Planning for retirement

Canadian Blood Services Defined Benefit Pension Plan ................................ .. .. .. . Planning for retirement Trustees of the Canadian ...
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Canadian Blood Services Defined Benefit Pension Plan ................................

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Planning for retirement

Trustees of the Canadian Blood Services Defined Benefit Pension Plan

CBS trustees

Union trustees

Kathryn Butler Malette Vice-President, Human Resources

Kevin Skerrett Canadian Union of Public Employees

Neil R. Wilkinson CBS Board of Directors

Shirley McVittie Ontario Public Service Employees Union

Faye Strike Executive Director, Human Resources Corporate Services

Dennis Blatchford Health Sciences’ Association of British Columbia

Alternates

Marcel Leclair Executive Director, Finance

Alice Mannion Newfoundland and Labrador Nurses’ Union

For more information on the Defined Benefit plan, contact Morneau Sobeco at 1 877 252 4442 or on line at cbsdbpension.hroffice.com.

May 2004

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...................... Foreword

Canadians are enjoying longer and longer retirements these days. Also, earlier retirement and increased life expectancy mean that people are spending almost as long in retirement as they spend in their working careers. From where you are right now, this may all seem a long way off. However, your future financial security and that of your loved ones depend on careful planning for your income needs during retirement. The Canadian Blood Services (CBS) Defined Benefit (DB) Pension Plan is jointly sponsored by CBS and the Participating Unions listed on page 1, and administered by a Board of Trustees representing both. The names of the current Board members appear on the inside of the front cover of this booklet. Employees who are represented by the Participating Unions enrol in the DB plan when they meet the eligibility requirements, as explained in the Eligibility and enrolment section. Other employees may also enrol in the DB plan, if they wish. All employees who were members of the Canadian Red Cross Pension Plan–Part II (DB plan) on September 27, 1998 joined this plan automatically on September 28, 1998. All service and earnings under the Red Cross plan count toward benefits under this plan.

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The DB plan provides an excellent way to begin building retirement income.

About this booklet

The DB approach

The following pages describe the features of the DB plan. With the defined benefit pension approach, you know in advance how much pension you will have when you retire. This pension is based on a formula that considers the average of your five consecutive years of highest annualized earnings while working for CBS. Since your years of highest earnings are often at the end of your career, your retirement pension generally bears some relationship to the amount of money you were earning when you retired. (In contrast, a defined contribution plan provides a pension that depends on your contributions and how well the funds in which they are invested perform.)

What you’ll learn

You will learn how to join the plan, the plan’s cost and who pays what, and the options you have in the event of various life events.

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Other information

In the Additional information section, we’ve also provided you with a brief description of government plans and personal retirement savings.

Definitions

For help with definitions of some pension terms, see the glossary at the back of the booklet. And be sure to check out the questions and answers in each section for even more insights into the plan. *

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This booklet is a helpful guide to one part of your retirement planning. Read it, share it with your family, and keep it handy for future reference. Of course, summaries never provide exhaustive detail. The official plan text governs your actual benefits from the plan, and is the final authority in any case of dispute. Any eligible member, beneficiary, or other authorized person may see and copy the full plan text, annual information returns, and other relevant documents, by contacting the Human Resources department at Head Office. If you have further questions, please contact Morneau Sobeco at 1 877 252-4442 or check out the DB web site at cbsdbpension.hroffice.com.

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...................... Table of contents

Eligibility and enrolment ....................................................... 1 Participating Unions..................................................................... 1 Regular full-time employees......................................................... 2 Employees other than regular full-time employees ....................... 2 Manitoba employees .................................................................... 3 Transferring service into the plan ................................................. 4 Examples...................................................................................... 5 Choosing not to join..................................................................... 6 Some questions and answers........................................................ 7

Contributing to the plan ........................................................ 9 The cost of the plan...................................................................... 9 Your contributions...................................................................... 10 Some questions and answers...................................................... 12

The pension formula ............................................................ 15 Some questions and answers...................................................... 16

Retirement benefits ............................................................. 18 Normal retirement...................................................................... 18 Early retirement .......................................................................... 19 Postponed retirement ................................................................. 20 Pension payment options ........................................................... 21 Indexing of pensions during retirement ...................................... 23 Your MPF contributions ............................................................. 23 Some questions and answers...................................................... 24

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What happens … ................................................................. 27 If you become disabled .............................................................. 27 If you take a leave of absence .................................................... 28 If you leave CBS......................................................................... 29 If you die while working for CBS................................................ 33 If you die during retirement........................................................ 34 Some questions and answers...................................................... 35

