ProAdmin calculates the Income Tax Act (ITA) Maximum Pension reflecting "post-reform" regulations. The parameters of the Canadian ITA Maximum Pension dialog box allow you to control the service and early retirement reductions for the calculation of the ITA maximum pension and also to define pre-reform and post-reform benefit accrual service for use by the #CANMAX operator.

ProAdmin’s calculation of the limit on the amount of pension that can be paid annually multiplies the number of years of benefit accrual service by the calendar year dollar limit (at the time benefit payments commence) on accruals for each year of service and adjusts for early retirement, i.e., (1) x (2) x (3), where:

(1) is the dollar maximum annual accrual payable at commencement age;

(2) is the number of years of benefit accrual service at decrement age; and

(3) is the early retirement reduction, based on valuation (i.e., rounded) age and exact service: 0.25% per month (3% per year) by which the pension commencement age precedes the earliest of age 60, 30 years of service and 80 points (age plus service), with a maximum reduction of 45%.

 

The Canadian ITA maximum pension parameters are:

Service for benefit accrual:

This parameter determines how to measure years of service in (2) above. Select from the library of Service Definition Sets defined. The arrow button accesses the library to create and modify Service Definition Sets.

Service for early retirement reductions:

This parameter determines how to measure years of service for purposes of determining the applicable regulatory early retirement reduction factor described in (3) above. The arrow button accesses the library to create and modify Service Definition Sets.

Allow service split based on reform date:

By checking this box, you identify pre-reform service and post-reform service to ProAdmin, in order to count just one or the other in (2) above. To apply the ITA maximum pension limit to either pre-reform or post-reform service, you must use the #CANMAX operator in your benefit formula, with an appropriate left argument (either 2 for pre-reform or 1 for post-reform). Thus, for example, for grandfathered plans that continue to apply the paragraph 9(g) maximum pension rule of Information Circular 72-13R8, you may apply the limit to just post-reform service.

 

Select the pre-reform service field from among the numeric and date fields unhidden in the current project.

Specify post-reform service by selecting a service field or a Service Definition Set. Select from the library of Service Definition Sets. The arrow button accesses the library to create and modify Service Definitions.

The Limitation year parameter allow you to choose either the calendar year or the plan year as the limitation year. For example, if the plan year begins in March but the limitation year is the calendar year, the dollar maximum for the calculations at all dates will be the same as if the plan year was the calendar year.

 

Notes:

1. If you indicate the service basis for either pre-reform or post-reform service, you must also specify the service basis for the other.

2. ProAdmin computes pre-reform service as the lesser of total (benefit accrual) service and the value indicated by the selected pre-reform service field. Post-reform service is not compared, however, to total service and thus not capped at the total service amount. Therefore, be sure that your specifications for benefit accrual service, pre-reform service and post-reform service are consistent (that the sum, as of the valuation date, of the amount of service indicated by the pre-reform and post-reform service parameter selections is equal to the amount of service indicated by the benefit accrual service parameter selection).

 

Important: As mentioned above, to reflect a service split in the ITA maximum pension, you must use the #CANMAX operator, with an appropriate left argument. Merely setting the apply ITA maximum pension radio button (under the Maximum Pension topic of the Benefit Definition) will not replace total service in (2) above with pre-reform or post-reform service.

 

Use public safety occupation early retirement reduction:

If this box is checked, in lieu of the early retirement reduction of (3) above, ProAdmin will apply the 0.25% per month (3% per year) reduction for each month (year) by which the pension commencement age precedes the earliest of age 55, 25 years of service and 75 points (age plus service), with a maximum reduction of 45%. This is in accordance with the regulatory criteria for plan members employed in a public safety occupation.