# Flex Pension Options



## hope4wealth (Sep 15, 2013)

My SO is one of the few people, these days, to have a DB Pension Plan.

As a part of this pension plan they also have Flex Options that they can contribute to, which include things such as: Early Retirement Pension, Bridge Benefits, Survivor Benefits and more. Participants are able to contribute to their Flex Options any time and can choose the amount they contribute. However, it's not clear on how much "should" be contributed for each of the options (or costs of each option) and if there is excess amount in the Flex account you can lose the money.

Anyone else have a similar type plan? Would appreciate any thoughts or inputs on how much we might be able to contribute without worry about losing this in the long run?

Likely haven't shared enough information related to this, but wanted general insights on flex options for DB Pension Plans and possible insight on how to calculate what you should contribute for various options.

Thanks in advance


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## Beaver101 (Nov 14, 2011)

hope4wealth said:


> My SO is one of the few people, these days, to have a DB Pension Plan.
> 
> As a part of this pension plan they also have *Flex Options that they can contribute to*, which include things such as: Early Retirement Pension, Bridge Benefits, Survivor Benefits and more. Participants are able to contribute to their Flex Options any time and can choose the amount they contribute. *However, it's not clear on how much "should" be contributed for each of the options (or costs of each option)* and if there is excess amount in the Flex account you can lose the money.
> 
> ...


 ... never heard of such a plan as likely newly engineered. But interesting to be able to have "contributory Flex Options" in a "DB" pension plan. Does the employer not contribute anything? Is there no pension document given by your SO's HR department?


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## NorthernRaven (Aug 4, 2010)

Here's an example of a flexible option plan, although the flex was apparently closed to new contributions as of 2014.


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## hope4wealth (Sep 15, 2013)

NorthernRaven said:


> Here's an example of a flexible option plan, although the flex was apparently closed to new contributions as of 2014.


Thank you, it is very similar to this link and has similar verbiage on over contributing due to Income Tax Act etc.


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## ian (Jun 18, 2016)

I was fortunate enough to have a DB plan like this. We could contibute up to 3 percent (maximum allowable by law at the time was $3300 per year. Company matched it with half..ie up to 1.5 percent/$1650 per year. 

I used it to bridge to 65 and to increase my survivor benefit.

On top of that I was also able to put up to $3300 in a group RSP.

Our DB plan was entirely funded by the employer, no employee DB pension deductions othe than the optional flex program.


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## peterk (May 16, 2010)

I have a flex provision to "juice" my DB pension as you describe above with bridging and indexing benefits. I asked my Payroll department how this works and they said the following:



> There are very strict rules surrounding contribution limits and all are set by CRA. The 3% maxes out at 192.69.
> 
> The $3,500 relates to contributions for years of service prior to 1990 and it is the maximum amount that is tax deductible in one year (whereas for contributions for 1990 and later the full contribution is tax deductible)
> 
> ...


So for me I can contribute 3% of my pay, to a max of $192.69 (bi-weekly). Sounds like 3% is the magic number, and I think a few others have said as well on this forum. I've started a thread about this 2 years ago I will try and dig it up later and link it here.


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## ian (Jun 18, 2016)

What always surprised me was the small percentage of employees who opted to take advantage of this company match.


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## hope4wealth (Sep 15, 2013)

ian said:


> What always surprised me was the small percentage of employees who opted to take advantage of this company match.


Thank you, this is very helpful.

How do you know that you won't over contribute by doing this? As my SO's pension package states that excess money in the Flex pension account will be forfeited.

I do think it will be useful to contribute but want to ensure it's of value to do so, and would prefer not to forfeit any of our contributions in the end.


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## peterk (May 16, 2010)

http://canadianmoneyforum.com/showthread.php/20682-DB-Pension-Employee-Contribution-Option-Tax-Treatment

Check out this thread discussing, I believe, the exact situation.