Additional information ........................................................ 36 Designating a beneficiary........................................................... 36 Plan administration .................................................................... 36 Marriage breakdown .................................................................. 37 Annual statements...................................................................... 37 Plan amendment or termination ................................................. 38 Government benefits.................................................................. 38 Personal savings......................................................................... 40 Some questions and answers...................................................... 41

Glossary ............................................................................... 44

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...................... Eligibility and enrolment

Participating Unions Employees represented by the following unions participate in the DB Plan. P

British Columbia Nurses’ Union

P

Canadian Union of Public Employees, Local 1655

P

Canadian Union of Public Employees, Local 1846

P

Canadian Union of Public Employees, Local 3728

P

Health Sciences’ Association of British Columbia

P

Hospital Employees’ Union of British Columbia

P

Manitoba Nurses’ Union

P

Newfoundland and Labrador Nurses’ Union

P

Nova Scotia Nurses Union

P

Ontario Nurses’ Association

P

Ontario Public Service Employees’ Union

P

Saskatchewan Union of Nurses

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Regular full-time employees If you’re a regular full-time employee, you may join the plan the first of the month after you complete three months of continuous service. If you don’t join then, you can join on the first day of any month thereafter. If you are represented by one of the Participating Unions indicated on page 1 and have not already joined the plan, you automatically join the first day of the month in which you complete two years of continuous service (that is, unbroken employment with CBS, whether in a full-time or other than full-time position). If you are not represented by one of the Participating Unions, you must join this plan or the Defined Contribution (DC) plan the first day of the month in which you complete two years of continuous service (that is, unbroken employment with CBS, whether in a full-time or other than full-time position). Your local Human Resources Representative will contact you shortly before you are eligible to join to supply the forms you need to fill out.

Employees other than regular full-time employees If your employment status is something other than regular full-time, you may join the plan the first day of any month, beginning with the month in which you complete two years of continuous service.

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Your local Human Resources Representative will contact you shortly before you are eligible to join, to supply the forms you need to fill out.

Manitoba employees Regular full-time employees

You may join the plan the first of the month after you complete three months of continuous service or the first of any month thereafter. If you are represented by one of the Participating Unions indicated on page 1 you automatically join the plan the first day of the month in which you complete two years of continuous service. If you are not represented by one of the Participating Unions, you must join this plan or the DC plan the first day of the month in which you complete two years of continuous service. Employees other than regular full-time

You may join the plan the first of the month after you complete three months of continuous service. If you don’t join then, you can choose to join on the first day of any month thereafter. If you are represented by one of the Participating Unions indicated on page 1 you automatically join the plan the first day of the month in which you complete two years of continuous service, as

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long as you have also earned at least 25% of the YMPE in each of two consecutive calendar years. If you meet the service and earnings criteria and are not represented by one of the Participating Unions, you must join this plan or the DC plan at that time. Your local Human Resources Representative will contact you shortly before you are eligible to join, to supply the forms you need to fill out to join the plan.

Transferring service into the plan If you were a member of another pension plan immediately before you commenced continuous service with CBS, you may be able to transfer your pension assets directly from your previous pension plan to this plan to provide additional credit and benefits under this plan. If you are interested in such a transfer, you should contact Morneau Sobeco at 1 877 252-4442, advising them of your pension entitlements and options under the previous plan. The credit and benefits that may be provided with the assets transferred from your previous pension plan will then be determined.

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Examples Let’s look at some examples that apply to employees joining this plan.

Dale is regular full-time employee

Date of hire Dale may join the plan Dale must join the plan

January 15, 2003 May 1, 2003 January 1, 2005

Sandy just transferred to a regular full-time position

Date of hire in the parttime position Sandy transferred to fulltime Sandy must join the plan

June 15, 1998

Date of hire Ahmed may join the plan

June 15, 2002 June 1, 2004

Ahmed is a temporary full-time employee

December 1, 2003 December 1, 2003

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...................... Phil is a temporary parttime employee working in Manitoba

Date of hire Phil may join the plan Phil earned, in 2002 Phil earned, in 2003 Phil must join the plan

August 15, 2002 December 1, 2002 $9,775 (25% of 2002 YMPE) $9,975 (25% of 2003 YMPE) August 1, 2004

Choosing not to join You may choose not to join the plan if you: P

are already a member of the CBS DC plan,

P

are a regular full-time employee and have not yet completed two years of continuous service,

P

work other than full-time (unless you work in Manitoba and have completed two years of continuous service, having earned at least 25% of the YMPE in each of two consecutive calendar years, in which case you automatically join the plan at that time),

P

work in the Northwest, Nunavut, or Yukon Territories, if you object to pension plan membership on the basis of religious beliefs, or

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...................... work in Manitoba, and are a full-time student or a member of a religious group that has as one of its articles of faith the belief that members of the group must not join a pension plan.

