Glossary
Pick a letter from the menu below to show the available word descriptions.
A
Annuity
A contract purchased from an insurance company to provide periodic (usually monthly) payments to a person for his or her lifetime
C
Canadian Association of Pension Supervisory Authorities
(CAPSA) The national inter-jurisdictional association of pension regulators whose mission is to facilitate an efficient and effective pension regulatory system in Canada. CAPSA discusses regulatory issues of common interest and develops practical solutions to further the coordination and harmonization of pension regulation across Canada
Capital Accumulation Plan
(CAP) A plan into which contributions are made on a tax-deferred basis. A CAP may include a defined contribution registered pension plan, a pooled registered pension plan, a group registered retirement savings plan, a registered education savings plan or a deferred profit-sharing plan.
Continuous Employment
The period during which an employee is continuously employed by the same employer. Continuous employment may be defined in the pension plan (or by law) to include certain periods of absence and/or of employment with an associated or former employer.
The Consumer Price Index
(CPI) is a statistical device that measures the change in the cost of living for Canadian consumers. Old Age Security pensions, Canada Pension Plan and Québec Pension Plan payments, and other forms of social and welfare payments are adjusted periodically to take account of changes in the CPI.
The Canada Pension Plan
(CPP) is a contributory governmental pension plan that provides benefits to workers and their families in the event of retirement, disability or death. The CPP applies in Canada, with the exception of Québec
D
Defined Benefit Plan
A pension plan that defines the pension benefit to be provided based on factors such as years of plan membership and average earnings calculated in accordance with the terms of the plan.
Defined Contribution Plan
A pension plan that defines the amount of employer and employee contributions (if any) to the pension fund, determined on an individual account basis. The benefit the member will receive on retirement is determined at the date of retirement and is based on accrued contributions and investment income.
E
Early Retirement Age
Members who are within 10 years of pensionable age are eligible to receive an early retirement pension from the plan (e.g. if the plan's pensionable age is 65, members could choose to retire at any time between the age of 55 and 65). However, the amount of pension may be reduced to compensate for the fact that it is payable for a longer period of time.
F
Flexible Pension Plan
is a defined benefit pension plan which allows plan members to make Optional Ancillary Contributions in order to acquire Optional Ancillary Benefits.
G
Guaranteed Pension
A pension that will be paid to a person for his or her lifetime, with a minimum number of payments guaranteed. For example, if the plan member opts for a five-year guarantee but dies after three years, payment will continue to the survivor or the estate for two more years.
I
Insurable earnings
as it pertains to Employment Insurance, is the total amount of earnings, in accordance with the Employment Insurance Act, that an insured person receives from insurable employment. Weekly insurable earnings serve to determine the Employment Insurance benefit payable, while the Annual Maximum Insurable Earnings (MIE) serve to determine the maximum annual premiums payable
L
LIF
A Life Income Fund (LIF) is a type of RRIF under which the owner of the LIF must withdraw, each year, a minimum amount prescribed by the Income Tax Act (Canada), up to a maximum amount prescribed by the pension legislation. It is now only in Newfoundland where the owner must use the balance of the funds when he/she reaches the age of 80 to purchase a life annuity.
LIRA
A Locked-In Retirement Account (LIRA) is a type of RRSP where the funds are subject to pension legislation. These funds must be used to purchase a life annuity or be transferred to a LIF, an LRIF or a prescribed RRIF (Saskatchewan only) by the end of the year during which the owner of the LIRA reaches age 71, at the latest. The LIRA is available in all jurisdictions, with the exception of British Columbia and the federal (PBSA). These two jurisdictions provide rather for the locked-in RRSP that is very similar to the LIRA.
Locked-in RRSP
A locked-in Registered Retirement Savings Plan is a type of RRSP where the funds are subject to pension legislation. These funds must be used to purchase a life annuity or be transferred to a LIF by the end of the year during which the owner of the locked-in RRSP reaches age 71, at the latest. The locked-in RRSP is available in British Columbia and the federal (PBSA). Legislation of British Columbia still provides for age 69 as maturity age instead of age 71. However, the Superintendent of Pensions of B.C. allows locked-in RRSP issuers to defer the transfer of funds held in these vehicles to a LIF until December 31 of the year in which the owner of the locked-in RRSP attains age 71.
Locking-in
A member cannot withdraw in cash the employer’s contributions and his/her contributions with interest. These contributions with interest must be used to provide a pension at retirement.
LRIF
A Locked-in Retirement Income Fund (LRIF) is a type of RRIF under which the owner of the LRIF must withdraw, each year, a minimum amount prescribed by the Income Tax Act (Canada), up to a maximum amount prescribed by the pension legislation. The purchase of an annuity at age 80 is not required. The LRIF is only available in Manitoba and Ontario as well as in Newfoundland and Labrador. However, LRIFs cannot be purchased in Ontario after December 31, 2008.
