Frequently Asked Questions“s
Please note that the Plan is governed by the Rules and Regulations and the Trust Agreement through which the Plan was established, together with any amendments to these documents. If there is any conflict between this FAQ and the Rules and Regulations or the Trust Agreement, the terms of the Rules and Regulations and the Trust Agreement will apply.
Introduction
We are pleased to provide you with this listing of Frequently Asked Questions (FAQs). We hope you'll find many answers to your questions here! We intend to continue adding to the list of FAQs over time. If you have a question that you think would be of interest to other members, we invite you to email us at info@mpfcanada.ca
If your question is not answered here, you may find the answer in our Summary Plan Description at http://www.mpfcanada.ca/summary.html
FAQ's
- The plan is a registered pension plan (RPP) - but there are two types. Which type of plan is our plan?
- How much will my pension be?
- Why is the benefit rate on contributions above 10% of scale wages lower than for the rest of my contributions?
- What happens if I retire before age 65?
- What happens if I retire after age 65?
- Is my pension guaranteed?
- Is my pension indexed after retirement?
- When I look at the fund's audited financial statements, it appears that payouts for 2010 were approximately $30 million (including administrative expenses), and income was around $60 million (including contributions and unrealized gains on investments) for the same period. With that significant a difference between income and expenditures, why can't we pay more in benefits?
- What happens if I die before I retire?
- How does the spousal benefit work if I die after retirement?
- Why would I (or my spouse) want to waive the right to a joint and survivor pension?
- What happens if I acquire a spouse after I retire?
- If I die after retirement and I don't have a spouse, is anything payable?
- What happens if I stop working or become disabled before I retire?
- Can pension contributions be paid on negotiated fees?
- Can I make my own contributions?
- If I work in the U.S., does my employer have to make pension contributions?
- I work in a symphony and I am on a leave of absence. Are pension contributions paid while I'm on that leave?
- What happens if I'm simply not working for a while?
- I am already receiving a pension, but I'm still working. Are pension contributions still being paid? Are these contributions treated in the same way as pension contributions made before I started my pension?
- I understand that the Income Tax Act prevents me from receiving any extra benefits from contributions made after the end of the year in which I turn age 71. Why do the pension contributions continue after that time?
- What is a pension adjustment (PA) and how does it affect me?
1. The plan is a registered pension plan (RPP) - but there are two types. Which type of plan is our plan?
The two types of RPP are defined benefit and defined contribution. Your plan is a defined benefit plan.
A defined contribution plan works much the same as RRSPs - money is contributed, it accumulates with tax-sheltered investment income, and the resulting accumulated amount is used at retirement to produce income. The amount of the income depends on the amount of contributions, the investor's ability to maximize investment income, and the type of income option(s) chosen at retirement.
A defined benefit plan (such as the Musicians’ pension plan) is very different. The member's benefit at retirement is based on a defined formula. The pension based on that formula is guaranteed to be paid for the member's lifetime (and sometimes longer depending on the survivor benefits provided by the plan).
In a defined benefit plan, the contributions coming into the plan (and investment income) are used to pay the promised benefits. The contributions and earnings are not made to an account in respect of a single member (as they would be if the plan was a defined contribution plan) - they are all commingled in a single fund which is used to pay benefits to all plan members and beneficiaries. To learn more about how a defined benefit plan like ours works, please see question 8.
2. How much will my pension be?
Please note that, for many purposes, your pension is divided into two parts.
Throughout this FAQ, we will refer frequently to your
Your monthly pension is based on the following formula:
- $3.80 for each $100 of contributions made to the plan on your behalf for covered employment prior to 1992 plus
- $3.70 for each $100 of contributions made to the plan on your behalf for covered employment on or after January 1, 1992.
- $3.25 for each $100 of contributions made to the plan on your behalf for engagements taking place on or after January 1, 2011.
There's one exception, which was effective May 1, 2006. For any contributions in excess of 10% of scale wages, you earn $2.00 of monthly pension for each $100 of contributions. Note that the maximum contribution is 12% of scale wages, so the $2.00 pension per $100 of contributions applies to any contributions between 10% and 12% of scale wages.
The calculation above determines your monthly pension payable for your lifetime starting at age 65. There are other benefits "attached" to your pension, including survivor benefits and early retirement benefits.