If you don’t join the plan, you will have to sign a form indicating that you’ve been given the chance to join and chose not to.

Some questions and answers What does YMPE mean?

YMPE stands for Year’s Maximum Pensionable Earnings. This is the amount the government sets each year, and uses to base your contributions to—as well as benefits from—the Canada or Quebec Pension Plan. Changes in this amount are based on increases in average weekly earnings in Canada. Earning a percentage of the YMPE in two consecutive calendar years is one of the DB plan eligibility criteria if your employment status is something other than regular full-time. How do I join?

Shortly before you’re eligible to join, a Human Resources Representative will contact you, and give you an enrolment form. You’ll use this form to provide personal details and to designate a beneficiary to receive benefits from the plan in case of your death.

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If I join the DB plan, can I later decide to switch to the Defined Contribution plan?

In general, no. Once you have joined the plan, you remain in the plan as long as you are employed by CBS. The only exception to this rule is if you joined the plan as a member of a Participating Union and later transfer to a position at CBS where you are no longer a member of any union. If you have a choice to join either the DB or the DC plan, it is important for you to read the descriptive booklets carefully to ensure that you make the decision that is right for you. Should I designate a beneficiary?

Provincial pension laws require that, for certain periods of service, if you have a spouse when you die, then your spouse must receive the benefits related to your plan membership payable in the event of your death. In certain provinces, if you want someone else to receive the benefits, your spouse may sign a form waiving this right allowing you to name someone else to receive the benefits. If you don’t have an eligible spouse, you may name anyone as your beneficiary. If you don’t designate a beneficiary, in the event of your death, the total value of your plan entitlement would be paid in cash to your estate. Under current income tax law, your eligible surviving spouse may transfer the benefit tax-free to another retirement plan.

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...................... Contributing to the plan

Both you and CBS contribute to building up your pension under the DB plan.

The cost of the plan The amount that you and CBS are required to contribute to the plan depends on the total cost of the plan. When the total cost is between 9.5% and 11.5% of pensionable earnings (that is, the earnings recognized for pension purposes of all CBS employees who are members of the plan), employees contribute 4.75% of earnings, and CBS contributes the difference, up to 6.75% of pensionable earnings. If the cost rises above 11.5% of pensionable earnings, the members and CBS will share the additional cost equally. Similarly, if the cost falls below 9.5%, the members and CBS will benefit equally from the reduction below that amount. Total contribution rates have fluctuated since plan inception. Contribution rates for members and CBS have been determined in accordance with the above rules. Historical rates are detailed in the following table.

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...................... Contribution rate Period

Member

CBS

Total

September 28, 1998 – December 31, 2001

4.00%*

6.75%

11.50%

December 31, 2001 – February 28, 2003

4.75%

6.75%

11.50%

March 1, 2003 –

5.00%

7.00%

12.00%

* Because of a partial contribution holiday of 0.75% of pay, rates reduced from 4.75% to 4.00%

Contribution rates will continue to change from time to time.

Your contributions Required contributions

For the purposes of contributing to the plan, your pay means your basic annual salary, excluding bonuses, shift premiums, and overtime pay. This amount is divided by 26 (the number of your bi-weekly pays each year), and rounded to the nearest cent. As explained above, your contribution percentage may change from time to time.

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Here’s an example. Sam works full-time and earns $40,000 a year

Annual pension contribution

5% × $40,000 = $2,000

Bi-weekly contribution

$2,000 ÷ 26 = $76.9231

Sam pays

$76.92

Money Purchase Feature (MPF) contributions

Money purchase feature (MPF) contributions are additional, optional contributions of 2% of earnings that you may be making to the DB plan, which attract a corresponding CBS contribution of 1% of your earnings. These additional contributions accumulate at the rate of interest the fund as a whole is earning, net of expenses, until your retirement, termination of employment, or death. If you were making MPF contributions to the plan on December 1, 1998, you may continue to make these contributions until: P you retire, P you leave CBS, P you die, P you decide to stop making them, or November 30, 2004, whichever happens first.

