# DB Pensions - a few questions



## Frank Drebin (May 10, 2015)

Couple questions regarding DB pensions:

1. Is there law/legislation to protect employees from their employer changing their DB pension rules while they are employed? ie) changing the magic number from 80 to 90, or increasing minimum retirement age from 55-60? For example if an employee was in a DB plan and 2 years away from retirement, can the company implement a new plan to force that employee to stay for another 5-7years to get the same pension, or else face early withdrawal penalties? Can they change the plan entirely?

2. Is there law/legislation to protect employees in the case of a company buyout? For example employee is working for "Company X" and has been a member of the DB pension plan. "Company X" is bought by "Company Y" which does not provide a DB pension benefit. Is "Company Y" obligated to continue with the DB benefits for said employee?

Thanks!


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## heyjude (May 16, 2009)

I think the applicable law would depend on the province or territory, unless it was a federal pension. 

http://en.m.wikipedia.org/wiki/Pension_regulation_in_Canada


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## Daniel A. (Mar 20, 2011)

Your first question depends on where as pointed out.

The second question in a company buyout no it depends on what was agreed to in the sale.

I think you need to be fairly specific as your question is to vague in general terms for the complexities of pensions.


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## sags (May 15, 2010)

The short answer is no.

If all employers had to do to avoid their pension obligations was reduce the benefits in the plan or sell themselves to a numbered company........they would all be doing it.


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## Frank Drebin (May 10, 2015)

Daniel A. said:


> Your first question depends on where as pointed out.
> 
> The second question in a company buyout no it depends on what was agreed to in the sale.
> 
> I think you need to be fairly specific as your question is to vague in general terms for the complexities of pensions.


Well I guess that is kind of my question. Start your career with Company X, which promises a full DB pension after 30 years of service. 15 years in, Company Y purchases Company X.

Does company Y have any obligation to continue with the DB pension for the employee? Or would Company X "pay out" the accumulated value of 15 years of service in the DB plan and the employee starts new with the DC plan that company Y provides?

Usually the first 10-15 years of a DB pension have a very low cash value, could an employee that chooses an employer because of DB pension be at risk if such a situation were to occur?

Perhaps I'm hoping someone could chime in with some real world examples. I know a guy...


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## Daniel A. (Mar 20, 2011)

Yes I have seen this happen, if the company taking over has a DC instead of a DB they have no obligation to continue your DB and yes you would have the value of your DB commuted.

Your right it is the first 15-20 years that funding is low and the end 10 years is where the real value is. I was almost faced with the same thing in private industry and lucky that the company was spun off instead of sold to a competitor so we retained our DB pension.

Had the company been sold to a competitor who I knew had a DC plan I would have lost about 250,000.00 in DB funding for my last five years. At the time when I looked at the graphs even leaving what I accumulated in the DB plan would have left me with 1,000.00 less a month.

In today's world this is one of the big pitfalls of DB pensions and trying to think in terms of 30 years out so much could change with companies. I know one guy that had been in a DC plan for all his working time when we took over his company they were given a choice of changing to our plan or staying with what they had he had the same service years and we compared numbers his were fairly good but dependent on market performance. Its unnerving in those last 10 years to have to wonder which way the tree will fall such a huge potential impact.

DC plans can be fairly good in that at least you get the real value of your retirement savings from day one and it makes it easier to change jobs, betting on the DB which is what I did does not come without risk. As I pointed out the guy that had spent his working life in the DC plan was doing fine from my read but converting from a DB where years mean everything is an expensive possibility that most people don't realize.


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## carverman (Nov 8, 2010)

Frank Drebin said:


> Does company Y have any obligation to continue with the DB pension for the employee? *Or would Company X "pay out" the accumulated value of 15 years of service in the DB plan and the employee starts new with the DC plan that company Y provides?*
> 
> Usually the first 10-15 years of a DB pension have a very low cash value, could an employee that chooses an employer because of DB pension be at risk if such a situation were to occur?


Pension rules are complicated. 
Using my former employer Nortel as an example; which had a DB pension plan only until about 1996; (when they went into a period of rapid growth and expansion and determined at that point that they could not sustain the DB pension topups based on the number of employees in 1996)

VS what they were required to topup during their growing years; 
from about 1976 when they gained independence from Western Electric (US), and was bought out by Bell Canada as a 100% owned subsidiary, when Nortel employees were given the same benefits as Bell employees, with their own DB pension plan. 

Around 1996 before the big 1998 Nortel expansion, with *Bell divesting themselves of their shares of Northern Telecom and any association with Bell*. 
(Nortel), then went ahead and offered existing employees to that point that were enrolled in the DB plan.... with *more than 10 years of service*, (where the pension is considered vested at that point and the employee is entitled to pension payments... once they have the magic number of 85..(age plus years of continuous service)...*.
Two options:

either to stay in the DB plan * , or choose to have their *commuted pension entitlement in the vested portion *of their DB plan *converted to the new DC plan,* and the company would continue contributions along with the employee making contributions. 

Any existing Nortel employees to that point (when the new DC plan was created) with* less than 10 years of service did NOT have the option *of staying in the DB plan..their entitlement was commuted and transferred over to the new Nortel DC plan. 

Any NEW employees from mid 1996 on would only be eligible for the DC plan.


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## carverman (Nov 8, 2010)

Daniel A. said:


> In today's world this is *one of the big pitfalls of DB pensions and trying to think in terms of 30 years out so much could change with companies.* I know one guy that had been in a DC plan for all his working time when we took over his company they were given a choice of changing to our plan or staying with what they had he had the same service years and we compared numbers his were fairly good but dependent on market performance. *Its unnerving in those last 10 years to have to wonder which way the tree will fall such a huge potential impact.*
> 
> DC plans can be fairly good in that at least you get the real value of your retirement savings from day one and it makes it easier to change jobs, betting on the DB which is what I did does not come without risk. As I pointed out the guy that had spent his working life in the DC plan was doing fine from my read but *converting from a DB where years mean everything is an expensive possibility that most people don't realize*.


In my case having about 18+years of continuous Bell, (where my years of service was bridged with Nortel, while Bell had majority stock ownership of Nortel up to 1998, it was more advantageous to stay in the Nortel DB plan for me , never thinking they would fail early in 2009. 

I was given early retirement in 2002, so at that point I had 23+ years of service and was given a Special *leave of absence with full pay
and benefits in recognition of my years of service, * until I had acquired the remaining years to be pensioned off at 25 years of service.

I was luckier than most that switched over to the DC plan and lost a "fair bit" in both the equivalent commuted value, and further DC contributions from the company after 2002, when they got into financial hot water.

In my case, even though the Nortel DB plan was severely under funded from 2002 onwards and by 2012 down about 33% in pension fund sustainability and growth, I am still collecting a reduced pension today, even if it's in the process of PENSION PLAN WINDUP.

It's a crap shoot as they say..I don't know if I would have done any better with a DC plan, except perhaps had some control over it once the company went bankrupt,
but at the same time, I realize that I never put a single red penny into my DB pension plan..so even as it gets even more reduced after windup..it's still free money
that otherwise I probably wouldn't have at this point in my life.


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## Frank Drebin (May 10, 2015)

Daniel A. said:


> Yes I have seen this happen, if the company taking over has a DC instead of a DB they have no obligation to continue your DB and yes you would have the value of your DB commuted.
> 
> Your right it is the first 15-20 years that funding is low and the end 10 years is where the real value is. I was almost faced with the same thing in private industry and lucky that the company was spun off instead of sold to a competitor so we retained our DB pension.
> 
> ...


Thanks for your reply. At my current employer one of the biggest advantages they have over other similar employers is that they still offer a DB pension, as well as an option for DC. I don't consider the DC option a benefit because those types of pensions/savings plans are available at almost every employer for my profession.

I think a lot of people at my workplace consider the DB pension a safe bet, because its "guaranteed" money. Which really it isn't, even in retirement. If the funding isn't there, or isn't managed properly, DB pensions can even be rolled back in retirement.


