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1. Employer Contributions = all contributions made to the provision in respect of the individual during the year, or in the first 2 months of the subsequent year if in respect of the previous year (i.e., if a contribution is made in January or February of 2001 but in respect of 2000, then that contribution is included in the 2000 pension credit calculations.)
2. Employee Contributions = all employee contributions made in the year under the provision. This includes all required and voluntary contributions.
3. Forfeitures = if the plan has immediate vesting (i.e., regardless of service they always get employer contributions), nil. If no immediate vesting (i.e., employees who leave before 2 years of employment lose their entitlement to the employer contributions), then the amount of the unvested portion that is allocated to their accounts. If the unvested amounts are returned to the employer, nil.
4.Surplus = if the plan has always been a money purchase plan, nil. If the plan was converted from a defined benefit plan to money purchase and at the time of conversion it had a surplus that was also transferred to this money purchase provision, then it is the amount of such surplus allocated to the individual in the year.
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The description for employer contributions and forfeitures are the same as in 1 and 3 above for money purchase provision.
3. Amounts Refunded = amount included in 1 & 2 above that is refunded in the year or the first 2 months of the subsequent year if; a) the amount is equal to or less than 50% of the money purchase limit (i.e., for 2002 may not exceed $6,750), b) the amount is greater than 18% of current year's compensation received from employer, and c) the amount is equal to or less than 18% of prior year's compensation received from the employer.
Amounts refunded are only applicable to the calculation of pension credits for years after 2001.
For the 2002 calendar year, the employer can refund excess contributions relating to cessations of employment based on this calculation or they can use the existing relief allowed under subsection 147(5.11).
SMEP - Money Purchase Provision
The pension credit calculation for a money purchase provision that is a SMEP would be the same as any other money purchase provision with the exception that the following contributions are also included:
SMEP - Defined Benefit Provision
1. Employer Contributions = contributions made in the year (on a measure that is specific to the employee, such as hours worked, units of production, etc.) or in the first 2 months of the following year if made in respect of the preceding year (i.e., contributions that are made in January or February of 2001 in respect of hours, units, etc. in 2000 are included in the 2000 pension credit). In order to find out what the rate per hour or unit of production is, contact your plan administrator.
Ex: If John worked 1,200 hours in the year 2000 and the rate in the plan is $1.50 per hour, then the employer contribution is $1,800.
2. Employee contribution = contributions made in the year or in January of the following year if in respect of the previous year (i.e., contributions made in January of 2001 in respect of 2000 are included in the 2000 pension credit).
3. Additional Contributions = in some situations the employer will put into the plan a contribution that is not specific to any employee. To determine what amount of this lump sum contribution is attributable to each member the following calculation must be done.
The benefit entitlement that is used above is based on the retirement benefits payable under the particular provision. Here are some examples of how to calculate the benefit entitlement.
Example # 1
Plan formula: 2 % of final average earnings. Member's earnings $45,000 2 % X $45,000 = $900 (this $900 in inserted into the calculation above as the benefit entitlement)
Example # 2
Plan formula: flat benefit $45 per month. Member's earnings $60,000 $45 X 12 (12 months in a year) = $540 (this is inserted in the calculation above as the benefit entitlement)
Example # 3
Plan formula: 1.3% of final average earnings up to the Year's Maximum Pensionable Earnings (YMPE) and 2% of earnings above the YMPE. Member's earning's $50,000 and the YMPE for the year is $38,300. (1.3% X $38,300) + (2% x $11,700) = 731.90 (this is inserted in the calculation above as the benefit entitlement)
For further examples, see the PA Guide T4084.
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