P

Members who were not making MPF contributions on December 1, 1998 are not eligible to begin making such contributions. Also, if you choose to stop making MPF contributions, you will not be allowed to re-enrol in this feature of the plan.

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...................... Here’s an example.

Sam's situation

Sam’s MPF contribution

2% × $40,000 = $800

CBS’s 50% contribution

1% × $40,000 = $400

Total MPF contribution

$1,200

Some questions and answers Are my pension contributions tax-deductible?

Yes. All your contributions to the DB plan are fully deductible from your income tax. You benefit right away, also, since contributions to the plan are deducted from your pay before Payroll calculates your income tax. Is there a limit on the amount I can contribute to the plan?

Yes. However, this maximum only applies to very high earners. If your pension is limited because of Income Tax Act rules (see question on page 19), it is possible that your contributions to the plan would also be limited.

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If I decide later that I don’t want to take part in the plan, can I stop contributing?

No. Once you are a member of the plan, you continue to contribute as long as you keep working at CBS, and your money stays in the pension fund until you leave CBS, retire, or die. If you want, you can stop making MPF contributions but, if you do, you won’t be able to begin making them again. What circumstances might make my contribution rate change?

The total cost of the plan could change, based on: P

the actuary’s valuation of the plan (done at least every three years) which, among other things, considers past experience (such as investment returns on the pension fund) and makes assumptions about future experience (such as interest rates), or

P

improvements to the plan.

In this case, your required contributions could also change, based on the formula described under “The cost of the plan”. Where are the contributions—mine and CBS’s—held?

Your contributions, CBS’s contributions, and the investment income this money earns are in a separate pension fund, managed by professional investment managers.

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What happens to my MPF contributions after November 30, 2004, when this feature ends?

Your contributions and CBS’s corresponding contributions, along with interest, will remain in the pension fund and continue to accumulate interest at the rate of interest the fund as a whole is earning, net of expenses, until your retirement, termination of employment, or death. You will receive updates on these contributions separately on your annual pension statement.

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...................... The pension formula

All the benefits paid from the DB plan are based on a formula that considers: P

your best average earnings (the average of your five consecutive years of highest annualized earnings while working for CBS), and

P

your years of plan membership, which is called your pensionable service.

Effective March 1, 2003, the plan formula is: 2.0% x your best average earnings x your pensionable service to October 31, 1997 plus 1.6% x your best average earnings x your pensionable service from November 1, 1997

Using this formula, you can estimate anytime what your pension will be, based on your best average earnings when you do the calculation. Let’s look at an example.

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...................... Matt’s best average earnings are $50,000 He has 10 years of membership to October 31, 1997 and 5 years after that date

Pension for service to October 31, 1997 1,000 2% x $50,000 Pensionable service × 10 years Matt’s pension for service to October 31, 1997

10,000

Pension for service from November 1, 1997 1.6% x $50,000

$800

Pensionable service

x 5 years

Matt’s pension for service from November 1, 1997

$4,000

Matt’s annual pension, payable for life

$14,000 ($10,000 + $4,000)

Some questions and answers What does “annualized earnings” mean?

Earnings, for the purposes of this plan, are always calculated on a full-year, full-time equivalent basis for those who work on a less than full-time basis. How is my pensionable service calculated if I work on a less than full-time basis?

Pensionable service reflects the actual time you work for CBS or are on a recognized leave of absence. If you work on a less than full-time basis, pensionable service is prorated.

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How are my best average earnings calculated if I’ve worked less than five years for CBS?

If you’ve worked for CBS less than five years, your best average earnings will be the average of your actual annualized earnings. Is there a maximum pension payable from the plan?

Yes. The Income Tax Act limits the amount of annual pension payable from registered pension plans like ours. For 2004, this maximum is $1,833 for each year of pensionable service. In 2005, the amount increases to $2,000 per year of pensionable service. Thereafter, the limit will be indexed annually following increases in average weekly earnings in Canada.

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Retirement benefits Once you decide to retire, your planning will reap its benefits. The income you get from the plan will play an important part in your financial security. You can also check with your Human Resources Representative to determine whether you are eligible for post-retirement insurance benefits.= There are a number of administrative steps required to process your pension, so you should notify your Human Resources Representative as early as possible once you decide on the date you wish to retire.

Normal retirement You may retire with an unreduced pension anytime after the last day of the month in which you turn 65.