For more information on how your pension is calculated, including examples, please see our Plan Summary at http://www.mpfcanada.ca/summary.html
3.Why is the benefit rate on contributions above 10% of scale wages lower than for the rest of my contributions?
The ability to accept contributions on earnings above 10% of scale wages is new. The Trustees have had advice from our actuary who has made a number of assumptions, including the potential impact of these increased contributions over time on the fund. The Trustees have determined that the benefit rate of $2.00 is prudent and affordable at this time.
4. What happens if I retire before age 65?
In this case, your pension will be a monthly amount calculated the same way as a normal pension. However, because you will be receiving your pension sooner and over a longer period of time, the monthly amount you will receive is reduced. The reduction factor is based on your age (years and months) at retirement.
Please check the Plan Summary link, http://www.mpfcanada.ca/summary.html, for more information about what happens if you retire early.
5. What happens if I retire after age 65?
You can choose to commence your pension at any age up to the December 1 of the year you turn age 71. If you are still working, you will continue to accrue pension benefits (as described in question 2) based on contributions made on your behalf during that time. If you continue in employment by the same employer you were employed by when you were 65, your pension benefit cannot be less than the actuarial equivalent of your pension earned to age 65. For an explanation of “actuarial equivalent”, please check the Glossary at the Plan Summary link, http://www.mpfcanada.ca/summary.html.
6. Is my pension guaranteed?
The Musicians’ Pension Fund of Canada has been in existence since April 1962, and is required to comply with the Ontario Pension Benefits Act (the OPBA). This legislation includes several protections for plan members, including:
- a requirement that the assets of the plan be held in a trust fund which is used exclusively for the benefit of members and their beneficiaries
- a requirement to remit employer contributions to the fund within 30 days of the end of the month for which they are due
- rules surrounding the investment of the plan's assets, to ensure that they are well diversified
- a requirement to review the fund regularly (at least every three years) to ensure that the assets are sufficient to meet the plan's obligations to pay benefits - for more information about this review, which is conducted by a qualified actuary, please see question 8.
Under the Ontario Pension Benefits Act (the OPBA), our plan is considered a multi-employer pension plan (MEPP). In this type of plan, employers make contributions based on rates negotiated through unions. Since employer contributions are fixed by negotiations (and cannot be varied simply because plan assets become insufficient to pay promised benefits), it is possible that the plan may have to be changed to reduce benefits already earned and even pensions that are currently being paid. But this has never happened in the history of our plan.
The Board of Trustees works diligently to ensure that the benefit rates are reasonable in light of many factors including expected income from the contributing employers and expected investment income. Having said that, there is always a possibility that economic or demographic forces beyond the Trustees' control could, at some time in the future, create a requirement to adjust earned benefits.
Also, because our plan is a multi-employer pension plan (MEPP), it is not covered by the Ontario Pension Benefits Guarantee Fund. (This is a fund, to which employers of single-employer pension plans contribute, that guarantees certain pension benefits in the event of bankruptcy, where the pension fund has insufficient assets to pay promised benefits.)
In summary, although there are no iron-clad "guarantees" that a pension from any plan, anywhere, is 100% safe and secure, the Musicians’ Pension Fund of Canada is administered by a conscientious Board of Trustees whose mission is "to administer the Plan in order to provide the best possible benefits for its members and beneficiaries". The Board also ensures that the plan is administered in accordance with the Ontario Pension Benefits Act (OPBA) and all other relevant legislation, including the Income Tax Act.
Except in the unusual circumstances described above, you can rest assured that, once your pension starts, it will be paid monthly for the rest of your life (and possibly beyond, depending on the survivor benefits that apply).
If you would like to read more about the Ontario Pension Benefits Act (OPBA), here is a link to an informative brochure issued by the Financial Services Commission of Ontario (FSCO), entitled "Your Pension Rights":
http://www.fsco.gov.on.ca/en/pensions/brochures/Pages/brochure_pension_rights.aspx.
The Financial Services Commission of Ontario (FSCO) is the "administrator" of the Ontario Pension Benefits Act (OPBA). They are responsible for the regulation of pension plans (like ours) which are registered under the Ontario Pension Benefits Act (OPBA).
7. Is my pension indexed after retirement?
An "indexed pension" is one that is increased periodically to reflect increases in the consumer price index (CPI). The consumer price index (CPI) is a measure of the degree of change in the price of goods and services purchased by Canadian consumers and is determined monthly by Statistics Canada.
