Glossary of pension terms

ancillary benefits additional benefits which may be provided by a pension plan. This may include: disability benefits, supplementary benefits, certain death benefits, and certain early retirement benefits.

beneficiary (or plan beneficiary) a person who is receiving, or is entitled to receive, a benefit under a pension plan.

contributory plan a pension plan that requires members to make contributions in addition to any employer required contributions. Contributions are normally made by payroll deduction.

defined benefit (DB) plan a pension plan that defines the ultimate pension benefit to be provided in accordance with a formula, usually based on years of service, earnings, on a flat rate, etc. A DB plan may be a contributory or non-contributory plan.

defined contribution (DC) plan (or money purchase plan) a pension plan that defines the amount of contributions (including required member contributions, if any) to the pension plan. The member's pension benefits are based on contributions from the member and employer, plus investment income on these contributions. At retirement, the amount of pension that can be bought is based on the accumulated contributions and investment return in the member's account. A DC plan may be a contributory or non-contributory plan.

member (also known as pension plan member or active member) refers to an employee who has enrolled in a pension plan and is accruing benefits for current service (employment).

non-contributory plan a pension plan in which all required contributions are made by the employer.

normal retirement age or date the age or date (which cannot be later than 66) at which a member is normally entitled to an unreduced pension under the terms of the pension plan.

pension benefit the total monthly, annual or other periodic amounts that start being paid to a member at retirement and that continue for the rest of his or her life. When the member dies, these payments would be made to any other person who may be entitled to receive them.

Pension Benefits Act (PBA) the Ontario legislation open new window that establishes minimum standards for registered pension plans in Ontario.

pension fund the fund that holds contributions, accumulates investment income and from which pension benefits are paid to members.

registered pension plan a plan that is organized and administered to provide pensions for employees, and to which an employer is required to make contributions, that is registered with FSCO in accordance with the Pension Benefits Act open new window. It does not include government programs such as the Canada Pension Plan (CPP) open new window, or the Old Age Security (OAS) Program open new window. Every employer who establishes a pension plan that is subject to Ontario's Pension Benefits Act must register the pension plan with FSCO.

wound up/wind up (or partial wind up) the termination or discontinuation of all (full wind up) or part (partial wind up) of a pension plan, usually at the decision of the employer. This often results from bankruptcy, corporate restructuring, or downsizing.

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