FREQUENTLY ASKED QUESTIONS

Revised May 2005 (with respect to a one-time 50% prescribed transfer)

The following is for general information purposes only and has no legal authority. Due to the Manitoba Pension Benefits Act and Regulation being amended periodically, this information may not yet include current amendments.

1. Is my employer required to set up a pension plan?

No. The establishment of a pension plan is voluntary. The PBA applies only to an employer who already has a pension plan in place, or sets up a new plan.

2. When am I eligible to join my employer's pension plan?

Where a pension plan is in effect for a class of employees, you are eligible to join based on the eligibility provisions outlined in the plan text. The PBA, however, requires that you must join if you are:

• a full time employee of that class and have completed 2 years of service,
• a part time employee of that class is eligible to join on the same basis as a full time employee of that class, but must join once they have completed 2 years of service and earned at least 25% of the YMPE in 2 consecutive 12 month periods.

Note: A Plan may require you to join sooner than the minimum requirements stated in the PBA.

3. What is the normal retirement age?

Each pension plan must have a normal retirement age, typically it is set at age 60 or 65.

4. What is the earliest age I can retire?

You are entitled to receive early retirement benefits subject to reasonable age and service requirements set out in the plan text. The Commission considered early retirement within the 10 years before normal retirement to be reasonable, but in no event can the plan requirements exceed age 55 and 10 years of service). The amount you receive will be based on your early retirement date and may be reduced to compensate for the fact that you will likely receive pension payments for a longer period of time.

5. Can I keep working and contributing past normal retirement age?

Yes. The PBA requires that an employee be given the option of continuing as a member of the pension plan. If you continue working and continue as an active member of the pension plan, you will continue to earn pension benefits. Your pension payments must commence no later than the end of the calendar year in which you turn 69.

6. What is "vesting"?

When you are "vested" you are entitled to the full value of your accrued pension, meaning the value of your own contributions, if any, plus your employer's contributions.

7. When am I vested?

The PBA sets out the minimum vesting requirements as follows:

termination of employment - for pre 1985 benefits, you are "vested" after 10 years of service or membership. For post 1984 benefits, you are "vested" upon completion of 2 years of service or membership.

retirement - at normal retirement age you are fully vested for service on and after January 1, 1984. Prior to the Normal Retirement Date, vesting is subject to the plan provisions.

plan wind-up - immediate vesting.

Note: A pension plan may provide for vesting earlier than the minimum stated in the PBA.

8. When are my pension benefits vested?

1. I started work on January 2, 1980. My employer's pension plan provided for vesting of pre 1985 benefits after 10 years of service or membership. The PBA provides for vesting of post 1984 benefits after 2 years of service or membership.
   
   The pension benefit you earned from January 2, 1980 to December 31, 1984 vested on January 1, 1990 (10-year vesting), and the pension benefit you earned from January 1, 1985 onwards is vested immediately under the 2 year vesting rule.

    

2. I started work on March 1, 1994. My employer's pension plan provides for vesting after 1 year of service. The PBA provides for vesting after 2 years. When are my pension benefits vested?
   
   The PBA sets minimum standards for pension plans. If your employer's plan provides for better benefits than the minimum set by the PBA (e.g. 1-year vesting instead of 2 years), your benefit is vested earlier. Therefore, the pension benefits you earned from March 1, 1994 onwards are vested on March 1, 1995.

9. What is "locking-in"?

Locking-in means that vested benefits may not be withdrawn as a lump sum, but must instead be used to provide retirement income.

10. When am I "locked-in"?

Under the PBA, for pre 1985 benefits, you are "locked-in" upon completion of 10 years of service and attainment of age 45. For post 1985 benefits, you are locked-in after completing 2 years of service.

Note: A pension plan may provide for locking-in earlier then the minimums stated in the PBA.

11. What are my options on termination of employment?

You may leave the money in your employer's pension plan or transfer your locked-in funds to a Locked-In Retirement Account (LIRA). Any non locked-in funds are available as a cash withdrawal.

If you quit or lose your job before your pension is vested, you are entitled to receive the contributions, if any, you paid into the plan, with interest. You are not entitled to any contribution made by your employer to the plan on your behalf.

If you are a member of a Defined Contribution pension plan and you quit or lose your job after your pension is vested, you are entitled to receive the employer’s contributions made on your behalf, with interest.

