 7.85% 76 77 14 7.99% 77 78 13 8.15% 78 79 12 8.33% 79 80 11 9.09% *For example, the minimum withdrawal in a year for a person aged 60 at the beginning of the year with a LIF balance of $100,000 is as follows: $100,000 x 3.33% = $3,330 (the minimum allowable withdrawal for the fiscal year). 29
Local 2041 Acoustic & Drywall In the initial year of the LIF, the minimum withdrawal amount is zero. You must begin receiving annual payments at least equal to the minimum before the end of the second year. If you do not initiate the withdrawal, the carrier must make the payment to you. What is the maximum withdrawal formula? LIF regulations permit cash withdrawals up to the maximum during the initial fiscal year, provided you are 55 years of age, and the transfer has not been made from another LIF. In the initial year of the fund, the maximum is pro-rated based on the number of months the fund has been in existence. The maximum withdrawal formula is designed to ensure that sufficient money remains in the LIF to purchase a Life annuity at age 80. The interest rate used to calculate the annuity factor for the maximum annual withdrawal may be determined using one of the following two methods: 1. by using an interest rate not to exceed six per cent for all years; or 2. by using an interest rate that is not higher than the prescribed rate (published in the Bank of Canada Review under identification number V122487, formerly B14013) for the first 15 years and a rate that does not exceed six per cent in the remaining years. The interest rate chosen will ultimately affect the balance in the fund available to purchase a Life annuity. Using a lower interest rate will result in a lower maximum annual withdrawal amount. As a consequence, the balance available to purchase an annuity at age 80 may be higher than for a younger age. It is important to note that the interest rate discussed above has no connection to the interest rate generated by the investments supporting the LIF. The maximum withdrawal formula is: Amount in LIF at start of year = maximum dollar withdrawal in year Present value of payments of $1 per year to end of age 90 30
Pension Plan The following table shows the maximum percentage of the LIF balance (at the start of the year) which must be withdrawn annually. The maximum annual withdrawal at each age must be recalculated on January 1 of each fiscal year. The dollar amount of the withdrawal must be calculated yearly based on the applicable percentage for that year. 2003 maximum annual payment amount table for an Ontario Life Income Fund (LIF) Maximum Years to end payment as a of year percentage of the Age at New age age 90 LIF balance as at January 1, 2003 during 2003 is attained January 1, 2003 * 48 49 42 6.19655% 49 50 41 6.23197% 50 51 40 6.26996% 51 52 39 6.31073% 52 53 38 6.35454% 53 54 37 6.40164% 54 55 36 6.45234% 55 56 35 6.50697% 56 57 34 6.56589% 57 58 33 6.62952% 58 59 32 6.69833% 59 60 31 6.77285% 60 61 30 6.85367% 61 62 29 6.94147% 62 63 28 7.03703% 63 64 27 7.14124% 64 65 26 7.25513% 65 66 25 7.37988% 66 67 24 7.51689% 67 68 23 7.66778% 68 69 22 7.83449% 69 70 21 8.01930% 70 71 20 8.22496% 71 72 19 8.45480% 72 73 18 8.71288% 31
Local 2041 Acoustic & Drywall Maximum Years to end payment as a of year percentage of the Age at New age age 90 LIF balance as at January 1, 2003 during 2003 is attained January 1, 2003 * 73 74 17 9.00423% 74 75 16 9.33511% 75 76 15 9.71347% 76 77 14 10.14952% 77 78 13 10.65661% 78 79 12 11.25255% 79 80 11 11.96160% * The maximum annual payment percentage is calculated on the basis of a 12-month fiscal year to December 31, 2003 using the interest assumptions of 6 % which represents the greater of the CANSIM V122487 rate for November 2002 (5.55%) and 6 % for the first 15 years, and 6 % for the years remaining to the end of the year in which the LIF owner attains 90 years of age. Spousal consent A LIF may only be purchased with the written consent of your spouse. When the pension assets are transferred to a LIF, the spousal rights with respect to the assets are also transferred. Taxation The total amount of the LIF payment is taxable in the year it is received. At the same time, the payment is eligible for the pension tax credit of $1,000. 32
Pension Plan Locked-in Retirement Income Fund (LRIF) The province of Ontario also offers the LRIF as a retirement option. The LRIF is similar to the LIF with the following exception: 1. there is no requirement to purchase an annuity at age 80; 2. the maximum withdrawal from a LRIF is equivalent to the greater of: a) interest earnings of the fund in the previous year (including unrealized capital gains or losses); b) the value of the assets of the fund minus the difference between all amounts transferred into and out of the fund since its establishment; or c) in the first two years of the fund, 6 per cent of the value of the assets of the fund. If you do not withdraw the maximum amount in any given year, the balance may be added to the maximum amount in the following year. The minimum withdrawal during a fiscal year must not be less than the minimum amount prescribed for a RRIF under the Income Tax Act. Amount of pension Q. How much of a monthly pension will I receive at retirement? A. The amount of monthly pension you receive at retirement will depend on two factors: 1. your pension account balance at retirement; and 2. the purchasing power given the market trends. 33
