Examples of information to be provided to obtain consent with regard to an amendment reducing benefits retroactively
To obtain the informed consent of affected members and beneficiaries with regard to an amendment reducing benefits retroactively, the members and beneficiaries must first be provided with a document that contains adequate and sufficient information. Below are four examples for amendments reducing benefits retroactively.
- Example 1: Reduction of the normal pension
- Example 2: Restriction on conditions for early pensions
- Example 3: Reduction of employer contributions
- Example 4: Elimination of indexation after retirement
Note that...
The document given to affected members to obtain their consent to the amendment reducing benefits retroactively is separate from the notice informing all members of the proposed amendment.
Example 1: Reduction of the normal pension
Type of plan: | Defined benefit |
Normal pension: | 2% of the average final salary per year of credited service |
Proposed amendment: | Reduce the normal pension to 1,5% of the average final salary per year of credited service, including service prior to 31 December 2011. The non-active members and beneficiaries as at 31 December 2011 are not affected. |
Effective date of the proposed amendment: | 31 December 2011 |
Date on which the notice informing members of the amendment is sent: | 15 November 2011 |
Who must consent to the amendment: | Active members as at 31 December 2011 |
We expect that each person who must give consent to the amendment receive, at a minimum, the information in the following example in order to understand how the amendment will affect him or her and be able to give informed consent.
1 April 2012
Mr. A. Smith
Address
Subject: Proposed amendment to reduce retirement pensions under the YYZ pension plan.
Proposed amendment
Here you must provide:
- an explanation of the situation;
- the effective date of the amendment;
- the formulae for calculating the pension before and after the amendment.
INFORMATION PERTAINING TO YOUR SITUATION
As at 31 December 2011, you had accumulated an annual pension of:
- $25 000 before the amendment;
- $18 750 after the amendment.
As a result of the amendment, your pension will be reduced by 25%.
Had you ceased to be an active member on 31 December 2011 and requested that the value of your benefits be transferred, the value would be:
- $219 300 before the amendment;
- $164 500 after the amendment.
As a result of the amendment, the value of your benefits will be reduced by 25%.
Consent
I hereby consent that the amendment reducing the normal pension under the YYZ pension plan, described above, have effect as at 31 December 2011 and apply to service completed prior to 31 December 2011.
Notez that...
If the date on which the notice of amendment informing members who must give their consent is after the effective date of the amendment, the personalized information must include service up until the date on which the notice is sent.
Example 2: Restriction on conditions for early pensions
Type of plan: | Defined benefit |
Normal retirement age under the plan: | Age 65 |
Conditions for early pensions before the amendment: | Members can receive an unreduced early pension as of age 60, regardless of the age at which they cease to be an active members of the plan. |
Conditions for early pensions after the amendment: | Members can receive an unreduced early pension as of age 60 provided they cease active membership at age 60 or older. Members who cease active membership before age 60 can receive an early pension, but the pension will be reduced by actuarial equivalence based on normal retirement age. The amendment applies to the total number of years of service. The amendment does not affect non-active members and beneficiaries as at 31 December 2011. |
Effective date of the proposed amendment: | 31 December 2011 |
Date on which the notice informing members of the amendment is sent: | 14 December 2011 |
Who must consent to the amendment: | Active members under age 60 on 31 December 2011. |
All active members who have not yet reached 60 years of age could be affected by the amendment. They must, therefore, give their consent. However, the members who have already turned 60 will not be affected because they already meet the new conditions for an unreduced early pension. Consequently, their consent is not required.
We expect that each person who must give consent to the amendment receive, at a minimum, the information in the following example in order to understand how the amendment will affect him or her and be able to give informed consent.
The individual who must give consent should be informed that the amendment will not affect his or her benefits provided he or she ceases active membership at age 60 or older.
Proposed amendment reducing benefits retroactively
with regard to conditions for receiving an early pension
under the YYZ pension plan.
Name of active member: Mr. C. Bridgeman
Proposed amendment
Here you must provide:
- an explanation of the situation;
- the effective date of the amendment;
- the conditions for receiving an unreduced early pension both before and after the amendment.
INFORMATION PERTAINING TO YOUR SITUATION
According to our files, you are 50 years of age and had accumulated a yearly pension of $25 000 as at 31 December 2011.
Had you ceased to be an active member on 31 December 2011 and requested that the value of your benefits be transferred, the value would be:
- $296 500 before the amendment;
- $219 300 after the amendment.
As a result of the amendment, the value of your benefits will be reduced by 26%.