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## Eclectic12 (Oct 20, 2010)

hope4wealth said:


> My SO is one of the few people, these days, to have a DB Pension Plan.
> 
> As a part of this pension plan they also have Flex Options that they can contribute to, which include things such as: Early Retirement Pension, Bridge Benefits, Survivor Benefits and more. Participants are able to contribute to their Flex Options any time and can choose the amount they contribute. However, it's not clear on how much "should" be contributed for each of the options (or costs of each option) and if there is excess amount in the Flex account you can lose the money.
> 
> Anyone else have a similar type plan? Would appreciate any thoughts or inputs on how much we might be able to contribute without worry about losing this in the long run?


Yes ... at my company one can book a session with the benefits person to go over what one wants to achieve, review where one is at and project what one thinks one needs.

There's also a web based calculator that is updated yearly. Part of the calculator is a flex pension part that allows one to adjust the pension by what flex option is chosen. It also reports the current estimated cost as well as what the employee currently has in their account.




Beaver101 said:


> ... never heard of such a plan as likely newly engineered ...


It's been around a long time for executives. The surprise when I joined the company was that regular staff also had the option to use it.


Cheers


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## Beaver101 (Nov 14, 2011)

Eclectic12 said:


> ..
> 
> *It's been around a long time for executives.* The surprise when I joined the company was that *regular staff also had the option to use it*.
> 
> Cheers


 ... and why would you be surprised that "regular" (please define) staff also had the option to use it if that was indeed the case or made known the case?


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## Eclectic12 (Oct 20, 2010)

"Regular" = full time, permanent employee (i.e. includes the mailroom clerk, receptionist).
"Executive" = small group of the total number of full time, permanent employees (i.e. not the mailroom clerk, receptionist).

The surprise is that at my current company - the flex pension is available to all full time employees. All previous flex pension plans I had read of/heard of were for executives only. 


Cheers


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## ian (Jun 18, 2016)

Our plan was available to all employees in the DB plan.

The provisions of the flexible plan were carried on for those in the supplementary plan (earning above the legislated limits) but paid out in a different manner. In my case they were incorporated into a lira account which I rec'd when I retired.


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## Eclectic12 (Oct 20, 2010)

So if I am reading this correctly, the flex plan was available to all employees who were in the DB plan, correct?

If so, this matches my current plan. 
As I say, for previous companies - I as a lower than executive employee did not have access to the flex plan as it was for the executive level employee.


Can you explain what you mean by the "flex plan was carried out for those in the supplementary (earning above the legislated limits)" bit?

For my current plan, for those earning above the legislated limits there is a separate supplemental pension. I don't believe the flex plan applies to the supplemental but I glossed over those details when I read the pension booklet.

In the regular pension, the flex plan is available to all employees.


Cheers


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## ian (Jun 18, 2016)

Our flex plan was applied to pensionable earnings above the stat. limit by use of a 'notional' account. Since I signed up for the 3 percent/1 1/2 match the company applied this 1 1/2 percent match to earnings above the max, which I believe was in the 103k area at the time. This pool of monies was notional in that I knew how much it was butIcould not access it or even make decisions on how it was invested. My component of the 3 percent flex topped out and ended at the max 103K salary limit. The investment return on the notional account was based on the average of two funds. When I retired, this notional account was was given to me in the form of a lira. It could not be used to buy enhancements to the DB plan.

The only flex monies that I could use to enhance the DB plan were my contributions and the company match up to to, but not exceeding, the stat. Gov't cap.

Manyof the supplemental plans are different when it comes to earnings above the gov't max. In my case I had to take the supplemental component of the DB plan as either part of a one time payment of the entire DB commuted value. IF I selected a monthly DB pension, the only option was to take the cummuted value in three annual lump sum payments. This was OK since it was tax advantageous for me.

Clear as mud?


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## Eclectic12 (Oct 20, 2010)

ian said:


> Our flex plan was applied to pensionable earnings above the stat. limit by use of a 'notional' account.


Interesting ... I wonder if the "executive only" flex plans work this way as well. No one shared the details to this level so I don't know.

