Quirion Financial
Services

1085 Carrick Street
Thunder Bay, ON
P7B 6L9

807-622-3700
1-800-785-2877

Questions & Answers – Pension Plan Total Wind-Up

Following the notices recently received by the Terrace Bay Hourly Employees, the Neenah Paper Ontario Canada Pension Plan will be terminated. The following questions and answers aim to provide you with a better understanding of the total wind-up process. Examples are also provided in appendix.

What is a pension plan wind-up?

A wind-up involves the settlement of pension benefits for all plan members (active members, inactive members entitled to a deferred pension, and retirees).

Am I going to lose any pension benefits as a result of the wind-up?

No. The company will pay into the pension plan any additional contributions required to offset any pension plan deficit, so you will receive your full pension benefits.

More specifically, what will be the main consequences of the wind-up?

Usually, a member is only entitled to a reimbursement of his/her contributions if he/she ceases to be employed before having accomplished two years of membership in the plan. One consequence of the wind-up is that every member becomes fully vested for all credited service. This means that even if you have less than two years of plan membership, your pension benefits will be fully vested for all credited service.

Other consequences are as follows:

  • If the combination of your age and years of service equals 55 or more, you will be given “grow in” rights, as follows:
  • If you are eligible to retire (meaning if you have reached age 57 with 15 years of service, you will be entitled to the payment of an immediate pension (reduced or unreduced, as the case may be);
  • If you are not eligible to retire (meaning if you have not reached age 57), you will be entitled to:
    • i) an unreduced pension beginning at the earlier on the date on which you would be entitled to an unreduced pension had the plan not been wound up and had you continued to participate in the pension plan to that date; and
    ii) a reduced pension beginning as early as the date on which you will attain age 57 and 15 years of service.
    Furthermore, if the combination of your age and years of service equals 55 or more and you have at least ten years of service or plan membership at the date of the wind-up, you will be entitled to a bridge benefit as if you had continued to participate in the pension plan.

Finally, you will have the right to:

  • transfer the value of your pension benefits into a prescribed vehicle, such as a locked-in retire account (LIRA), even if you are more than 55 years old (however, you will not be entitled to such transfer if you are receiving your pension), or
  • to receive a deferred or immediate annuity

    • How will my pension benefits be determined?

    Your pension benefits will be established according to the following factors, which determine the amount needed to save today to provide the pension benefits you are entitled to receive on your retirement date:
    • Your age;
    • The date upon which you are eligible to retire;
    • The pension benefits your are entitled to receive; and
    • The rate of interest expected to be earned until your retirement date.

    When and how will I be entitled to receive my pension benefits?

    It is important to note that pension legislation provides that, once the wind-up notice has been given, no payments of pension benefits can be paid out of the pension plan until the Financial Services Commission of Ontario (FSCO) has approved the wind-up report. However, retirees who are in receipt of their pension benefits before the wind-up notice is issued will continue to receive their benefits from the pension plan.

    In addition, the plan administrator (Neenah Paper) can request the FSCO to authorize the payment of pension benefits before receipt of their approval of the wind-up report for those who are eligible to retire and therefore receive an immediate pension.

    As a result, your pension benefits will be paid as follows:

    • If you were receiving your pension benefits before the wind-up notice date, you will continue to receive them from the pension plan. The pension will eventually be insured by an insurance company after the FSCO’s approval has been granted;
    • If you are eligible to retire and therefore receive an immediate pension, you will receive your pension benefits once the FSCO has authorized the payment of such pension benefits. You will then be provided with an Option Statement. The pension will eventually be insured by an insurance company following receipt of the FSCO’s approval.
    • If you are not eligible to retire, you will not be entitled to receive payment of your pension benefits until the wind-up report has been approved by the FSCO, which is expected to occur sometime in 2007. Once the FSCO has provided its approval, you will receive, within 60 days, an individual statement setting out the options available to you. You will then receive your pension benefits within 60 days following our receipt of your election form.

    What will be my payment options?

    Your option statement will show the following options: Transfer of the value of your pension benefits to:
    • A Locked-In Retirement Account (LIRA)
    • A Life Income Fund (LIF), if you are eligible to retire
    • A Locked-in Retirement Income Fund (LRIF), if you are eligible to retire
    • Another pension plan, if the other pension plan allows for such transfer
    Receive a deferred or immediate annuity. If you choose this option, your annuity will be eventually insured by an insurance company. Please note – if you have very few years of service, you might be entitled to receive a cash payment.

    What is a LIRA?

    A LIRA is a type of RRSP where funds can only be used to provide retirement income. The funds cannot be cashed out. You decide how the funds are invested. When you are eligible to retire (i.e., you have reached age 55), you can transfer the funds to a LIF or a LRIF, or purchase a life annuity.

    What is a LIF?

    A LIF is a type of RRIF (a RRIF is a fund where you transfer property from an RRSP, RPP, or from another RRIF) where you must withdraw, each year, a minimum amount up to a maximum amount, both of which are prescribed by legislation. You decide how the funds are invested. When you reach age 80, the balance of the funds must be used to purchase a life annuity.

    What is a LRIF?

    As with the LIF, a LRIF is another type of RRIF where you must withdraw, each year, a minimum amount up to a maximum amount, both of which are prescribed by legislation. You decide how the funds are invested. However, unlike the LIF, you are not required to purchase a life annuity at age 80.

    Will my pension benefits earn interest until the transfer or purchase?

    Interest will be credited to the value of your pension benefits until the date of transfer or purchase, as the case may be.