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Early retirement You may choose to retire early, anytime after the last day of the month in which you reach age 55, as long as you meet the eligibility criteria (which varies by province), generally equal to two years of plan membership. If you retire early, you may choose to receive a pension immediately, or the first of any month thereafter, but no later than the last day of the month in which you turn 65. If you choose to receive the pension right away, your pension, calculated according to the formula described in the section “The pension formula”, is reduced, because it will be paid for a longer period. The pension will be reduced by: P

0.3% for each month between age 60 and age 65, and

P

0.4% for each month by which your early retirement date precedes age 60.

Let’s look at what happens if Matt retires early.

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...................... Matt retires on th his 58 birthday

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$14,000 Pension calculated according to the formula Early retirement reduction P .3% for each month between 60 and 65 60 months × .3% = 18% P

.4% for each month before age 60

24 months × .4% = 9.6% Total reduction 27.6% Matt’s pension is reduced by

27.6% × $14,000 = $3,864 Matt’s annual early retirement pension

$14,000 - $3,864 = $10,136

Postponed retirement Your retirement may be postponed beyond your normal retirement date under certain circumstances. If you retire late, your pension is calculated as for normal retirement, but will be higher, since it includes all pensionable service up to your actual retirement date. Under current income tax law, you must start receiving your pension no later than the end of the calendar year in which you reach age 69.

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Pension payment options Normal form of payment

The normal form of pension gives you a lifetime pension, with a guarantee that at least 120 monthly payments will be made. If you die before you’ve received these 120 payments , your beneficiary will receive the balance of the payments, either as continuing income or in one lump sum. A pension for your spouse

If you have an eligible spouse when you retire, pension legislation requires that your pension be paid in a form that provides a pension to your eligible surviving spouse if you die. To accomplish this, the initial amount of pension you receive will be reduced from the normal form to account for the fact that the pension will be paid during two lifetimes instead of one. You will have a choice of two options—a pension reducing to twothirds of the original amount, paid to your eligible surviving spouse on your death, or a pension that continues in the same amount as you were receiving. The amount by which your pension is reduced at retirement will depend on which option you choose. If you want to receive an alternative form of pension payment, your spouse must waive entitlement to this survivor pension in writing.

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...................... Optional forms

You may choose one of the other pension payment options offered by the plan. Your pension amount may be adjusted to provide you with a higher pension that has no guaranteed payment period, or one that has a 60-month guarantee. If you have a spouse and wish to take one of the optional forms, your spouse must sign a form, waiving the automatic spousal pension.

Pension calculated according to the Anne retires with a pension of $9,600 formula Annual pension paid to Anne P normal form (guaranteed 120 months) P 66% spousal pension P

P P

$9,600

$9,600 $9,250

100% spousal pension

$9,025

no guarantee period

$9,750 $9,700

guaranteed 60 months

If you are getting ready to retire, you may want to contact Morneau Sobeco to discuss these options.

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Indexing of pensions during retirement Your pension will be indexed each January 1st to reflect 75% of the annual increase in the Consumer Price Index above 2%, to a maximum of 5.5%. If the cost of living stays the same or goes down, your pension amount will not change. Your eligible spouse’s survivor pension will be indexed in the same way.

Your MPF contributions When you retire—whether early, late, or at the normal date—and have made MPF contributions, you may use these accumulated savings and the interest they’ve earned—as well as CBS’s contributions if your benefits are vested—to generate additional retirement income, in one of the following ways.

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...................... If your benefits are not vested*, you may …

transfer your contributions as well as those of CBS, and the interest they’ve earned to a locked-in retirement savings arrangement, P P if you are taking another job, transfer your contributions as well as those of CBS, and the interest P they’ve earned to your new employer’s pension plan, if that plan accepts transfers like this, or P use your contributions as well as those of CBS, and the interest they’ve earned to purchase an immediate or deferred annuity from an insurance company. * Vesting refers to your right to receive both your contributions and CBS’s contributions. See the Glossary for a full description of when vesting takes place. P

receive your contributions and the interest they’ve earned in cash, transfer your contributions and earned interest to your own RRSP, or if you are taking another job, transfer your contributions with interest to your new employer’s pension plan, if that plan accepts transfers like this.

If your benefits are vested*, you may … P

Some questions and answers What does “locked-in” mean?

Benefits are locked-in once they are vested. When this occurs, the money may not generally be withdrawn in cash, but must be used to provide you with retirement income or transferred to a locked-in retirement plan.