If you are a member of a contributory Defined Benefit pension plan and you quit or lose your job after your pension is vested, you are entitled to receive the pension benefit under the terms of the plan.

For post 1985 benefits, your required contributions cannot be used to pay for more than 50% of the cost or value of your pension; therefore, you will receive any excess employee required contributions, with interest, in cash or in the form of additional pension.

12. What are the requirements regarding the receipt of information and the processing of my benefit?

Under the PBA, on termination of employment an employer has 60 days after being notified of your termination of employment to provide a statement outlining your benefits. A plan member has 90 days in which to make an election the employer, or person responsible for making the refund, must make the refund within 90 days of the later of your termination of employment or the receipt of all required documentation.

13. Why does the PBA require me to select a joint and survivor pension when I retire?

In the past, pension plans often provided a form of pension that guaranteed payments for your life only, with no continuing pension to your spouse or common-law partner on your death. The joint and survivor pension ensures that your spouse or partner will receive at least 2/3rds of your monthly pension payments from the pension plan after your death.

14. Can I waive the right to the joint and survivor form of pension?

Yes. You and your spouse or common-law partner must jointly waive the joint pension by signing a Pension Waiver Form, in the presence of a witness, not more than 15 days after receipt of your retirement statement. You are not permitted to be present when your spouse or partner signs this form.

15. How does the PBA define a "spouse", "common-law partner" or "common-law relationship?"

"Spouse" where used in relation to another spouse means the person who is married to that other spouse, and "spouses" means two persons who are married to each other.

"common-law partner" of a member or former member means

1. a person who, with the member or former member, registered a common-law relationship under section 13.1 of The Vital Statistics Act, or

    

2. a person who, not being married to the member or former member, cohabited with him or her in a conjugal relationship

1. for a period of at least three years, if either of them is married, or
2. for a period of at least one year, if neither of them is married;

"Common-law Relationship" means the relationship between two persons who are common-law partners of each other.

16. What is required to establish the spouse's or common-law partner's entitlement to receive the joint annuity form of pension, the death benefits and the breakup of the marriage or common-law relationship benefits?

Entitlement under the PBA is dependent upon the partner's ability to establish the existence of the relationship or provide proof of its registration under The Vital Statistics Act, as applicable, to the satisfaction of the plan administrator.

17. My spouse or common-law partner and I are separated. Is he/she entitled to any of my pension benefits?

Where there is a either a court order under The Family Property Act or a written agreement between the parties regarding the division of family assets, the PBA requires that the pension payments or pension credits that are subject to an equal division are those that accrued

1. in the case of a common-law relationship, from the first day of the period in which the parties cohabited with each other in a conjugal relationship and which continued they became common-law partners, or
2. in the case of marriage, from the date of marriage or, if there was a period in which the parties cohabited with each other in a conjugal relationship and which continued until they were married from the first day of that period,

until the date that the parties began living separate and apart.

For spouses who began living separate and apart before June 30, 2004, the pension benefit credit or payments due subject to division are those from the date of marriage.

The parties may agree to waive the sharing of the pension payments or pension credits in the form and manner prescribed in the PBA.

18. My spouse or common-law partner has died. He/she was not yet receiving a pension, but was vested in his/her pension plan. Will I receive any benefits?

For pre 1985 benefits, the amount you will receive will depend on the provisions of the pension plan. For post 1985 benefits, the PBA requires that the vested benefits are paid to the spouse or partner as a locked-in benefit or to the estate if there is no spouse or partner.

19. My spouse or common-law partner has died. He/she was receiving a pension. Will I receive any benefits?

Any entitlement to pension benefits will be based on the form of pension elected by the member at retirement. For example, if the joint pension was not waived at retirement, the spouse or partner is entitled to the survivor pension. If it was waived and the member selected a single life pension, there will no further benefits payable.

20. I am a joint annuitant and am receiving a survivor pension. Will I lose my pension if I remarry or enter into a common-law relationship?

No. Survivor benefits do not cease upon remarriage or entering into a common-law relationship.

21. Can my pension be reduced when I start receiving Old Age Security (OAS) payments or Canada Pension Plan (CPP) payments?

Some plans offer an optional form of pension known as an integrated pension. If you elected this option at retirement, you will receive an additional benefit through higher pension payments from the plan until you start receiving OAS and CPP payments, so as to maintain a level income. Once you start receiving OAS and CPP payments, you will not receive this additional benefit and your pension will be reduced.

