Current Company Savings and Investment Plans
What are EPSP, RRSP and TFSA and what's the future of my Company Group Plan?
Company Group Savings and Investment Plan
Once reaching the Employee's minimum contributions of $1,850 a year to either the EPSP or the RRSP, the Company then makes a $850 contribution to either of those 2 accounts. The company contribution is not allowed to go to your TFSA, as this account can only have individual contributions. A great benefit that was available to all employees through the following Savings Accounts in the Group Plan.
We will learn in the near future the fate of these accounts as they are under a Group Plan now which I suspect will have to be changed to a individual plan. The individual plan can remain with the current Insurance Company or you will be able to transfer your accounts out to a investment firm of your choice.
Employee Profit Sharing Plan: (EPSP)
This is a non-registered account with in the Group Plan. Subject to taxes for any growth income, dividends or capital gains.
Register Retirement Savings Plan: (RRSP)
This is a Government Savings Plan, where the money you make in your RRSP investments is not taxed as long as it stays in the RRSP plan. Once you starting receiving an income from this plan, it will be counted as an income and you will be taxed. This is know as a "Taxed-Deferred Plan" You can convert your RRSP holdings to a Registered Retirement Income Fund (RRIF) (to receive an income) at any time, usually earliest is age 55. However, an RRSP must be converted to a RRIF by the end of the calendar year that you turn age 71. As you make contributions into your RRSP, you will receive a tax benefit for that year’s income tax, you can contribute up to 18% of your gross income. Early withdrawals from the RRSP Plan, will be subject to a withholding tax penalty. The tax penalty is as follows, if you take up to $5,000, they institution will hold back 10% of the withdrawal amount, If you take between $5,000 and $15,000, they hold back 20% and if it's more than $15,000, they hold back 30%.
Tax Free Savings Account: (TFSA)
This is a Government Savings Plan which is a flexible investment account that can help you meet both your short- and long-term goals. Investment income in a TFSA—whether you're earning interest, dividends or capital gains—are not taxed, even when withdrawn. You can also carry forward any unused contribution room from previous years. The current TFSA limited for all years previous and including 2018 is $57,500 a person over the age of 18.
WELCOME Friends at Birmingham Street
Retirement NOW-- Pension---LIF (Pension income payments)
Retirement LATER--Pension-----LIRA (Growth $ tank) ----LIF (Pension income payments)
Retirement Income NOW
At this time your Pension will be switched to a LIF for your monthly income payments.
Within the first 60 days of receiving your Pension, you have the option to transfer up to 50% into an RRSP. Note: No RRSP contribution room needed for this transfer.
Retirement Income LATER
Pension transfers to a LIRA and remains there until you are ready for a Retirement Income.
Then at Retirement, within the first 60 days of switching your LIRA to a LIF, you have the option to transfer up to 50% into an RRSP.
Both above options apply to “BD” Campbells Pension or “DC” Manulife Pension Account.
Keep in mind that money in a LIRA is locked and is taken by monthly income. No additional withdrawals can be made.
If you decide to transfer some to an RRSP, that allows you to have accessibility to that money and withdraws can be made at any time, after the withholding tax is paid. (see below)
Use the following RRSP lump-sum withholding rates in Ontario to deduct income tax:
10% on amounts withdrawn up to and including $5,000;
20% on amounts withdrawn over $5,000 up to and including $15,000; and
30% on amounts withdrawn over $15,000.
Canadian Private Pension Plans;
Employer sponsored private pension plans provide an important source of retirement income for employees and their families. Employers generally set up pension plans voluntarily; however, once a pension plan is established, it must be funded and administered in compliance with applicable tax and pension laws as per Province.
Retirement plans for Campbells Employees;
1- A Defined Benefit Pension Plan (DB) is a type of pension plan in which an employer promises a specified pension payment on retirement that is predetermined by a formula based on the employee's earnings, years of service and age. The employer is responsible for meeting the guaranteed future pension payments. This type of pension is currently held with Campbell Soup.
2- A Defined Contribution Plan (DC) is a type of retirement plan in which the employer, employee or both make contributions on a regular basis. ... In DC plans, future benefits fluctuate on the basis of investment earnings and places the financial risk on the employee, which is becoming the normal type. No promises on a specified future pension payment by the employer. This type of pension is currently held in a locked-in-account with Manulife.
#4 "Beneficiaries for your Pension or LIRA".
Pension held with Campbells
Campbells has many options in regards to Pension Payout, as you will learn in the upcoming meetings.
1-If you have a spouse at time of retirement, the law requires that you provide a surviving spouse benefit. This means your pension will be reduced, leaving money for the surviving spouse benefit. This requirement can be over ridden with spousal consent in the form of a signed waiver. Once this waiver is signed and submitted, you will be entitled to receive all of your pension income, but in case of your death there is no surviving spouse benefit. No pension income for your spouse.
2-In case of death prior to age 55, the Plan pays a benefit to your spouse or beneficiary equal to the value of your pension from your Normal retirement date as shown on your statement.
3-In case of death after the age of 55, and your spouse is the beneficiary, your spouse is entitled to receive a benefit equal to 50% of the pension that you would have received or take the lump sum equivalent of the above lifetime pension.
Pension held in a LIRA or a LIF
1-If the owner of a LIRA or LIF account dies, his/her surviving spouse will be able to transfer 100% of the survivor benefit directly, to his/her own RRSP or RIF (Retirement Income Fund), or a lump sum payment equal to the value of the LIRA on the date of death, where permitted by the Federal Tax Act.
2-If the Pension owner of the LIRA or LIF has no spouse at death, then the death benefit balance will instead go to a designated beneficiary or beneficiaries.
3-If there are no designated beneficiary or beneficiaries, then the balance will go to their estate. Death benefits are not locked in and may be paid out as cash, or the balance may be transferred to the recipient's own RRSP or RIF.
Learning Moments Series
Professional Advice: This document was prepared solely as a general guide and is not intended to provide or replace professional, legal or tax advice. For your own specific situation, please consult your own tax and legal advisors.
#2--- Pension Transfers
According to the Financial Services Commission of Ontario (FSCO), you should be aware of your pension rights. If your employment comes to an end before you reach retirement age, within 30 days of termination, the company pension plan administrator must provide you with a written statement that includes details about the benefits payable to you, the options you have, then possibly the common 60-day deadline for any decisions.
If you are ready for retirement NOW, when your employment ends, you have two choices:
1-You can transfer the commuted value (lump sum) of your deferred pension out of Campbell’s Pension Plan, to an “locked-in-plan.” The locked-in-plan is called a Life Income Fund (LIF) and you will receive your monthly pension income NOW.
2-You can leave the funds you have in the Campbell’s Pension and you will receive your monthly pension income NOW.
If you choose to transfer the funds from your Campbell’s Pension to retire LATER, it is important to note that the transferred funds are still locked-in and cannot be paid until you reach a minimum age of 55.
The Pension Plan Value must be transferred to:
1-Another employer sponsored pension plan that agrees to accept the transfer.
2-Transfer to a Locked-in Retirement Account (LIRA).
3-An insurance company LIRA for the purchase option of a GMWB Segregated Fund Plan or a Life Annuity, both payable at the time you are ready for your retirement monthly pension income.
Both of these LIRA’s options have a 100% Pension Protection contract.
If you take your pension NOW, a Pension transfers to a LIF for monthly pension income NOW.
If you want your pension LATER, transfer to a LIRA, then transfer to a LIF for monthly pension income LATER.