According to the plan, what are the tax implications of a plan member’s contributions, the plan sponsor’s contributions, and the interest earned on contributions?

Instructions: Answer all questions in complete sentences; be thorough but concise. Use your own words and, where applicable, cite any references appropriately, including page numbers.

Upload your completed assignment as a Word document on the Assignment 1 page. If you encounter difficulties preparing this assignment, contact your Academic Expert through the Student Support Centre.

Part A – Short answer (35 marks)

Answer the following questions. These should be answered in a sentence or two, or a short paragraph.

Answers must be complete and clearly labeled by question number.

What are the three legs of the “three-legged stool” for retirement systems in Canada?

According to the assigned reading, why are all three “legs” necessary? (5 marks)

Describe one benefit and one drawback of employer-sponsored pension plans from each of the following perspectives: the government, employees, and employers. (10 marks)

What is the principal difference between defined benefit (DB) and defined contribution (DC) pension plans? (5 marks)

How do the pros and cons associated with a defined benefit plan vary depending whether you are the employer or employee? (5 marks)

Explain the difference between the aims of the regulations established by the provinces (pension standards legislation) and that contained in the Income Tax Act for pension plans. (5 marks)

ABC, Inc. is setting up a pension plan for its employees. There are 50 employees located at the company’s headquarters in Toronto, 100 employees at the manufacturing plant near Edmonton, and 75 employees at the distribution centre in Vancouver. In which jurisdiction should ABC, Inc. register its pension plan? Why? (5 marks)

Part B – Application (30 marks)
The questions below are based on the plan document for the University of Saskatchewan included as a PDF on the assignment page.
Read through the plan document. Prepare a short answer (one line to one paragraph maximum should be sufficient to answer each question) for each of the following questions. Answer in your own words, where possible. Support your answer with the relevant page and section number from the plan document, where applicable:
What type of pension plan is this (DB, DC, hybrid, etc.)? How do you know? (5 marks)
Who contributes to the plan? How are each party’s contributions determined? (10 marks)
When is the normal retirement date? Explain how early retirement and postponed retirement are defined for this plan. (5 marks)
Locate the pension benefit formula. Explain, in general and in your own words, how increases or decreases in annual earnings would impact the retirement benefit earned by a member. (5 marks)

According to the plan, what are the tax implications of a plan member’s contributions, the plan sponsor’s contributions, and the interest earned on contributions? (5 marks)

Part C – Critical Thinking (35 marks)

The reading assignments for this unit discussed plan design considerations and introduced the main types of pension plans. This part of the assignment asks you to apply this knowledge to a hypothetical situation.

Background

Assume you are a consultant who has been hired by XYZ, Inc. to provide recommendations on what type of plan the company should adopt. The company is a medium-sized tech firm that is anticipating a period of strong growth. Their employees are highly skilled and there is fierce competition among similar employers to recruit and retain top talent. The company wants to offer a pension plan to improve their compensation package, but are concerned about long-term commitments. The HR manager is new to the position, and recently arrived from a company that had no pension plan. He believed that offering a plan would be a very strong policy for XYZ, Inc. He is working through this issue before presenting it to other departments. He is unfamiliar with their options and are asking you to provide some options and recommendations.

Task

Write a short report that:

provides background (including pros and cons) on the broad types of plans available,
outlines at least three plan options that the company is to choose from,
recommends that the company adopt one of the plan options, and
justifies the recommendation based on the company’s specific needs.

Guidelines

Write in your own words and cite supporting materials appropriately.

You are encouraged but not required to conduct additional research. You may use the optional resources provided in the Lesson 2 Learning Activity as a starting point.

Be professional and respectful in your writing and use appropriate organization and formatting.

Do not exceed 750 words.

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