22. Can my pension plan have different requirements for plan membership, contributions, or plan options for men and women?

No. Sex discrimination by plans is prohibited under the PBA. This also applies to annuities purchased from an insurance company with funds from a pension plan.

23. My employer went bankrupt. What happens to our pensions?

If you belong to a defined benefit plan, which is fully funded, your benefits are not affected. If the plan is not fully funded, the member's benefits may be reduced.

If you belong to a defined contribution plan, your benefits are not likely to be affected by a bankruptcy, unless current contributions to the plan have not been remitted by your employer. Also, benefits may have to be reduced slightly to cover the costs associated with the windup.

24. Is my pension fully guaranteed?

Pensions are not guaranteed by this legislation. The PBA requires plan sponsors to adequately fund all benefits earned by members, and to make special payments to make up any funding shortfalls. The PBA also requires plan sponsors to establish investment guidelines for the prudent investment of pension funds and further requires pension funds to be held by a fund holder, such as trust company, group of trustees, or life insurance company.

25. Are my pension funds protected from creditors?

Funds in a pension plan, LIRA, LIF or LRIF are protected against assignment or seizure.

26. I can't seem to get any information about my benefits or entitlements under the pension plan. Who do I talk to?

You are entitled to a summary of the plan's provisions on becoming eligible to join the pension plan. You are also entitled to an annual statement of your contributions, benefits and personal data (e.g. birth date), your pension benefit or employer's contributions made on your behalf (depending on what type of plan you belong to), and if you are a member of a defined benefit plan whether or not the plan has sufficient funds to pay all the benefits earned by the members. This annual statement is to be provided to you within six months of the fiscal year end of the plan.

You are also entitled to receive, subject to a reasonable fee, certain additional information about your pension plan on written request to the employer under section 23 of the regulation under the PBA. You may also get information from your union representative. If you are unable to get the information required under the PBA, contact the Pension Commission who will investigate on your behalf.

27. What is the earliest age that I can use my LIRA, LIF and LRIF funds for retirement purposes?

Funds in a LIRA, LIF or LRIF, that are governed under the Manitoba PBA, may be used at any age to provide retirement income. The funds may not be withdrawn as a lump sum cash payment at any age.

28. Are there any circumstances in which locked-in funds can be withdrawn as a lump sum payment (i.e. hardship or shortened life expectancy, commutation of small amounts of pension benefit credits)?

No one has the authority to grant an exception to the locking-in rule regardless of the circumstances, including financial hardship.

Subject to certain requirements, the PBA permits a pension plan, Locked-in RRSP or LIRA, LIF or LRIF to provide for withdrawal of locked-in funds in a lump sum upon certification by a medical practitioner of a considerably shortened life expectancy.

The PBA does permit individuals with small amounts of pension benefit credits held by financial institutions in Locked-in RRSPs, LIRAs, LIFs and LRIFs to be commuted and paid in a lump sum subject to certain requirements.

The PBA requires all pension plans to commute and pay in a lump sum small vested benefits. This applies only to termination of membership from a pension plan.

The PBA also allows a LIF or LRIF owner who is at least age 55 to apply for a one-time transfer of up to 50% of the balance in his or her LIFs or LRIFs to a prescribed RRIF that is not locked-in. See questions 39 to 55 for additional information.
 

29.  What is a life annuity?

A life annuity is a pension offered by a life insurance company.  The insurance company guarantees payment of a pension for a person's lifetime.  Different survivor benefits and guarantees may be part of the annuity purchased.  The cost of the annuity is determined by the insurer.

The payments under a life annuity are guaranteed, regardless of how the financial markets perform, or what interest rates are.  When you purchase a life annuity the risk of fluctuations in investment markets and interest rates is transferred to the insurance company.

30.  Must my life annuity have survivor benefits?

If you have a spouse or common-law partner at retirement, then the life annuity must have survivor benefits.  Survivor benefits give the surviving spouse or common-law partner a lifetime pension of at least 66 2/3 percent of the pension that was being paid to the annuitant.

When you have survivor benefits, the amount of the pension payable at retirement may be reduced to ensure that continuing payments can be made throughout your lifetime and your spouse's or common-law partner's lifetime.

A person may receive a pension that does not offer a survivor benefit ONLY IF the spouse or common-law partner signs the waiver prescribed by The Pension Benefits Act before the retirement.

