# Defined contribution pension plan



## dumbmoney (Apr 9, 2011)

Since there's no option to opt out, does that money become lost if I leave the company or Canada in the future?


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## DanFo (Apr 9, 2011)

Normally your entitled to everything you put into it back...and usually after a certain period of time you become vested and whatever the company has put into it on your behalf is yours as well...if you leave the company you usually have the option of leaving the money where it is accumualting growth in the current plan or moving the money over into another registered plan. You should be able to get the exact details and your options from you employer or the plan's sponsor


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## dumbmoney (Apr 9, 2011)

I'll discuss this in more detail with HR this Monday.

What I'm concerned about is that if I were to leave Canada for an extended period of time and living overseas as a non-resident (I'm talking about at least 10 years, possibly not coming back), I'd lose that money.


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## Four Pillars (Apr 5, 2009)

dumbmoney said:


> I'll discuss this in more detail with HR this Monday.
> 
> What I'm concerned about is that if I were to leave Canada for an extended period of time and living overseas as a non-resident (I'm talking about at least 10 years, possibly not coming back), I'd lose that money.


You won't lose the money in either case.


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## Jungle (Feb 17, 2010)

Most companies let you have all the money after 2 years. Best to check policy. When you quit, the money is transferred to a locked in retirement account. (LIRA) There you can invest it anyway you want, with any bank/brokerage that will accept you.


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## CanadianCapitalist (Mar 31, 2009)

I can tell you how it works in the Federal Government. If you leave within 2 years, you only get your contributions back. If you leave after 2 years, you have the option of transferring out the actuarial value of your pension value. You best bet is to talk to HR and request the pension booklet.


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## andrewf (Mar 1, 2010)

One of my biggest frustrations is having my pick of a bunch of high cost mutual funds in my company pension.


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## Rob79 (Feb 16, 2011)

andrewf said:


> One of my biggest frustrations is having my pick of a bunch of high cost mutual funds in my company pension.


That is the one positive about my plan, it is the CSSPEN (Cooperators) and they are large enough that they pre-package a Balanced, Bond, Equity, Money Market fund, they do not allow you to pic mututal funds, but the MER is only 0.2% and there historical in the balanced is about 10%


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## dumbmoney (Apr 9, 2011)

But if I were to leave Canada, I won't have access to that money until I come back to retire?


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## MoneyGal (Apr 24, 2009)

Whether you leave Canada or not, if the contributions have vested, you will normally not be able to access them until retirement age (except under certain conditions usually related to financial hardship or a very shortened life expectancy, and depending on your status in Canada, and on the existence or not of tax treaties between your new country and Canada). 

"Retirement age" is usually defined as 55 and older. However, all of these are just generalities. 

If you don't want DC monies "locked into" a container designed to provide income (only) in retirement, you need to either leave the plan before your contributions vest (and that typically means foregoing any contributions made on your behalf by your employer), or find a way to "unlock" the plan before retirement. 

If you leave Canada permanently and become a non-resident for tax purposes, you may be able to unlock vested contributions. 

Here is a basic link from taxtips.ca which provides an overview of how you might be able to unlock vested contributions: 

http://www.taxtips.ca/pensions/rpp/unlockingrpp.htm

We don't have enough information about your situation to provide any more information than these generalities.


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## kcowan (Jul 1, 2010)

The money in a DC plan is yours. You can do as you please with it (subject to certain known restrictions).

(What she said.)


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## Eclectic12 (Oct 20, 2010)

Jungle said:


> Most companies let you have all the money after 2 years. Best to check policy. When you quit, the money is transferred to a locked in retirement account. (LIRA) There you can invest it anyway you want, with any bank/brokerage that will accept you.


Hmmm ... I suspect it is less the company and more government regulation but I digress.

As for what happens when you quit, I've experienced quiting while in both Defined Contribution (DC) and Defined Benefit (DB) pensions at different times, with different companies. 

Note that I am including the DB pension in case other readers with a DB pension are also wondering about options when they quit.

In both cases, I was vested and was given at minimum options a, or c and only one offered option b or d. It is possible to be offered all of the options.

Options offered:

a) leave the plan "as-is" and collect the proceeds (DC) or pension (DB) at retirement. For both plans, this meant no new money would add to the plan so that the growth was either limited to what was already in the DC pension or capped to the formula of the DB pension. Investment choices for this option are either what the plan offers (DC) or none (DB).


b) transfer the current amounts into another another pension plan with the new company. This depends on whether the new company pension supports this option. I was only offered this once with the DB plan. When I priced it out, because of my age plus salary, the entire sum of the old pension bought 1 month additional DB coverage in the new plan - so I didn't think it was worth losing control of the investments.


c) transfer the current amounts into a Locked In Retirement Account (LIRA). I've done this for both DC and DB pensions. In both cases, the transfer opened up a lot more investment choices but added costs in the form of commissions and potentially annual fees for the LIRA. 

The DC pension transfer was not much of a change as whatever it grows to is what you have to work with at retirement. The DB pension transfer was a change as it removed the capped benefit guarantee which pretty much made it the same as the DC - except I now have control of what it is invested in.


d) Cash out the excess portion collected by the DB plan and pay income taxes on it. 

That particular DB plan had collected from me more than the benefit to be paid. So the employee/employer amounts plus growth that supported the benefit had to use one of options a, b, or c. The small amount that was "excess" - I had the choice of a, b, c, or d.



In all cases, I stayed in Canada, working for a Canadian company. There are likely other requirements when one goes abroad. 


Cheers


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## Eclectic12 (Oct 20, 2010)

dumbmoney said:


> Since there's no option to opt out, does that money become lost if I leave the company or Canada in the future?


From a high level - quitting but staying in Canada will result in a series of options being offered (see my post to Jungle). 

A question for you to ask about your DC pension is whether the employer is also putting money into the plan. If so - whether you will also receive the employer's contributions plus the resulting investment growth will depend on how long you've been in the plan. If the time is equal to or more more than the amount dictated by pension legislation - you are "vested" and will receive both sets of contributions plus investment growth (i.e. employee + employer + any investment growth).

Here is a link with more details. Note that it also explains defined benefit pensions but it covers the defined contribution pension as well.
http://www.retirementadvisor.ca/ret...iclePage=Companypension&learningMenu=articles


If you leave Canada - again you won't lose your contributions. However, there are more items to consider than just the pension and RRSPs. For example, according to this tax blog, you might also be subject to capital gains tax or income taxes.
http://blog.taxresource.ca/what-happens-if-i-leave-canada/


As well - if you have already transferred the pension to an RRSP or LIRA and move to the US, this blog entry says there may US tax implications:
http://blog.taxresource.ca/rrsps-and-leaving-canada/


So - if you do decide to leave Canada, while what's posted here may be of use, it would be a good idea to get professional advice.


Cheers


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## dumbmoney (Apr 9, 2011)

I just spoke to HR on Monday. Here's a breakdown of my situation. 

I am required to put in 5% of my pre-tax income into the plan, and the company will put in another 5%. This apparently takes away my RRSP contribution limit by 10%, reducing it to 8%.

There is a good chance that I might leave Canada in the next 5 years to pursue more studies and then work afterwards. I will be returning to Asia where I was born.

My main concern was that if my money is locked inside my pension, I wouldn't be able to have access to it in the near future when I will need it most. I definitely don't want to take out another $15k loan if I take out the money in my pension.

Thanks for the help thus far.


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