RET - Week 03 Slide Questions (W23)

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Seneca College *

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FSM511

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Accounting

Date

Feb 20, 2024

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pdf

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5

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Retirement Planning Week 3 Winter 2023 Page 1 Review Questions Registered Pension Plans (Part 1) 1. What is a registered pension plan (RPP)? 2. How are private pension plans regulated in Canada? 3. How is a private pension plan administered? 4. Why is vesting important to employees who change employers during their career? 5. Why is portability important to employees who change employers during their career? 6. What is the normal retirement age (NRA) of a private pension plan? 7. How is a contributory plan different from a non-contributory plan?
Retirement Planning Week 3 Winter 2023 Page 2 8. What is a defined benefit plan (DBP)? 9. How do final earnings or best average earnings DBPs work? 10. How does a career average DBP work? 11. How does a flat benefit type of DBP work? 12. Greg participated in his company’s pension plan for 25 years, which provides benefits of 1.85% for each year of service, based on the member’s average earnings in the final three years of service. If he earned $50,000 in 2020, $55,000 in 2021, and $65,000 in 2022, what is his pension? 13. Wendy is retiring after 20 years of participation in her employer’s pension plan, which provides a benefit of 2.0% of her best earnings over three consecutive years. Calculate her pension given the following recent earnings history: $55,000 in 2018; $70,000 in 2019; $80,000 in 2020; $85,000 in 2021; and $65,000 in 2022.
Retirement Planning Week 3 Winter 2023 Page 3 14. What are the advantages and disadvantages of a final/best average defined benefit plan to the employees and to the employers? 15. Who is responsible for maintaining the solvency of a DBP? 16. How are employer contributions toward a DBP calculated? 17. If there is a surplus in the plan, who should benefit, the employer or employees? 18. What are current service contributions? 19. What are past service contributions? 20. Paula is retiring from an employer whose defined benefit pension plan is based on 1.75% of the plan member’s career average earnings. Assume she earned an average salary of $65,000 each year during her 12 years of participation in the plan. What is her pension?
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