Our flex plan OTOH has people making $40K signing up and participating. There's a set menu of what they can buy with the $$$ as well as the choice of what it is invested in. There's no company matching funds.




ian said:


> ... When I retired, this notional account was was given to me in the form of a lira. It could not be used to buy enhancements to the DB plan.


Weird ... our plan has whatever dollars the funds grew to, which then buy pension enhancements. If one ends up with too much, the DB pension profits. If one ends up with too little for the range of enhancements one wants to buy then one has some choices to make.

There's no LIRA ... just whatever enhancement one buys and whatever profit the DB pension makes.




ian said:


> ... The only flex monies that I could use to enhance the DB plan were my contributions and the company match up to to, but not exceeding, the stat. Gov't cap.


Now I am confused ... there was a notional account that resulted in a LIRA and another that bought enhancements?




ian said:


> ... Many of the supplemental plans are different when it comes to earnings above the gov't max ...


Maybe that's the key difference ... our flex plan allows one to contribute or transfer other payments such as overtime up to the gov't max but no more. That may explain why it can only buy pension enhancements.


Cheers


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## ian (Jun 18, 2016)

The monies in the notional account were the employers 1.5 percent match on my earnings in excess of the 103K. These monies could not be used to buy enhancements to the DB plan. They cashed out in the form if a LIRA. Only my 3 percent and the company .1.5 percent match on earnings below the 103K limit could be used To buy DB enhancements. I was in the executive tier. No exec pension other than the supplementary. Employees got the details when the reached the pay band or is salary or variable income such as commission, bonus, etc.


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## Eclectic12 (Oct 20, 2010)

Interesting that for your executive version there's a $103K split that can't be used to enhance benefits but will provide retirement $$$ from the LIRA.

It is sounding like the employer $$ is what is causing the difference ... though under $103K amounts, the employer money is fine for enhancing the pension.


When I get a chance, I'll re-read our plan but as I say ... there's a set menu, set amounts for the max per year but no references that I recall to income levels.

Cheers


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## peterk (May 16, 2010)

The flex plan you guys are talking about, does it affect your Pension Adjustment? I have a 1.5/1.5% matching contribution supplemental plan, which is controlled by me through Sunlife, and contributes to my PA. I also have another 3% contribution that is an employee contribution, which I cannot control, that does NOT contribute to the PA but still gives me a RPP deduction on my T4. This is the money earmarked through the DB pension plan for enhancements like indexing and extra bridging etc.


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## NorthernRaven (Aug 4, 2010)

From CRA:


CRA said:


> Ancillary benefits are benefits that are provided under a pension plan in addition to the lifetime retirement benefits that are provided to a member, and they therefore do not increase the member's pension adjustment. (Some examples are increased early retirement benefits, survivor benefits, and bridging benefits.)
> 
> Since ancillary benefits are not taken into account in computing pension adjustments and past service pension adjustments, members can improve their benefits without reducing the amount of deduction room available for registered retirement savings plan contributions.


There's also a CRA bulletin from 1996 on flex pension plans.


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## ian (Jun 18, 2016)

To the best of my knowledge, and recollections from speaking to a pension expert, is that the 3 percent optional flex does not/did not impact our PA. That was a benefit that my employer took advantage of when our plan was revised I the late 90's.


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## OhGreatGuru (May 24, 2009)

Expecting 20-somethings to make good long-range decisions about pension plans is asking a bit much. As this is a DB plan, sounds like a good way for the employer to reduce its pension liability, under the guise of "flexibility", knowing full well that many young employees will take the money in their pocket now, rather than plan for retirement.


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## ian (Jun 18, 2016)

I do not understand how this would reduce the er's db pension liability. There is no impact on the DB. The flex option is exactly that. It is used to 'buy' enhancements such as bridges, inflation adjustments, guaranteed payout periods, etc. When an ee selects this options it adds up to $1600 per year to the per ee benefits cost.


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