It is important to refer to your pension plan booklet, or other plan documents, for specific information on your plan. These documents can be obtained from your pension plan administrator.
In a Defined Contribution (DC) Plan, members will contribute a percentage of pay (or a flat dollar amount) and the employer will provide a contribution, which may be more, less, or equal to the member contribution. An employer must contribute a minimum of 1% of pay. Contribution requirements for the member and the employer are set out in the plan documents.
In a DC Plan, each member has their own account. Members’ contributions are invested. A member may have the ability to select from certain investments or the plan sponsor may make this decision on behalf of all members.
Your pension statement will show the contributions made since the last statement and the value of your invested contributions. You should thoroughly review every pension statement you receive for accuracy as it is more challenging to have errors corrected years later when you are ready to retire.
Your pension benefit paid from membership in a DC Plan is based on how much money is accumulated in your account. This amount cannot be known with certainty in advance.
Many factors determine the pension you will receive. The main three factors are:
amount of contributions,
return on investment, and
life expectancy of you and your principal beneficiary.
As a member of a DC Plan, you bear the risk and financial gains or losses will directly impact your retirement income. For example, you may outlive your retirement savings if you live longer, however, your retirement income may increase if your investments perform better than expected.
Legislation does not permit a pension to be paid directly from a DC Plan.
To start receiving your pension upon retirement, your accumulated money must be:
