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Discussion Starter · #1 ·
The company I work for plans to wind up the define benefit plan.
They have to get approval from Financial Services Commission of Ontario.
Anybody in this forum who has their plan wind up, would you like to share how long was the process?
Say from the company announcement until approval from Financial Services Commission of Ontario.
Thanks.
 

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I doubt there is a specific answer to your question.

Often, plans are orphaned such that everyone is moved to a DC plan but the DB plan remains in place. This usually happens when the plan goes into a liability condition, as was common in 2008/2009. This happened to me and it also happened to my wife. In my wife's case, the employer has been trying to kill that plan for the last decade with the most ridiculous claims and untenable statements. They claim it is in a liability condition but the books are good. So far, the employer has been laughed out of court several times.

Get this... my retired wife's primary pension is a DB plan but we commuted the DC plan she was in the last few years of her career. The DC plan is somehow in a liability condition and they held back 28% of her equity when they commuted the pension. I have received no satisfactory answer to my question of how a DC plan can go into a liability condition without anyone going to jail. For now, we are rolling with it. Apparently, they will pay the rest after a few years if they are able.

I wish you well in this, Freedom2022.
 

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I think it may depend on the individual employee contract. I had retired with DC but a few people I know who had retired around the same time as me got DB. That's because they had started with the company much earlier than me and under a different contract.
 

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There is a difference between winding up and simply 'closing' the plan.

My employer closed the DB plan. New employees got the DC plan. Depending on years of service employees had options.

Take the commuted value, move it to a DC. Freeze the DB benefits but commence with the DC, or...remain in the DB program with a warning that it would be wound up in 7 years. It was closed 10 years later but not would up. Employees still in the DB plan had their benefits frozen. They then got the DC. It has been 23 years since the first announcement, 13 since the DB plan was closed. But...it has not been would up. I get updates every years as funding etc. What has happened is that risk is being moved to third party financial firms-banks, insurance firms in the form of annuity purchases to satisfy/.mirror DB pension obligations. The DB plan remained in effect through two successive mergers.

I remained in the DB. I was grandfathered because of my combo of age and service. It was absolutely the right decision for me given market crash that occurred. The company was not offering me enough to move to the DC plan. Two different contacts in HR who were familiar with the options advised me, informally and very much off the record, to stay in the DB plan.

The DB plan was relatively small in terns of participants. It was well funded. The employer made some very substantial excess DB contributions to bring the plan up to fully funded from both on ongoing and a windup perspective in the years following the change.
 

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Discussion Starter · #6 ·
Thank you all for responding to my post.
I am not worry the company try to trick us with this wind up.
They are committed to pay full amount to all DB participants.
The company is not going through bankruptcy.
The business is doing well right now.
They want to wind up DB, because all newer employees only receive define contribution benefit.
So, fewer participants of DB year after year.
They said the wind up will be completed early next year or 2024.

I think they also worry that most people will just quit to get a huge lump sum payment due to historically low interest rate.
Since they announce wind up, we can take early retirement, but we only get monthly annuity, no lump sum option.
If they start the wind up process now, interest rate will climb to above 2% by the time Financial Services Commission of Ontario receive the formal application.
 

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They want to wind it up because a company should not be taking responsibility of an employees retirement like what happens with DB plans. DB plans takes all the uncertainty and risk of retirement investing and places it on the back of the employer. That is not the business they are in and they have no more control over it then an employee does. It makes sense that an employer would make an attempt to offset this risk, that really should not be there's to bear, back to the person who's problem it really is.
 

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Discussion Starter · #8 ·
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They want to wind it up because a company should not be taking responsibility of an employees retirement like what happens with DB plans. DB plans takes all the uncertainty and risk of retirement investing and places it on the back of the employer. That is not the business they are in and they have no more control over it then an employee does. It makes sense that an employer would make an attempt to offset this risk, that really should not be there's to bear, back to the person who's problem it really is.
Thank you.
Yes, that makes sense.
I just wish Financial Services Commission of Ontario approves sooner than later.
Interest rate will keep rising.
With low interest rate, I will get more lump sum payment.
 