31.  What will my monthly income be?

If an amount is being transferred from a pension plan, which is a defined contribution benefit, or if an amount is transferred from a LIRA (locked-in Retirement Account), the amount of monthly income will vary depending on the amount transferred and the options chosen.

32. Does the PBA apply to the Canada Pension Plan and Old Age Security payments?

No. Both the Canada Pension Plan and Old Age Security are administered by the federal government. For further information on the CPP and OAS, phone 1-800-277-9914.

33. Must I purchase a life annuity at age 80 under the Life Income Fund?

No. Effective January 1, 2003, the legislation was amended to remove the requirement to purchase an annuity at age 80.

34. Are income withdrawals from a LIF or LRIF prorated in the first year?

No. Effective January 1, 2003, the requirement to pro-rate income in the first year of a LIF or LRIF was removed.

35. When will I fully utilize my retirement savings?

Assuming the LIF or LRIF owner withdraws the maximum amount each year, the owner’s LIF or LRIF is generally depleted during his or her 90s.

A LIF and LRIF are personal retirement income funds designed to provide a regular flow of retirement income similar to a life annuity. However, unlike a life annuity or pension from a pension plan or insurance company where mortality risk is shared amongst other pensioners, the LIF and LRIF are personal funds and the owner must individually carry the risk of outliving his or her retirement funds. The PBA and regulations therefore restrict the LIF and LRIF owner’s access to income in an effort to ensure lifetime retirement income.

36. If I transfer my LIF/LRIF to another financial institutions in any given year can I make another withdrawal with a new carrier?

When a LIF or LRIF owner requests a transfer from one LIF or LRIF to another LIF or a LRIF during a given calendar year, the financial institution issuing the new LIF or LRIF contract cannot make any payments to the owner during that year. The LIF or LRIF owner must be sure to make any desired withdrawals from the old LIF or LRIF before making the transfer.

37. What happens to the LIF or LRIF on the owner’s death?

On the death of the member, the surviving spouse or common-law partner is automatically the primary beneficiary, regardless of previously named beneficiaries, a conflicting will, or outstanding debts against the estate.

The value of the LIF/LRIF balance must be paid to the spouse or common-law partner. The balance may be paid out in cash, or transferred to any other vehicle permitted by Canada Revenue Agency.

If there is no surviving spouse or common-law partner, funds may revert to a named beneficiary of the estate, and may be paid out in cash.

38. Where can I obtain the CANSIM Rate and the Years Maximum Pensionable Earnings or "YMPE"?

The CANSIM Rate is one of the factors used in calculating the maximum annual withdrawal amount under the LIF. The CANSIM Rate used is Series V122487 for the month of November preceding the year. The CANSIM Rate can be obtained by calling 613/782-7506.

The Year's Maximum Pensionable Earnings or YMPE may be obtained by calling 613/954-0419.

39. What is a prescribed transfer?

A prescribed transfer is a one-time transfer of up to 50% of the balance in one or more of an owner’s LIFs or LRIFs to a Registered Retirement Income Fund (RRIF) that is not locked-in and the contract for which meets the requirements of the regulation (prescribed RRIF).

A prescribed transfer is only permitted once in a person’s lifetime and not one-time per fund. If you have more than one LIF or LRIF with your institution, one application will cover all your funds with that institution and identify those funds from which you wish to make a transfer. If you have LIFs or LRIFs with different financial institutions, you must request and make separate applications with each institution. All applications, with all financial institutions, combine to make up a one-time transfer.

40. At what age can I make a one-time or prescribed transfer of LIF or LRIF funds to a prescribed RRIF?

You must be at least age 55 to request your financial institution make a prescribed transfer.

41. What is the maximum amount available for a prescribed transfer?

You may make a request to your financial institution for a one-time or prescribed transfer to a prescribed RRIF of an amount up to 50% of the balance in one or more of your LIFs or LRIFs. The maximum amount available for a prescribed transfer is based on the fund balance at the date you requested your financial institution to make a prescribed transfer. The maximum amount available for a prescribed transfer may be affected by:

• any amount that is payable to a former spouse or common-law partner as required by the credit splitting provisions under section 31(2) of The Pension Benefits Act,
• an order issued by the Maintenance Enforcement Program of the Department of Justice under The Garnishment Act to enforce a maintenance obligation, or
• an order issued by the Maintenance Enforcement Program under section 59.3 of The Family Maintenance Act to preserve assets.