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If you want to transfer your benefit to a locked-in plan or account, the administrator of that plan must complete and sign a form agreeing to abide by this rule. Who is my spouse for the purposes of this plan?

The term spouse includes your legally married, common-law, or same-sex spouse. Pension legislation in each province defines spouse slightly differently and, since the plan applies across Canada, the definition will depend on where you work. When you join the plan, the Human Resource Representative will give you a copy of the various definitions. Won’t I end up paying for most of my pension if I work for CBS for a long time?

One characteristic of the DB plan is that CBS must pay for at least 50% of the cost of your benefits from the plan. First, the value of your pension is determined when you retire, leave CBS, or die. The value of your pension is the amount of money the actuary estimates it will cost, in today’s dollars, to purchase the amount of pension you’re entitled to. If your required contributions, with interest, equal more than 50% of that value, you will receive the excess amount, either as additional pension, or a cash refund. See the example of how this calculation works, under “After your benefits are vested”, in the next section.

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How is the “value” of my pension calculated?

First, the amount of pension you are entitled to—based on your years of pensionable service and your best average earnings—is calculated. The value of your pension is the amount of money the actuary estimates it will cost, in today’s dollars, to purchase the amount of pension you’re entitled to. The calculation is based on your age, using assumptions like average life expectancy, interest earnings, and other relevant factors. Can I transfer the value of my pension out of the plan when I retire?

No. Once you are age 55, you are no longer eligible to transfer the value of your pension out of the plan. When your benefit is very small, it may be paid in one lump sum rather than as a pension; when this happens depends on the provisions of the pension legislation that applies in the province where you work.

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...................... What happens …

If you become disabled If you’re on sick leave with pay, or are eligible for workers’ compensation benefits, you continue contributing to the plan, although if you wish to stop making MPF contributions, you may. Remember, though, that if you stop making MPF contributions, you won’t be able to start again after you get back from sick leave. If you’re on sick leave without pay, you may choose to continue contributing for up to one month; if you do continue, you build up pensionable service for that month. If you decide not to contribute, your pensionable service is broken, and begins again once you return to work when contributions resume automatically. Once you’re eligible for benefits from the Long-Term Disability Plan, you stop making your required contributions to the plan. CBS pays the contributions on your behalf, until you return to work, terminate your employment, reach age 65, or die. These contributions are based on your pay just before you became disabled. You continue to build up service under the plan just as if you were at work. If you wish, you may continue making MPF contributions during your disability. Remember, though, if you stop making MPF contributions, you won’t be able to start again after you get back from disability.

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If you take a leave of absence If you go on pregnancy or parental leave without pay, you may keep contributing to the plan for the period of your statutory leave, plus one month. If you wish to stop making MPF contributions, you may; however, you won’t be able to start again after you get back from the leave. If your pregnancy/parental leave is with reduced pay, you will keep making required contributions and may keep making MPF contributions. You can either make contributions based on your reduced pay, or contribute based on your full pay before the leave. The HR Department will let you know your options before your leave starts. If you take part in the pre-paid leave plan, your plan participation will depend on the options available under the pre-paid leave policy. The HR Department will let you know your options before your leave starts. If you’re on other forms of leave without pay, you may choose to continue contributing for up to one month; if you do continue, you build up pensionable service for that month. If you decide not to contribute, your pensionable service is broken, and begins again when contributions resume automatically once you return to work. Remember, if you choose to stop making MPF contributions, you won’t be able to start again after you get back from the leave.

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If you leave CBS

Leaving CBS before age 55

If you leave CBS before you reach age 55, you receive benefits from the plan even though you aren’t eligible to retire; which benefit you receive depends on whether or not your benefits are vested. Vesting refers to your right to receive a pension from the plan, paid for with your contributions and CBS’s contributions. See the Glossary for a full description of when vesting takes place, which differs by jurisdiction. Before your benefits are vested

You get back a refund of your required and MPF contributions with interest. You can take the refund as cash, transfer it to a money purchase provision of another registered pension plan, if the plan accepts such transfers, or transfer it to your RRSP. After your benefits are vested

You receive the value of your pension. CBS must pay at least half the cost of your pension, so if your required contributions with interest equal more than 50% of the value of the pension, you will receive the excess amount, either as additional pension, or a cash refund, as illustrated in the following example.

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...................... David leaves CBS after 15 years of pensionable service.