M
Maximum contributory earnings,
with respect to the CPP/QPP, is the amount of the Yearly Maximum Pensionable Earnings minus the amount of the Year’s Basic Exemption. It serves to determine the maximum amount of earnings on which contributions are made.
O
Optional Ancillary Benefits
(OAB) Benefits which are provided by optional ancillary contributions under a Flexible Pension Plan. Optional Ancillary Contributions (OAC) Contributions made under a Flexible Pension Plan in order to acquire optional ancillary benefits.
OAS
Old Age Security (OAS) is a monthly pension paid to Canadians who are age 65 or over and who fulfill the residency requirements. The pension is adjusted quarterly based on the Consumer Price Index.
OSFI
The Office of the Superintendent of Financial Institutions (OSFI) is the entity making sure pension plans governed by the Pension Benefits Standards Act, 1985 (PBSA) comply with this act and are administered in accordance with its requirements.
P
Pension Adjustment
(PA) The estimated value of a member's pension benefits accruing in a particular year as determined under the Income Tax Act. For defined benefit plans, the PA is determined by a formula. For defined contribution plans, the PA is the total of all employer and employee contributions for the year. A person's RRSP contribution room is reduced by the value of the previous year's PA.
Pension Benefit
The periodic amount that a member or former member is or may become entitled to under the terms of the pension plan.
Pension Benefit Credit
The aggregate value, at any given time, of a person's pension benefit and other benefits that is provided to them under a pension plan.
Plan Administrator
The person or group that is responsible for managing your pension plan and the pension fund. The plan administrator could be the employer, a board of trustee or a pension committee. The plan administrator may hire a third party service provider to manage the day-to-day work but the plan administrator is ultimately responsible.
Plan Termination
Discontinuation of a pension plan resulting in the cessation of benefit accruals under that plan.
Plan Wind-Up
Distribution of the benefits and assets of a pension plan that has been terminated.
Pooled Registered Pension Plan
(PRPP) A type of pension plan that is similar to a defined contribution plan but employer contributions are not mandatory. A PRPP pools contributions together for investment purposes and for cost efficiency. Administrators of PRPPs must hold a license issued by the Superintendent of Financial Institutions.
Q
The Québec Parental Insurance Plan (QPIP)
is a contributory governmental insurance plan that provides benefits to Québec workers in the event of maternity, paternity, parental or adoption leave.
QPP
The Quebec Pension Plan (QPP) is a governmental pension plan that provides for benefits to workers and their families in the event of retirement, disability or death. QPP applies in Quebec. The QPP is similar to the CPP.
R
RRIF
A Registered Retirement Income Fund (RRIF) is an arrangement under which the owner of the RRIF must withdraw, each year, a minimum amount prescribed by the Income Tax Act (Canada). A prescribed RRIF (Manitoba and Saskatchewan only) is similar to a RRIF with the exception that certain minimum pension legislation standards are retained, such as protection of spousal rights and creditor protection.
Registered Retirement Savings Plan (RRSP)
A personal retirement savings account offered by financial institutions. RRSPs are governed by the Income Tax Act which sets the maximum amount of RRSP contributions that can be deducted from an individual's taxable income.
Restricted Life Income Fund (RLIF)
Similar to a Life Income Fund (LIF), however, an RLIF holder may, on a one time basis, unlock 50% of the funds.
Restricted Locked-In Savings Plan (RLSP)
An investment account that can only be established as a result of a transfer of funds from an RLIF. Similar to a Locked-in Registered Retirement Savings Plan, however, the funds in an RLSP can only be transferred back to an RLIF, a pension plan, if that plan permits, or to an insurance company to purchase an immediate or deferred life annuity.
T
Tax-Free Savings Account (TFSA)
An investment vehicle that allows individuals to save money and benefit from a tax-free environment on the earnings generated and on withdrawals.
V
Vesting
A member is entitled to a deferred pension under the pension plan after the completion of a certain period of employment or of membership under the plan, and sometimes the attainment of a certain age.
If a member is not entitled to a deferred pension at termination of membership, he/she will be entitled to the refund of his/her contributions, if any, with interest. If a member is entitled to a deferred pension, he/she will be entitled to that deferred pension.
Y
The Year’s Basic Exemption (YBE)
is the amount of base earnings on which you are not required to contribute to the CPP/QPP.
YMPE
The Year’s Maximum Pensionable Earnings (YPME) corresponds to the maximum amount of earnings of an individual that is used to determine the maximum amount of contributions and of benefits that must be paid to or from the Canada Pension Plan or the Quebec Pension Plan. The YMPE is revised annually.