42. Does my spouse or common-law partner have to sign a consent form for me to transfer to a prescribed RRIF?

Yes. A LIF or LRIF owner who was a pension plan member cannot make a prescribed transfer unless a cohabiting spouse or common-law partner consents in writing by completing the “Spouse’s/Common-law Partner’s consent to transfer to a Registered Retirement Income Fund Contract”. This consent form is part of the application form.

43. Can I make a prescribed transfer from all of my locked-in funds?

A prescribed transfer may only be made from a LIF or LRIF that is locked-in under The Pension Benefits Act of Manitoba and regulation. A prescribed transfer cannot be made from either a LIRA or a pension plan.

44. Who should I contact to request the transfer of my LIF or LRIF to a prescribed RRIF?

You must request the financial institution managing the LIFs or LRIFs from which you wish to make a prescribed transfer for an application form. Remember as you are limited to a one-time transfer from one or more of your LIFs or LRIFs you must ensure your application includes all LIFs or LRIFs from which you wish to make this one-time transfer. Further, if you have LIFs or LRIFs managed by different financial institutions from which you also wish to make prescribed transfer, you must make a separate application to each institution.

45. What is the minimum withdrawal I must make from a prescribed RRIF?

The Income Tax Act establishes the minimum annual withdrawal required to be made from a RRIF. The amount of the minimum annual withdrawal varies each year based on your age at January 1.

46. What is the maximum withdrawal from a prescribed RRIF?

There is no maximum annual withdrawal restriction imposed on the prescribed RRIF and the owner may withdraw part or all of the funds at any time. The withdrawal will be considered part of your income for the year and you will have to pay tax. There is no withholding tax on the minimum withdrawal. Tax is required to be withheld on withdrawals that exceed the minimum.

47. Do I ever have to purchase a life annuity?

No. You do not have to purchase a life annuity.

48. What happens when I die?

If the owner who was a pension plan member dies, the balance of the prescribed RRIF must be paid to the surviving spouse or common-law partner, unless the spouse or partner has received or is entitled to receive all or any part of balance under an agreement or order under The Family Property Act. In any other case the balance of the prescribed RRIF may be paid to the designated beneficiary or the estate of the owner.

49. Can my prescribed RRIF be seized by my creditors?

No. The money in a prescribed RRIF may not be assigned, charged, anticipated or given as security, and is exempt from execution, seizure or attachment.

However, a prescribed RRIF is subject to attachment for purposes of satisfying Family Property Act claims and maintenance orders.

50. Where can I find a prescribed RRIF?

A wide variety of financial institutions, such as banks, trust companies, credit unions, insurance companies and brokerage firms, offer the product. The contract for a prescribed RRIF must meet the requirements of the regulation under The Pension Benefits Act of Manitoba.

51. What are the rules for investing my prescribed RRIF?

The investment rules are those placed on a RRIF by the Income Tax Act. No further restrictions apply. You determine how the money in your prescribed RRIF is invested and investment earnings may continue to grow on a tax-sheltered basis to the extent they are not withdrawn.

52. Can I transfer my money from one prescribed RRIF to another prescribed RRIF?

Yes. However, before the transfer takes place, you must withdraw the minimum annual withdrawal amount required under the Income Tax Act.

Money that originated from a registered pension plan (locked-in) must be kept separate from ordinary RRIF funds that accumulated as a result of personal savings.

53. Can I roll over my annual withdrawal to an RRSP or RRIF?

No. The prescribed RRIF has certain characteristics such as creditor-proofing and protection of spouses and common-law partners that make it different from an ordinary RRSP or RRIF.

54. Do I receive my income monthly or in a lump sum at the start of the year?

The frequency of payments is a matter between you and your financial institution.

For more interpretive information about The Pension Benefits Act, please write to:

Pension Commission of Manitoba
1004-401 York Avenue
Winnipeg MB R3C 0P8
Telephone: (204) 945-2740
Fax: (204) 948-2375
E-Mail: pensions@gov.mb.ca

Copies of The Pension Benefits Act and Pension Benefits Regulation may be obtained from:

Statutory Publications
200 Vaughan Street
Winnipeg MB R3C 1T5
Telephone: (204) 945-3101
Fax: (204) 945-7172