Had you ceased to be an active member on 31 December 2011 and requested that payment of your pension begin at age 60, your yearly pension would be:
- $25 000 before the amendment;
- $19 000 after the amendment.
As a result of the amendment, your yearly pension will be reduced by 24%.
Should you cease to be an active member at age 60 or older, the amendment will not affect your pension.
Consent
I hereby consent that the amendment restricting the conditions for receiving an early pension under the YYZ pension plan, described above, have effect as at 31 December 2011 and apply to service completed prior to 31 December 2011.
Note that...
If the date on which the notice of amendment informing members who must give consent is after the effective date of the amendment, the personalized information must include service up until the date on which the notice is sent.
Example 3: Reduction of employer contributions
Type of plan: | Defined contribution |
Employers contributions before the amendment: | 5% of the member's salary |
Employer contributions after the amendment: | 3% of the member's salary |
Effective date of the proposed amendment: | 1 January 2012 |
Date on which the notice informing members of the amendment is sent: | 30 June 2012 |
Who must consent to the amendment: | All active members as at 30 June 2012 as well as those who ceased active membership between 1 January and 30 June 2012. |
The members were informed of the amendment on 30 June 2012. For the reduction to apply between 1 January and 30 June 2012, affected members must give their consent.
We expect that each person who must give consent to the amendment receive, at a minimum, the information in one of the following two examples in order to understand how the decrease in the employer contributions will affect him or her.
30 June 2012
Ms. E. Forest
Address
Subject: Amendment to reduce employer contributions retroactively with regard to the ABC Inc. pension plan
Proposed amendment
Here you must provide:
- an explanation of the situation;
- the effective date of the amendment;
- employer contributions required both before and after the amendment.
INFORMATION PERTAINING TO YOUR SITUATION
For the period from 1 January to 30 June 2012:
- your salary is $30 000;
- the employer contributions required before the amendment are $1500;
- the employer contributions required after the amendment are $900;
- the employer contributions decrease by $600 as a result of the amendment.
Consent
I hereby consent that the amendment whereby the employer contributions under the ABC Inc. pension plan are decreased have retroactive effect from 1 January 2012.
30 June 2012
Decrease in employer contributions
for
the ABC Inc. pension plan
Proposed amendment
Here you must provide:
- an explanation of the situation;
- the effective date of the amendment;
- employer contributions required both before and after the amendment.
Information
For the period from 1 January to 30 June 2012, the amendment reduces the employer contributions by 2% of the salary you received during that period.
Consent
I hereby consent that the amendment whereby the employer contributions under the ABC Inc. pension plan are decreased have retroactive effect from 1 January 2012.
Example 4: Elimination of indexation after retirement
Type of plan: | Defined benefit |
Indexation under the plan: | Retirement pensions are automatically indexed on 1 January of each year on the basis of the increase in the Consumer Price Index for Canada (CPI), to a maximum of 2%. |
Proposed amendment: | Eliminate indexation for all credited service for active members. The amendment does not apply to non-active members or to beneficiaries as at 31 December 2011. |
Effective date of the amendment: | 31 December 2011 |
Date on which the notice informing members of the proposed amendment is sent: | 31 October 2011 |
Who must consent to the amendment: | All active members |
We expect that each person who must give consent to the amendment receive, at a minimum, the information in the following example in order to understand how the amendment will affect him or her and be able to give informed consent.
31 May 2012
Mr. G. Hamel
Address
Subject: Proposed amendment reducing benefits pertaining to indexation for the Clinique ZZZ pension plan
Proposed amendment
Here you must provide:
- an explanation of the situation;
- the effective date of the amendment;
- the indexation formula both before and after the amendment.
INFORMATION PERTAINING TO YOUR SITUATION
As at 31 December 2011, you had accumulated a yearly pension of $25 000$.
Had you ceased to be an active member on 31 December 2011 and requested that the value of your pension be transferred, the value would be:
- $267 100 before the amendment;
- $219 300 after the amendment.
As a result of the amendment, the value of your pension will be reduced by 18%.
Should you request that payment of your pension begin at age 65, 20 years later when you turn 85 the yearly pension payable would be:
Consent
I hereby consent that the amendment reducing benefits whereby the rate of indexation under the Clinique ZZZ pension plan is decreased, as described above, have effect as at 31 December 2011 and apply to the total number of years of service credited prior to 31 December 2011.
Note that...
If the date on which the notice informing members who must give consent to the amendment is after the effective date of the amendment, the personalized information must include service up until the date on which the notice is sent.
See also