Pension Glossary

Actuary: A business professional who applies their knowledge of mathematics, probability, statistics and risk theory to real-life financial problems involving future uncertainty.

Beneficiary: An individual, institution, trustee or estate that receives, or may become eligible to receive, benefits under a will, insurance policy, retirement plan, annuity, trust or other contract.

Commuted value: Amount of an immediate lump-sum payment estimated to be equal in value to a future series of payments.

Defined Benefit Pension Plan: A plan that defines the pension to be provided (based on service, average earnings, etc.) but not the total contributions. If a plan is contributory, employees must contribute to the plan at a specified rate, with the employer paying the balance of the cost. The PCC has a Defined Benefit Pension Plan.

Defined Contribution Pension Plan: A plan that defines contributions to be made by the employer and possibly employees, but not the benefit formula. Accumulated contributions and investment income are used to purchase an annuity for the member.

Going Concern: Measures the long-term financial condition of the plan; assumes the plan will continue indefinitely.

Income ratio: The ratio of your pensionable income to the maximum qualifying income.

Maximum Qualifying Income (MQI): Used to calculate the maximum pension and group insurance contributions. The MQI for each year is equal to 160% of the top level of the minimum stipend as established each year by General Assembly (rounded to the nearest multiple of $60).

Normal Retirement Date: The first day of the month following your 65th birthday.

Pensionable Income: The stipend or salary paid to a member by an employer for the year or part-year during which the Member is in Pensionable Service, to a maximum equal to the Maximum Qualifying Income in that calendar year. For the purposes of this provision, “stipend” includes an allowance of 60% of actual stipend paid, in lieu of housing, utilities and other allowances and “salary” includes any emolument paid by the Employer in respect of premiums for the extended health care and dental insurance plans.

Pensionable Service: A period of  full time or pro-rated part time service in a given calendar year during which you have made contributions to the pension plan (measured in complete months).

PfAD (Provision for adverse deviations): Amount required to be funded by Ontario pension legislation for the going concern valuation, in addition to the cost of pension benefits. The PfAD is determined as a percentage of liabilities and normal cost, and is dependent on certain criteria: asset allocation of the plan and whether a plan is open or closed (as defined by pension legislation)

Solvency Ratio: Ratio of solvency assets to solvency liabilities. For purposes of determining the solvency ratio, solvency liabilities may exclude the value of some ancillary benefits, such as indexation.

Solvency: Measures the financial position of the plan if it were to wind-up on the valuation date.

Special Payments: Payments required to be made to a pension fund in accordance with pension legislation to eliminate deficits in accordance with the going concern or solvency valuations.

Valuation: An actuarial examination of a pension plan to determine whether contributions are being accumulated at a rate sufficient to provide the funds out of which the promised pensions can be paid when due.

Vesting: The right of an employee, on termination of employment, to part or all of their accrued pension; usually requires locking-in of employee’s benefit entitlements when the size of the benefit is above a specified threshold. Vesting is usually in the form of a deferred pension commencing at retirement age. Statutory vesting occurs when the employee meets the age and/or service conditions set out in pension benefits legislation.

Wind-up: The termination or discontinuance of a pension plan. The wind-up of a pension plan stops the accrual of benefits and requires a disposal of all plan assets and liabilities.

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