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## Frank Drebin (May 10, 2015)

carverman said:


> In my case having about 18+years of continuous Bell, (where my years of service was bridged with Nortel, while Bell had majority stock ownership of Nortel up to 1998, it was more advantageous to stay in the Nortel DB plan for me , never thinking they would fail early in 2009.
> 
> I was given early retirement in 2002, so at that point I had 23+ years of service and was given a Special *leave of absence with full pay
> and benefits in recognition of my years of service, * until I had acquired the remaining years to be pensioned off at 25 years of service.
> ...


I see the whole "Free money" aspect of a DB pension, but does a DB pension not chew up a lot of RRSP room? Almost handcuffing you to use it as your only option? (Pre TFSA I suppose)


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## AltaRed (Jun 8, 2009)

Frank Drebin said:


> Thanks for your reply. At my current employer one of the biggest advantages they have over other similar employers is that they still offer a DB pension, as well as an option for DC. I don't consider the DC option a benefit because those types of pensions/savings plans are available at almost every employer for my profession.
> 
> I think a lot of people at my workplace consider the DB pension a safe bet, because its "guaranteed" money. Which really it isn't, even in retirement. If the funding isn't there, or isn't managed properly, DB pensions can even be rolled back in retirement.


As already noted, pensions are very complicated and do depend on whether a federal pension or a a provincial pension, etc, etc. Generally, the concept is that employers cannot retroactively change the past but they are certainly free to change plans going forward, including stopping any further service and contribution accruals. So if they change the early retirement option, they would most likely only change it for forward contributions, but retain the past in the original plan. One would then essentially get 2 pension payments (though it may be a consolidated payment). One payment under the old plan and one for the new plan. By the time I retired, my DB pension was made up of 3 distinct components... as pension plan terms changed over some 27 years of employment, including once being acquired by another company.


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## Beaver101 (Nov 14, 2011)

Frank Drebin said:


> I see the whole "Free money" aspect of a DB pension, but *does a DB pension not chew up a lot of RRSP room*? ...


 ... I had the same question given the PA that goes with a DB plan. And I still don't see it as a non-strings attached "freebie" as there is no financial incentive to the employer?


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## carverman (Nov 8, 2010)

Frank Drebin said:


> T
> I think a lot of people at my workplace consider the DB pension a safe bet, because its "guaranteed" money. Which really it isn't, even in retirement. * If the funding isn't there, or isn't managed properly, DB pensions can even be rolled back in retirement.*


Exactly; if the company is no longer around to top up the funding, the investment climate such as it is, cannot provide enough growth to sustain the retirees claiming benefits as time goes on. 

Even if some do not qualify for pension benefits initally, (magic number = 85) at some point these retirees, or employees that have left the company with
the DB pension, will want to claim the benefits they are entitled to, as soon as they qualify.

This can deplete the DB plan a much faster than expected, if the company doesn't take up the slack to compensate from general revenues for the
shortfall.


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## carverman (Nov 8, 2010)

AltaRed said:


> As already noted, pensions are very complicated and do depend on whether a federal pension or a a provincial pension, etc, etc. Generally, the concept is that employers cannot retroactively change the past but they are certainly free to change plans going forward, including stopping any further service and contribution accruals. So if they change the early retirement option, they would most likely only change it for forward contributions, but retain the past in the original plan. One would then essentially get 2 pension payments (though it may be a consolidated payment). One payment under the old plan and one for the new plan. By the time I retired, my DB pension was made up of 3 distinct components... as pension plan terms changed over some 27 years of employment, including once being acquired by another company.


I have a similar one with mine. It is made up of two components which I have never understood..but as long as I have some DB pension benefits coming in, I'm not too worried about it, as things will change at some point with the ongoing windup of the DB plan.