Local 2041 Acoustic & Drywall Estimated purchasing power If you have an accumulation of $1,000 of required employer contributions and investment earnings, then based on an interest assumption of five, six or seven per cent at retirement, you can expect to receive a monthly pension payable in the form of a Joint and Last Survivor annuity, reducing to 60 per cent with a five-year guarantee of approximately the following amount: Age Monthly pension per $1,000 assuming interest rate at retirement of: 7% 6% 5% 50 $6.38 $5.72 $5.08 51 $6.42 $5.77 $5.13 52 $6.48 $5.83 $5.19 53 $6.53 $5.88 $5.25 54 $6.59 $5.95 $5.32 55 $6.66 $6.02 $5.39 56 $6.73 $6.09 $5.46 57 $6.80 $6.16 $5.54 58 $6.88 $6.25 $5.63 59 $6.96 $6.34 $5.72 60 $7.06 $6.43 $5.82 61 $7.15 $6.53 $5.92 62 $7.26 $6.64 $6.03 63 $7.37 $6.75 $6.15 64 $7.49 $6.88 $6.28 65 $7.62 $7.01 $6.41 Q. Does this pension affect my entitlement to CPP or OAS benefits? A. No. The pension you earn under the Local 2041 Acoustic & Drywall Pension Plan is payable in addition to the Canada or Quebec Pension Plans and Old Age Security. 34
Pension Plan Government programs As of January 2003, the maximum benefits available at age 65 are: 1.Canada Pension Plan (CPP); or 2.Quebec Pension Plan (QPP); 3.Old Age Security (OAS); $801.25/month $453.36/month. You may receive the CPP as early as age 60, but your CPP benefit amount will be reduced by six per cent per year for each year that you retire earlier than age 65. Death benefits Q. What happens to my account balance if I die before retirement? A. If you die before the commencement of your pension and you have a surviving spouse at the time, your surviving spouse is entitled to: a) receive a lump sum payment equal to the accumulated required and Additional Voluntary Contributions with investment earnings; b) purchase an immediate or deferred pension; c) purchase a Life Income Fund (LIF) or Locked-In Retirement Income Fund (LRIF) that meets the requirements for a registered retirement income fund under the Income Tax Act; d) transfer to a pension fund related to another pension plan if the administrator of the other pension plan agrees to accept the payment; or e) transfer to a Registered Retirement Savings Plan (RRSP). These provisions do not apply if you and your spouse are living separate and apart at the date of your death, or if your spouse signed a waiver of preretirement death benefit prior to your demise. Where no surviving spouse exists, or where you and your spouse are living separate and apart, your designated beneficiary or estate will receive the accumulated contributions and interest in a lump sum cash settlement. 35
Local 2041 Acoustic & Drywall Q. How long does my spouse have to decide on her options after my death? A. The law requires your surviving spouse to notify the administrator and convey a decision on the necessary forms within 90 days from the date of death; otherwise, the spouse shall be deemed to have elected to receive an immediate pension. Q. If I am married, can I designate a beneficiary other than my spouse? A. Yes. However, to do so, your spouse must complete a spousal waiver of preretirement death benefit where the spouse gives up all rights to a benefit on your death. These forms are available at the administrator s office and must be filed with the administrator prior to the member s date of death. Q. What happens to my pension if I die after retirement? A. If you die after you have begun receiving a monthly pension, the amount of any further benefit will be determined by the form of pension chosen at retirement. Q. Is the death benefit taxable? A. Yes, the death benefit is taxable. If your surviving spouse wishes to defer the taxation, she/he may transfer it to a registered retirement savings plan. Credit splitting on divorce, annulment or separation Q. Is my spouse entitled to any portion of my pension on marriage breakdown? A. Yes, under the provincial property law, your spouse is entitled to a maximum of 50 per cent of the pension assets accumulated while married. The Plan will allow for your spouse s share to be transferred out of the Plan as if the spouse was a terminated member, or the pension assets may simply be assigned to your spouse as of the effective date of a court order or written agreement between you and your spouse. In any case, the pension assets assigned to your spouse continue to be subject to the lock-in provisions and payment of benefits to your spouse will not be permitted until the earlier of the date your pension benefits commence or the date of your normal retirement. 36
Pension Plan Spousal waivers Pension legislation protects the rights of your spouse. It is important for you to realize that your spouse or common-law partner is entitled to different types of pension benefits at different times during your membership in the Plan. For example, although your spouse may agree to waive his/her entitlement to a preretirement death benefit, this does not affect his/her entitlement to pension benefits on marriage breakdown, or on your death. There are basically three triggering events: legal separation or divorce; retirement; and death. Three distinct waivers are required. On legal separation or divorce, your former spouse is entitled to up to 50 per cent of the assets accumulated during the relationship. On retirement, you must select a form of pension which will provide a survivor pension of at least 60 per cent of the amount payable prior to your death. On death, your surviving spouse is entitled to 100 per cent of the assets in your account, less any assets which were previously assigned to a former spouse or common-law partner. Please contact the Plan administrator for assistance with any of these issues. Assignment Q. Can I use my pension benefits as collateral to borrow money? Can my pension benefits be seized on bankruptcy? A. No. The law prohibits the assignment of any pension benefits. This provision is for your protection and is intended to ensure that you will receive a pension when you retire. Investment Q. Where are the funds being invested? A. At the present time, the Statement of Investment Policies and Procedures for the Pension Trust Fund calls for 50 per cent of the assets to be actively managed in a pooled balanced fund managed by Bissett Investment Management. The other 50 per cent are to be actively managed in a pooled balanced fund managed by AIM Funds Management Inc. 37