Only about 32% of all defined benefit plans in Canada provide any form of guaranteed indexing after retirement. Most of them are public sector plans where funding comes, at least in part, from taxpayers.
You may wonder why more plans do not provide guaranteed indexing - it's because doing so is very expensive. If you compare the cost of $1 of pension where the pension has guaranteed post-retirement indexing to $1 of unindexed pension, the cost of the indexed pension can be 30% (or more) higher than the cost of the unindexed pension.
If our plan were to provide guaranteed indexing, one of two things or a combination of both would need to happen:
- in order to receive the same amount of pension on an indexed basis, the contributions would have to increase substantially and/or
- the current schedule of benefits would have to be reduced
The Board of Trustees regularly reviews the different types of benefits that the plan provides, and makes changes periodically based on what it believes is in the best interests of the members. Since very few (if any) multi-employer pension plans like ours provide guaranteed indexing, and since the cost is significant, the Trustees have not implemented guaranteed indexing as part of the menu of benefit provisions under the plan.
8. When I look at the fund's audited financial statements, it appears that payouts for 2010 were approximately $30 million (including administrative expenses), and income was around $60 million (including contributions and unrealized gains on investments) for the same period. With that significant a difference between income and expenditures, why can't we pay more in benefits?
This question touches on some fundamental issues surrounding defined benefit pension plans. When the Trustees consider what benefits the plan can afford, they are required by legislation to assess the cost of providing all benefits earned, and not just those which are currently being paid.
Of course it's important to have enough money in the fund to pay pensions to those who have already retired, but it's equally important to build up assets in anticipation of paying pensions to those who have not yet retired. Assets also need to be there to cover benefits on termination and pre-retirement death.
The process involves something called an actuarial valuation. An actuary is a specialist in the mathematics of risk, especially as it relates to insurance and pension calculations such as premiums, reserves, dividends, insurance and annuity rates, and pension costs.
The Trustees employ the actuarial services of The Segal Company Ltd. Actuaries with that company are responsible for producing the actuarial valuation which is required by legislation to be performed at least once every three years. An actuary cannot operate independently - the Trustees are involved in the setting of the actuarial assumptions that are used in performing the valuation. As always, the Trustees must act in the best interests of the members when they are working through this process.
An actuarial valuation looks at the cost of benefits for everyone in the plan - active members, terminated deferred vested members, retirees, and beneficiaries. There's a "backward looking" exercise and a "forward looking" one.
First, the actuarial report compares the assets of the plan to the cost of benefits earned ("the liabilities") to the valuation date. It's important to know that the plan is well funded in terms of the benefits earned to the valuation date.
As of the last filed valuation, the liabilities for retirees represented about 29% of the total liabilities. Liabilities for non-retired members represented about 71% of the total liabilities. Back to the question above - the Trustees are not permitted to focus only on the 29% of liabilities that are connected to benefits of the current retirees and beneficiaries. They must also ensure that the money is there to support the other 71%!
Next, the actuarial report examines the cost of future benefits being earned in the plan - it answers the question, "How much money is needed to be paid in the year following the valuation to pay for the benefits we expect will be earned in that year?"
9. What happens if I die before I retire?
The pre-retirement death benefit is equal to the commuted value of your accrued pension benefit at the date of your death. Different options apply depending on whether you have a spouse at your date of death. Please check the Plan Summary link, http://www.mpfcanada.ca/summary.html, for more information about what happens if you die before you retire.
10. How does the spousal benefit work if I die after retirement?
Firstly, please note that the definition of spouse differs depending on where you work - each province is a little bit different. Generally speaking, your spouse is a person to whom you are married and with whom you are living; otherwise, it is the person with whom you are living in a marriage-like relationship for a period of time (usually three years, but less if you have children together). If you're in doubt regarding whether your spouse is a "spouse" for pension purposes, please contact the fund office.
If you had a spouse on the date your pension begins (and you and your spouse did not waive the spousal survivor benefit), then your spouse will receive a pension equal to 66 2/3% of the pension you were receiving at the time of your death. This pension will be payable for the rest of your spouse's lifetime. (This is referred to as a “joint and 66 2/3% survivor” pension.) Note that the reduction to 66 2/3% of your pension only occurs after your death.