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## sags (May 15, 2010)

carverman said:


> Exactly; if the company is no longer around to top up the funding, the investment climate such as it is, cannot provide enough growth to sustain the retirees claiming benefits as time goes on.
> 
> Even if some do not qualify for pension benefits initally, (magic number = 85) at some point these retirees, or employees that have left the company with
> the DB pension, will want to claim the benefits they are entitled to, as soon as they qualify.
> ...


Only if the company goes bankrupt can pension benefits become underfunded and rolled back.

In all other scenarios, the company must provide 100% funding before the administrator winds up the plan......due to a change to DC plan or a sale to another company.

In those cases, as noted by AltaRed the earned pension benefits must be honoured.

There used to also be a general consensus that while past service pension benefits were guaranteed, ancillary benefits such as health care coverage and life insurance were not.

I heard it expressed frequently by those who were supposed "experts" on pensions.

GM thought so to, and sent out letters to all their management retirees informing them they would no longer provide the coverage.

The retirees sued GM in a class action suit and won. GM had to retroactively pay all costs and benefits to the retirees.

After decades of promising retirement benefits in booklets and literature, the Superior Court wasn't going to let GM just walk away.

The court decision was a landmark case that changed the legal landscape for pensions.

http://business.financialpost.com/legal-post/benefit-changes-inspire-class-action-and-other-lawsuits


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## sags (May 15, 2010)

All "registered" pensions in Canada fall under government supervision.

They have periodic audits to ascertain the plan funding levels.

If the plan is underfunded, the company is ordered to pay the shortfall into the fund, within the repayment guidelines.

I don't know how all other pension benefits are calculated, but pensions for the Big Three autoworkers pay a set dollar amount per year of service.

There is no last few years of increased value...........beyond the usual yearly increase.

For example..........a person with 14 years of pension time will receive 50% of what a person with 28 years of pension time would receive.

Using a factor of $1 per year of service as an example.

14 X 1 = $14

28 X 1 = $28

In Canada, Nortel and US Steel are about the only examples I have heard that retirees had to receive reduced benefits. Both those companies went into bankruptcy.

There is far too much unwarranted worry about DB pension plans. They have rarely failed and most are currently well funded.


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## fraser (May 15, 2010)

Gai Lea (co op) pensioners took a large haircut a few years ago. Those multi employer do plans are always at risk.

Alumtek (not sure that the name is correct) DB pensioners also took a hit....it went through the courts after bankruptcy procedures. Management employees in their supplementary plan got nothing.


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## Daniel A. (Mar 20, 2011)

Air Canada took a hit as well.


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## Eclectic12 (Oct 20, 2010)

Frank Drebin said:


> ... I think a lot of people at my workplace consider the DB pension a safe bet, because its "guaranteed" money. Which really it isn't, even in retirement. If the funding isn't there, or isn't managed properly, DB pensions can even be rolled back in retirement.


YMMV ... as I understand it, the changes to my DB pension did not change what those where were already retired received - only those who were still active employees or those who were not collecting a pension. As the new rules were communicated via education sessions about a year before the rules came into effect - there was a bunch of people who retired to take advantage of the early retirement date that was being pushed back & to keep the payout the same. 




Frank Drebin said:


> I see the whole "Free money" aspect of a DB pension, but does a DB pension not chew up a lot of RRSP room? Almost handcuffing you to use it as your only option? (Pre TFSA I suppose)


Are you thinking the employer contributions are "free money"?

IAC ... how much the pension adjustment (PA) will reduce future year's RRSP contributions will vary depending how rich the pension payout formula is, as well as how high one's salary is. I've known people in a DB pension who earn $600 a year in RRSP room due to the DB pension generating a large PA. Most I know with a high salary in a private pension are earning about $4K to $6K RRSP room a year.

As you say ... one can use the TFSA plus whatever RRSP room is available. Finally, one can also use taxable investments as well.




Beaver101 said:


> ... I had the same question given the PA that goes with a DB plan.