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They want to wind it up because a company should not be taking responsibility of an employees retirement like what happens with DB plans. DB plans takes all the uncertainty and risk of retirement investing and places it on the back of the employer. That is not the business they are in and they have no more control over it then an employee does. It makes sense that an employer would make an attempt to offset this risk, that really should not be there's to bear, back to the person who's problem it really is.
.. so why even offer a DB plan since that's going to be an going liability for the company?

And then ...then ... some companies offer a SERP - Supplementary Employee Retirement Plan (DB format)... reserved for upper echelons of course. No additional liabilities there?
 

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I went through a wind up of a DC plan after all stock of a whole CCPC was bought by another one.
Sun Life was the DC underwriter for the new company, and sent a pick an option letter.
Except they did not offer transfer to another company.

I set up a LIRA at Itrade first, and then had all the finds that had to go LIRA into that, and some of the funds that could go RRSP to my Itrade rrsp account.
 

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Discussion Starter · #12 ·
That is what we are advised to do.
When the DB wind up, we'll have two options: annual annuity or lump sum.
The lump sum payment will be transferred to our LIRA account.
However, there is a maximum transfer value allowed by federal government.
The payment above the maximum transfer value can be transferred to RRSP, if there is room available.
The value above LIRA and RRSP will be paid in cash, that is taxable.
 

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That is what we are advised to do.
When the DB wind up, we'll have two options: annual annuity or lump sum.
The lump sum payment will be transferred to our LIRA account.
However, there is a maximum transfer value allowed by federal government.
The payment above the maximum transfer value can be transferred to RRSP, if there is room available.
The value above LIRA and RRSP will be paid in cash, that is taxable.
These were same choices that I had when I took my pension. The DB plan was closed at the time but it was not wound up. And still is not.

Approximately thirty percent of my commuted value was above the CRA transfer limit and was thus fully taxable in my hands. RSP had no room.
 

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I know you won't be able to make a decision until you receive the numbers on the commuted value and annuity monthly payout. Are you leaning to one or the other now that you have indicated both options will be available? How long are you from retirement?
 

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They want to wind it up because a company should not be taking responsibility of an employees retirement like what happens with DB plans ...
Maybe ... or it could be that they were sold the idea that the company would save money.

Similar to claims of outsourcing IT services that ended up costing more than having the IT services in-house, moving out of a DB pension can have a long time before money is saved. I can recall being shocked with a pension consulting firm reported that Saskatchewan was on decades of waiting for the savings to roll in from having new employees in a DC plan. :rolleyes:


Cheers
 

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... so why even offer a DB plan since that's going to be an going liability for the company?
Sometimes it's to be competitive with other employers.


... And then ...then ... some companies offer a SERP - Supplementary Employee Retirement Plan (DB format)... reserved for upper echelons of course. No additional liabilities there?
Even few still make the SERP available to all employees.

There's also the companies with DB pensions that only the employer contributes to. I forget which big 6 bank opened one of these in 2009.


Cheers
 

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With historically low interest rate, lump sum is a better option.
YMMV ... I know people who took the CV and have gone back to work after wasting the funds. They also had a huge tax bill for the amount they could not transfer on a tax deferred basis and that was larger than their available RRSP contribution room.

I know others who took the CV and are doing quite well.


Knowing oneself is an important factor IMO.


Cheers
 

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Sometimes it's to be competitive with other employers.


Even few still make the SERP available to all employees.

There's also the companies with DB pensions that only the employer contributes to. I forget which big 6 bank opened one of these in 2009.


Cheers
I participate in an employer funded DB. In some ways it is a bit of a red herring for the employee as it comes out of total compensation. Technically there should be little difference than making 94k a 6k in pension contribution and earning 100k.

Most people do not fully understand how their total compensation can add value for them. In most cases a DB pension is better than other options, due to the benefit of near guaranteed retirement income. However, in most cases a DB does not provide the same opportunity for passing along an inheritance to heirs should one pass early. Most importantly, like any portfolio it has to be properly managed and funded. In my experience the greatest benefit to employer funded plans is the forced savings. Most people do not take care of these matters themselves. I worked with many people that had negative savings rate. I am not surprised, but I should be, of how many fail to take advantage of employer matching.
 
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