There is an actuarial cost to this benefit. Effective January 1, 2011, that cost will no longer be borne by the plan for the
At retirement, there is an option to add a ten-year guarantee. If you and your spouse both die during the first ten years of your pension payments, your pension will continue to be paid to your named beneficiary (or your estate if you did not name a beneficiary) for the ten-year guarantee period. If you die during the first ten years, the spousal reduction to 66 2/3% of your pension does not occur until the end of the ten-year guarantee period. After the ten-year guarantee period is over, your spouse, if still living, will receive 66 2/3% of the monthly amount for his or her lifetime. In order to have this ten-year guarantee added, your pension will be reduced - the reduction equals the cost (as determined by the fund's actuary) of providing you with this extra guarantee.
If you have a spouse on the date your pension begins, you may also elect a joint and 100% survivor option (no guarantee period). Under this option, you will receive your monthly pension for as long as you live, but it will be reduced to account for the value of the extra survivor benefit. Upon your death, your spouse, if still living, will receive 100% of your pension for the remainder of his or her lifetime.
It is possible for you and your spouse to waive your right to a joint and survivor pension. If you do so, you will be entitled to the same options as a person who does not have a spouse. For more information about this waiver opportunity and the options available if a waiver is signed, please see the Plan Summary at http://www.mpfcanada.ca/summary.html.
11. Why would I (or my spouse) want to waive the right to a joint and survivor pension?
There could be a number of reasons for doing this - for example, if the non-member spouse is significantly older than the member, then replacing the spousal benefit with a different guarantee could be beneficial, or if the member has children from a prior marriage and wants them to benefit in the event of the member's death prior to the expiration of the chosen guarantee period. Every situation is different, and the answers to these questions are not always simple. If you are thinking of waiving the spousal benefit, we recommend you seek independent legal and/or financial advice.
12. What happens if I acquire a spouse after I retire?
The plan pays a spousal benefit only to the person who was your spouse on the date your pension began. If you did not have a spouse on that date, then the benefit payable after you die, if any, will be based on the guarantee described in question 13 below.
13. If I die after retirement and I don't have a spouse, is anything payable?
Your pension will be paid to you for as long as you live. When you retire, you’ll be given a choice of guarantee periods to add to your lifetime pension. The options are:
- Pension for member’s life but guaranteed for five years in any event
- Pension for member’s life but guaranteed for ten years in any event
- Pension for member’s life but guaranteed for fifteen years in any event.
If, for example, you choose a ten-year guarantee and you receive your pension every month for 65 months and then you die, your beneficiary (or estate if you have not named a beneficiary) will continue to receive a monthly pension in the same amount for the following 55 months.
When you elect an optional form, there will be an actuarial adjustment taking into account the option you choose. The amount of the adjustment will vary depending on a number of factors, including your age, your spouse’s age if applicable, and the optional form.
The adjustment factor will also differ for the two parts of your benefit.
14. What happens if I stop working or become disabled before I retire?
If you are a vested member, you are entitled to benefits on becoming totally and permanently disabled and on termination of your membership due to stopping work. The term "vested" means that you have an absolute right to receive a benefit in accordance with the plan terms. Please check the Plan Summary link, http://www.mpfcanada.ca/summary.html, for detailed information about what happens in any of these events.
15. Can pension contributions be paid on negotiated fees?
Sometimes you might be earning more than the minimum pay levels in your collective bargaining agreement or the scales of your AFM/CFM local or affiliated local, probably because you have negotiated a better fee. The plan states clearly that contributions can only be made pursuant to a collective agreement, or pursuant to a local engagement contract in which case the employer is to contribute pursuant to AFM/CFM scales.
16. Can I make my own contributions?
Unfortunately not. The plan only permits employer contributions. In order for the plan to be considered a registered pension plan (which permits the tax-deductibility of employer contributions, and the tax-sheltering of investment income on those contributions), the Income Tax Act requires that there must be a bona fide employer-employee relationship in respect of every member who participates in the plan. If we were to accept member contributions, it would be difficult, if not impossible, to ensure that there was, in fact, an employer-employee relationship in existence in respect of every contribution received. This is just one of the main reasons why only employers are permitted to contribute to the plan.
Most people consider it advantageous to belong to a pension plan where the employer effectively "foots the bill" for the cost of benefits provided.
17. If I work in the U.S., does my employer have to make pension contributions?
If you are temporarily working in the U.S. for a Canadian employer, your employer can continue to make pension contributions to the Canadian plan. Note that there are limits in the Income Tax Act on the period of time this can happen. Please contact the fund office if you need more information about these limits.