As I say - it depends on how rich the pension formula will pay out. The formula is (9 x annual accrued benefit) – 600 ... so one will always earn $600. Most private DB pensions will have people earning some RRSP contribution room.
http://www.milliondollarjourney.com/what-is-the-pension-adjustment-pa.htm




Beaver101 said:


> ... And I still don't see it as a non-strings attached "freebie" as there is no financial incentive to the employer?


Now I'm confused. 

If it's a "freebie" that flows from employer to employee then by definition - there would never be a financial incentive to the employer. The same holds true for DC pensions or RRSPs where the employer provides matching funds.


The pension is about what benefits other employers are offering plus what the employer feels they should do. If it was simply a "what's the financial incentive" - all employers would offer the gov't legislated minimum.


Cheers


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## fraser (May 15, 2010)

DB pensions do of course reduce the amount of RSP room that you have available in the following year. Notwithstanding, you will always have minimum contribution room of approximately $3400 (it changes as the max. allowable pension changes).

Many DB plans allow for contributions over and above the CR DB maximums. As I recall, the maximum pensionable salary is something like $120K as set by CRA. These are the contributions, employer and in some plans employee, that are placed in federally or provincially regulated DB pension plans. 

Many companies provide identical benefits for those over the CRA salary limit. The monies are placed in what is known a supplementary pension plans. These are not audited by any gov't regulation, other than CRA, and the benefits are paid from the company's general revenue stream. As such, they are very much at risk in the event of bankruptcy proceedings.

You can also have a DB plan that has a small matching DC like contribution. The max. for this used to be approx. $3300. year. It does not reduce your RSP room. I was a member of such a plan for a number of years. We had a non contributory DB plan plus a DC plan where we could contribute up to 3 percent of the CRA maximum. THe company would match it. These monies could only be used for pension enhancements....indexing, early retirement, spousal, etc.


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## Beaver101 (Nov 14, 2011)

Eclectic12 said:


> ...
> 
> Now I'm confused.


 ... okay, maybe the word "incentive" isn't the right word used here for the employer as surely the employer can consider DB pension contributions as business expenses, nothing to say about any matching employee contributions component? So not sure just how is it a freebie or much of a freebie is it for the employee.


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## fraser (May 15, 2010)

DB's can be a huge benefit.

My DB, and supplemental DB, had a combined commuted value of $1.2M when I retired after 25 years. 

We did not contribute a dime to the plan. It was employer funded.


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## peterk (May 16, 2010)

Certainly you shouldn't be thinking of a DB pension as a "freebie". It is part of your annual compensation and should be treated as such when comparing decisions to leave or stay or accept a new job.


The freebie aspect may come into play a bit when you consider that the "annual compensation" is tax deferred until retirement, where you will likely have a lower tax rate, and that the "interest rate" you're earning on those funds is a much higher rate than any risk-free GIC RRSP you may have.


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## Eclectic12 (Oct 20, 2010)

Beaver101 said:


> ... okay, maybe the word "incentive" isn't the right word used here for the employer as surely the employer can consider DB pension contributions as business expenses, nothing to say about any matching employee contributions component?
> 
> So not sure just how is it a freebie or much of a freebie is it for the employee.


I believe either way (DB, DC, matching contributions, expenses to setup the program) .... it's all a business expense.

The main on-going issue is the DB pension as the costs to the employer can fluctuate dramatically where top ups are required.


The other way to question the "freebie" part is whether in a no pension/no Group RRSP situation the employer would just pay the employee more in salary.


Cheers


*PS*

Because I've never had an employer contribution only pension ... I keep forgetting that for a lucky few don't have employee contributions. Just like the neighbours of a teacher in the Windsor area that worked for the car company had trouble believing the teacher had health care premiums. :biggrin:


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## Eclectic12 (Oct 20, 2010)

peterk said:


> ... The freebie aspect may come into play a bit when you consider that the "annual compensation" is tax deferred until retirement, where you will likely have a lower tax rate, and that the "interest rate" you're earning on those funds is a much higher rate than any risk-free GIC RRSP you may have.


YMMV ... where matching occurs - there is a "freebie" aspect as where one chooses to not use it by making contributions, one loses it.

