A Pension for Life
What type of pension plan is the Teamsters Canadian Pension Plan (TCPP)?
The TCPP is a defined benefit multi-employer and multi-divisional pension plan.
When contributions were reported on your behalf by an employer participating in the plan, you became a member of the Teamsters Canadian Pension Plan. The contributions to the TCPP are made as a whole, not into individual accounts, and they are invested to provide all members of the TCPP a pension that is payable for life. This is unlike an RRSP, where contributions are made to individual accounts and investment and longevity risks are borne by those individuals.
Members are not entitled to individual account balances based on the Total Employer and/or Employee contributions, but rather the contributions are made to the TCPP and they are invested to provide all members of the TCPP a pension that is payable for life!
Another key difference from an RRSP is that funds with the TCPP cannot be withdrawn while a member is still active under the Plan. All the funds in the TCPP belong to all the members within the Plan to provide retirement benefits. However, depending on your province of employment, there may be consideration for financial hardship or shortened life expectancy.
Under the TCPP, there is better retirement protection, as opposed to an individual RRSP where funds may run out while the person is still living.
The TCPP provides for a monthly pension benefit payable for life, which becomes payable at the member’s retirement date. If a member is under age 55 when their membership in the Plan terminates, the value of their pension will be calculated based on their age, the pension benefit formula, and various assumptions such as interest and mortality rates and the option to transfer the value to a locked-in retirement vehicle will be made available. If the calculated value of the member’s pension is determined to be “small”, at any age, then it may be transferred to an RRSP or paid out in cash, less withholding taxes.
Most Divisions of the TCPP require two calendar years with less than 350 hours worked before membership in the TCPP terminates. Your annual statement indicates the termination provisions that apply to you under your Division. If you return to work with the same or another participating TCPP employer before your membership terminates, your membership will continue, and your pension benefit will continue to grow.
The big difference between an RRSP and the TCPP is that the TCPP operates under a collective approach, whereby risks are shared – overall, you get a higher pension, a more stable and predictable pension for your lifetime… and peace of mind in retirement!
Reach out to your Divisional Administrator for more information.