If, on the other hand, you are working in the U.S. for a U.S. employer, then contributions cannot be made to the Canadian pension plan. You should contact the U.S. pension plan office to determine if contributions may be made to that fund. If your service becomes "divided" in this way, between the Canadian and U.S. plans, both plans have provisions which allow the credit in one plan to be recognized in the other for eligibility and vesting purposes - so you will not be unduly disadvantaged in the event that your benefits are split between the two plans.
18. I work in a symphony and I am on a leave of absence. Are pension contributions paid while I'm on that leave?
Contributions to the plan are made on the basis of Collective Bargaining Agreements (which exist between the AFM/CFM and Employers) and Participation Agreements (which exist between the Trustees and Employers). If your Agreement allows for contributions to continue while you are on an "approved" leave of absence, then contributions will continue. Note that there are limits under the Income Tax Act regarding how long contributions during an "approved" leave of absence can be made.
19. What happens if I'm simply not working for a while?
As explained in question 16 above, there must be an employer-employee relationship in place in order for any contributions to be made to the plan on your behalf. If you are not working, you are not eligible to have contributions made to the plan during that period.
If you are vested (see question 14), you will not have to make any decisions about your pension benefit until you have had 24 months with no contributions. At that point, you are eligible to terminate your membership in the plan and you will be offered various termination options. Please refer to the Plan Summary link, http://www.mpfcanada.ca/summary.html, for detailed information about what happens on termination of membership.
If you are working again before the 24-month period expires, then your membership will simply continue and you will accrue additional pension benefits in respect of the continuing contributions made to the plan. The fact that your membership is deemed to not be terminated for this 24-month period is a real advantage of the plan, since your years of membership after a break in service of less than 24 months will be added to your pre-existing years of membership. If this was not the case, then you would have to "start over" every time you came back to work.
20. I am already receiving a pension, but I'm still working. Are pension contributions still being paid? Are these contributions treated in the same way as pension contributions made before I started my pension?
Pension contributions do continue, and you receive extra pension based on these contributions (in respect of contributions made before the end of the year in which you turn age 71), but your extra pension is not calculated in the same way as it was before you retired.
At the end of each calendar year, any post-retirement contributions plus interest are converted into additional pension using an actuarial calculation which is recommended by the plan's actuary and approved by the Trustees. This calculation takes into account various factors including prevailing interest rates, your current age, your life expectancy, etc.
The additional pension is effective on the January 1 following the calendar year in which the contributions are made. It then simply becomes part of your regular pension payments.
21. I understand that the Income Tax Act prevents me from receiving any extra benefits from contributions made after the end of the year in which I turn age 71. Why do the pension contributions continue after that time?
The Plan Rules and Regulations, and the Trust Agreement, state that contributions are to be made in accordance with Collective Bargaining Agreements (which exist between the AFM/CFM and Employers) and Participation Agreements (which exist between the Trustees and Employers). These agreements set out the requirements for the contributions to be made, and they do not and cannot distinguish between employees on the basis of age.
As discussed above in question 1, contributions to a defined benefit plan are not made to an account in respect of a single member (as they would be if the plan was a defined contribution plan) - they are all commingled in a single fund which is used to pay benefits to all plan members and beneficiaries. So any contributions made to the plan in respect of members who are over age 71 simply become part of the fund assets which are used to pay plan benefits to everyone.
22. What is a pension adjustment (PA) and how does it affect me?
The Income Tax Act requires pension adjustments to be reported in respect of all contributions made to the plan. Each year, your employer(s) must report the amount of employer contributions on your T4 in the box entitled "Pension Adjustment". This amount is used to reduce your RRSP contribution room in the year following the year of the T4.
The fund is not your Employer and therefore does not report Pension Adjustments (PAs). It is not the fund's responsibility to ensure Employers' compliance with the Income Tax Act.
The idea behind the Pension Adjustment (PA) is that everyone should have similar access to tax-sheltered retirement savings, whether they are earning a pension through a registered pension plan or are saving for retirement through their personal RRSP, or both. If you're already earning a pension through your employer and the AFM/CFM sponsored registered pension plan, then your ability to save through your RRSP needs to be limited in some way to reflect your registered pension plan participation. This is why the Pension Adjustment (PA) exists.