I get the overall point though.


Cheers


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## Daniel A. (Mar 20, 2011)

I was once told that employers with a pension system receive a reduction on their CPP payments to the government not sure if this is true.


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## Eclectic12 (Oct 20, 2010)

^^^^

I suspect if it was it, it was before the latest round of changes to deal with CPP potentially underfunded. I tend to question if it ever was but only having been an employee ... :biggrin: , I don't know.

CPP has to pay out regardless of what company pension is added to it so I don't see why there would have ever been a rationale for an employer to pay less than the required premiums.


Cheers


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## fraser (May 15, 2010)

Some employers comprehend CPP into their DB, retirement plans. I believe that the federal civil service does. 

Not certain about private DB plans. The few that I am familiar with do not. They are separate. My sister used to pay 12 percent into her pension at the school board- 5 percent CPP and 7 percent matching DB. Her school board's plan incorporated/comprehended CPP.


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## Eclectic12 (Oct 20, 2010)

fraser said:


> Some employers comprehend CPP into their DB, retirement plans. I believe that the federal civil service does.


The ones I have read reduce what the employee is paid from the company pension by the amount CPP starts paying. So it makes sense that the company could put less into their own pension.

CPP has to pay out so it does not make sense to me that CPP would be happy accepting less employer contributions. After all, CPP only has employer + employee + investment growth (plus the funds from those who die early) to fund the payouts.


For the employer (or employee CPP) contributions to be reduced, it would seem to me that CPP would need to be allowed to pay less when the company pension kicks in. 


Cheers


*PS*



> The OPSEU Pension Plan is integrated with the CPP, as are many other public and private sector plans.
> 
> Integration means that the OPSEU Pension Plan is designed to take into account CPP contributions and benefits. For instance, during the member’s employment, *both the member’s and the employer’s contributions to the OPSEU Pension Plan are reduced *to reflect the fact that contributions are also payable to CPP for a portion of the member’s earnings.


http://www.optrust.com/Employers/Em...Canada-Pension-Plan-integration-at-age-65.asp

I interpret this to mean CPP is getting full employee/employer contributions. It is the contributions to the company DB pension that is being adjusted (in this case, OPSEU's plan).


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## sags (May 15, 2010)

I have a pension plan, never contributed to RRSPs and my total unused RRSP contribution room is $65,000 despite earning in the top 10% percentile.

A Big Three (GM, Ford, Chrysler) auto worker's pension for a 30 and out employee drops from $3500 a month to $2000 a month at age 65.

I think most pensions have a similar reduction. Perhaps those that don't "drop" simply never paid any extra supplementary or bridge benefits to start with.

(IE.........they don't lose what they didn't get).

I remember people with military pensions were quite upset that their pensions were decreased at age 65. What they didn't realize was that their pension wasn't reduced....it was artificially higher pre-age 65 with supplement, transition, or bridge benefits.

Of course, after people receive something for a time, they feel cheated if they believe it is being "taken away".

Many companies offered incentives for people to retire. The company wanted their most costly employees (higher wages and vacation time) to move from the "company books" to the pension plan. They could then hire lower cost employees.

There was a time period when many employers wanted to reduce their headcounts.........from auto companies to hospitals.

We considered taking CPP from 60 -65 as "double dipping".......because we receive the CPP and the pension hasn't been reduced yet.

The original idea for the pension was to provide a steady income from retirement onwards, with a combination of pension and government benefits.

When the government allowed "early" CPP..........it changed things, and many pensions didn't adjust for the change.

Hence "double dipping" with the CPP became common.


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## Eclectic12 (Oct 20, 2010)

sags said:


> I have a pension plan, never contributed to RRSPs and my total unused RRSP contribution room is $65,000 despite earning in the top 10% percentile.


Whereas a similar person in my private company DB pension starting today, over thirty years would accumulate $120K of RRSP contribution room.




sags said:


> A Big Three (GM, Ford, Chrysler) auto worker's pension for a 30 and out employee drops from $3500 a month to $2000 a month at age 65.
> 
> I think most pensions have a similar reduction. Perhaps those that don't "drop" simply never paid any extra supplementary or bridge benefits to start with.


It might be the bridge benefits. My previous two employers had no bridge benefits for regular employees (I'm sure the executives did). My current pension is the first that has offered such a choice ... if I am willing to fund it out of my pocket.

I seem to recall the PS pension saying the payout would stay flat where the bridge would cover to age 65, when the bridge dropped off.

For my private DB pensions, I don't recall any of them dropping their payouts at age 65 by such a huge amount (by CPP but that's at max $1065 a month). I'll check the manual for the latest updates and post what I find.


That's all to say that YMMV.


Cheers


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## GreatLaker (Mar 23, 2014)

My private non-contributory DB pension provides a standard pension payment without a bridge, but optionally it has a "level income option" where if you retire before age 65 the initial monthly payment is higher followed by a lower monthly payment at 65. Effectively it is an optional bridge amount, that I presume would be actuarially equivalent to the standard payout.

If anyone is really interested in understanding the pension system give the following book a read:
The Pension Puzzle by Bruce Cohen and Brian Fitzgerald.
http://www.amazon.ca/Pension-Puzzle-Complete-Government-Benefits/dp/0470839538/ref=sr_1_1?ie=UTF8&qid=1433810634&sr=8-1&keywords=the+pension+puzzle

The Real Retirement by Fred Vettese and Bill Morneau is also a good book, less numbers based than The Pension Puzzle. it gives guidelines for what percent of working income must be replaced during retirement based on various life scenarios.
http://www.amazon.ca/Real-Retirement-Could-Better-Happen/dp/111849864X/ref=sr_1_1?s=books&ie=UTF8&qid=1433810790&sr=1-1&keywords=the+real+retirement


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## Beaver101 (Nov 14, 2011)

This might be of relevancy in answering the OP's 2 questions:

*Winnipeg nurse, Kara Held, says retirement pushed back 10 years because of error*

https://ca.news.yahoo.com/winnipeg-nurse-kara-held-says-110000879.html



> A Winnipeg nurse says an error made in 2001, but discovered only recently, may have pushed back her retirement date by almost a decade.
> 
> Kara Held has been a nurse since 1982. Originally with the Victorian Order of Nurses (VON), Held, along with hundreds of others, was absorbed into the Winnipeg Regional Health Authority (WRHA) in 2001.
> 
> ...


 ... and so it was an error, penalizing the member but not so unfavourable for the sponsor though. Is this fair?


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## CalgaryPotato (Mar 7, 2015)

DB plans can be great, but they are definitely not a freebie. I know the plan I'm in was underfunded for a long time, and now we're making up for it, with high contribution rates. About 12% on average is what comes off of my cheque. But my employer is paying their part too, so I still consider myself lucky to have one. 

But they aren't magic either. If you get offered a job that pays 10-15% more without a benefit plan you can still create your own self directed RRSP and do quite well with it. You'll just need to force yourself to take out that money first before other expenses. 

IMO the biggest benefit is that no one knows when they are going to die. You have 2 choices, overfund your retirement fund with the plan to live a long life, knowing you'll probably leave a large inheritance, or underfund your retirement fund, and hope you don't outlive it. Pension plans take the guess work out of it, and even it out for everyone.


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## Eclectic12 (Oct 20, 2010)

^^^^^

The issue I've observed with jobs that offer more $$$ is that after the salary, the few who do look at other things - look at health care type benefits and almost no one looks at pensions/type of pensions/features.

The increase in salary goes to other items until towards the end, when it is a much bigger challenge to make up for.


At risk of sounding like a broken record ... of the few who talked to me about it - two were focused on the loss of RRSP contribution room versus carefully comparing the pros/cons plus what could be achieved. The one of the two who ran the numbers figured out quickly that with an 8% growth rate - his best case scenario for the RRSP to DB pension comparison was exhausting the RRSP at the six year mark versus a guaranteed ten year payout.



Cheers


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