Value of David’s pension

$40,000

David’s contributions with interest

$32,000

$20,000 CBS’s 50% share of the cost of David’s benefit David’s excess contributions $32,000 – $20,000 = $12,000

There are choices to make on how you receive the benefit, whether as a deferred pension or as a transfer, depending on the province you work in. In Northwest and Yukon Territories, Nunavut, and Prince Edward Island, you must receive a pension or transfer the benefit to a locked-in retirement plan. In all other provinces, you may take this amount in cash. Adjusted termination benefits

If you have more than one year of pensionable service when you leave CBS, you may choose to have your benefit adjusted by the “10% rule”. Under this rule, you receive your required contributions with interest (CWI) times a factor (which depends on how many years of pensionable service you have in the plan). This factor ranges from 110% for those with one year of pensionable service to 200% for those with ten or more years of pensionable service, as the following examples illustrate.

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If the benefit payable according to the 10% rule is greater than the value of your benefit (including your excess contributions, if any), you will be able to choose to receive the higher amount. However, although the amount may be higher, the entire benefit will be locked-in; you may not receive any portion of it in cash.

David leaves CBS with 15 years of pensionable service

$40,000 Value of David’s pension $32,000 David’s contributions with interest (CWI) $20,000 CBS’s 50% share of the cost of David’s benefit David’s excess contributions1 $32,000 – $20,000 = $12,000 David’s total benefit value2

$40,000 + $12,000 = $52,000 Adjusted termination benefit (CWI × 200%)3

$32,000 × 200% = $64,000 David chooses

$64,000 1 2 3

David’s required contributions with interest equal more than 50% of the value of the pension. David is entitled to receive the difference between 50% of the value of the pension and his contributions, added to the value of his pension. Since David has 10 or more years of service, he chooses the maximum adjusted termination benefit.

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...................... Denise leaves CBS with 2 years of pensionable service.

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$6,000 Value of Denise’s pension $4,000 Denise’s contributions with interest (CWI) Denise’s excess contributions1 $4,000 – ($6,000 × 50%) = $1,000 Denise’s total benefit value2

$6,000 + $1,000 = $7,000 Adjusted termination benefit (CWI × 120%)

$4,000 × 120% = $4,800 Denise chooses3

$7,000 1 2 3

Denise’s required contributions with interest equal more than 50% of the value of the pension. Denise is entitled to receive the difference between 50% of the value of the pension and her contributions, added to the value of her pension. Since Denise’s total benefit value is greater than the adjusted termination benefit, she chooses this amount.

MPF contributions

When you leave CBS, you will receive a refund of your MPF contributions, CBS’s corresponding contributions, and the interest they’ve accumulated.

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Shortened life expectancy

If, when your employment terminates, you are terminally ill and have a reduced life expectancy, you can ask to receive your plan benefits as a lump sum equal to the value of your pension benefits. Rather than being paid in cash, you may choose to transfer the benefit to an RRSP or a registered pension plan. If you have a spouse, your spouse must complete a waiver of the automatic survivor benefit, since, if you choose this option, your eligible surviving spouse will not receive any benefits from the plan when you die. Leaving CBS after age 55

If you leave CBS after you have reached age 55 and are eligible to receive an immediate pension from the plan, you can choose an immediate or deferred pension. You are no longer entitled to transfer the value of your pension out of the plan. See the section Retirement benefits for more details about your pension options.

If you die while working for CBS If you die while working for CBS, your survivors receive benefits from the plan; which benefit depends on whether or not your benefits are vested. Vesting refers to the right to receive a pension from the plan, paid for with both member and CBS contributions. See the Glossary for a full description of when vesting takes place.

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Before your benefits are vested

Depending on the province where you work, your eligible surviving spouse or your designated beneficiary receives a refund of your required and MPF contributions, with interest.

After your benefits are vested

Your eligible surviving spouse, or beneficiary if you have no eligible surviving spouse, receives the value of your pension, as well as the balance of your contributions with interest over 50% of that value, if any. There are choices to make on how the benefit is paid, whether as a pension or as a transfer, depending on the province you worked in. Your spouse or beneficiary will also receive a refund of your MPF contributions, CBS’s corresponding contributions, and the interest they’ve accumulated. Morneau Sobeco will provide your survivors with details.

If you die during retirement If you die during retirement, the benefits to be paid depend on the pension payment option you chose before you retired.

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Some questions and answers What does “locked-in” mean?

