DB Pension Plan Benefits
KNOWLEDGE EXPECTED OF: Both CFP® Professionals and QAFPTM Professionals
- Identify factors that influence the pension benefit amount for a defined benefit pension plan member, such as:
- Member’s length of pensionable service
- Member’s contributions to plan
- Employer’s funding of plan
- Identify factors used to determine the normal retirement date for a defined benefit pension plan member, such as:
- Member’s age
- Length of pensionable service
- Member’s age plus years of pensionable service
- Identify the events that may precipitate an early retirement, such as:
- Voluntary choice
- Satisfying the pension factor for an unreduced pension
- Permanent disability
- Termination of employment
- Explain the types of benefit formulas for determining the pension income payable to a defined benefit pension plan member, such as:
- Final earnings
- Best average
- Career average
- Flat benefit
- Estimate the projected pension benefit for a defined benefit pension plan member.
- Estimate the projected survivor benefit for a defined benefit pension plan.
- Estimate the tax impact of receiving a pension benefit from a defined benefit pension plan.
- Identify that the employer retains the risk for the value of the pension benefit received from the plan.
- Explain the pension benefit options that may be available to a defined benefit pension plan member.
- Life income
- Life income with a guarantee period
- Joint and survivor pension
- Joint and survivor pension with a guarantee period
- Explain the relationship between defined benefit pension plan member benefits, survivor benefits and guarantee periods.
- As survivor benefits are increased
- As survivor benefits are decreased
- As guarantee periods are increased in length
- As guarantee periods are decreased in length
- Identify that a spouse† may waive their right to survivor pension benefits.
- Explain the ancillary benefits that a defined benefit pension plan member may receive, according to the Financial Services Commission of Ontario (FSCO),1,†† such as:
- Bridging benefits
- Temporary supplemental benefits
- Disability benefits
- Death benefits
- Early retirement options and benefits
- Explain how each of the factors may impact the decision to commence receiving a pension benefit from a defined benefit pension plan, such as:
- Life expectancy
- Cash flow needs
- Impact on government benefits
- Tax impact
- Evaluate the factors to consider that may impact the decision to commence receiving a pension benefit from a defined benefit pension plan.
† Unless otherwise noted, “spouse” in the defined benefit and defined contribution pension plan sections includes common-law partners in jurisdictions that recognize common-law partners under pension legislation.
†† While the FSCO website provides information related to pension plans in Ontario, the information referenced here is generic across the country.
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