Benefits are locked-in once they are vested. When this occurs, the money may generally not be withdrawn in cash, but must be used to provide you with retirement income or transferred to a locked-in retirement plan. If benefits are transferred to a locked-in plan or account, the administrator of that plan must complete and sign a form agreeing to abide by this rule. What rate of interest do my contributions earn?

Interest on your required contributions depends on an external benchmark, that is, average rates of returns offered by Canadian chartered banks on personal, five-year, fixed-term deposits. The average is calculated over a 12-month period ending on December 31st of the year before the interest is credited. Interest begins to build up on the first of the month following the month the money is deposited in the pension fund, and compounded annually. If you are making MPF contributions, they will be credited with interest at the rate of return earned by the fund as a whole.

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Additional information

Designating a beneficiary When you join the plan, remember to complete the beneficiary designation section of the enrolment form, for benefits payable in case of your death. Provincial pension laws require that, for certain periods of service, if you have a spouse when you die, then your spouse must receive the benefits related to your plan membership payable in the event of your death. If you don’t have a spouse, you may change your designated beneficiary anytime, depending on the law where you work. Morneau Sobeco can give you more details.

Plan administration The plan is administered by a Board of Trustees, made up of trustees appointed equally by CBS and the Participating Unions listed on page 1. The names of the current Board members appear on the inside front cover of this booklet. Updated lists of Trustees along with Records of Decisions made by the Trustees are posted on the DB Plan website, at cbsdbpension.hroffice.com.

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The Board of Trustees is responsible for interpreting plan rules and ensuring that the plan meets the requirements of all governing legislation. For questions on day-to-day plan administration or your own pension entitlements, you should contact Morneau Sobeco, administrative agent on behalf of the Board of Trustees, at 1 877 252 4442 or on-line at cbsdbpension.hroffice.com.

Marriage breakdown If your marriage or common-law relationship ends, provincial legislation may require that the pension benefits you’ve built up during your marriage be shared with your former spouse. The actual split of the benefits will be according to a court order or separation agreement. If this situation arises, your legal counsel can advise you of the steps to follow.

Annual statements Each year, you will get a written statement of the benefits you’ve accumulated under the plan. Of course, CBS needs to have your current address in order for you to receive this information. If your address changes, be sure to notify your local Human Resource Representative.

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Plan amendment or termination Although CBS and the Participating Unions listed on page 1 intend to continue the plan indefinitely, they do have the right to terminate or amend it at any time. At this time, we do not expect that any amendment will affect the benefits you have already accumulated under the plan. However, if the plan is underfunded, members’ accumulated benefits may be reduced in accordance with applicable legislation. Each time the plan is amended, you will receive an explanation of the amendment, once it is approved by pension authorities. In certain cases, this explanation may be included in your annual statement.

Government benefits When you retire, under current legislation, you will be entitled to receive benefits from the Canada/Quebec Pension Plan and may be entitled to benefits from Old Age Security and the Guaranteed Income Supplement.

Canada/Quebec Pension Plan (C/QPP)

The C/QPP pays benefits to you based on your earnings and contributions (up to the YMPE) during the time you spent in the workforce.

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The actual amount of your C/QPP payments also depends on your age at retirement. Normally, you’ll start receiving benefits at age 65; however, you can receive reduced benefits as early as age 60, or an increased benefit after age 65. Benefits are paid monthly—adjusted each January 1st to reflect increases in the cost of living. P

You should apply for C/QPP benefits about six months in advance of the date on which you want to start receiving the benefit. You can get forms: • outside Québec, at the local Human Resource Centres of Canada office or by downloading them from the Internet at http://www.hrdc-drhc.gc.ca/isp/ris/rismain_e.shtml, • in Québec, at the office of the Régie des rentes du Québec (on the Internet at http://www.rrq.gouv.qc.ca/an/accueil/00.htm).

Old Age Security (OAS) and Guaranteed Income Supplement (GIS)

The OAS pension is a flat-rate pension you will receive once you reach age 65, in addition to your C/QPP pension, provided you meet certain residency requirements. OAS benefits are paid monthly—adjusted each quarter to reflect increases in the cost of living. As your total retirement income increases, however, the benefit is reduced. Above a certain income level, you are no longer eligible for OAS benefits.

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...................... You should apply for OAS benefits about six months in advance of the date on which you want to start receiving the benefit. You can get the necessary forms at the local Human Resource Centres of Canada office or by downloading them from the Internet at http://www.hrdc-drhc.gc.ca/isp/ris/rismain_e.shtml. The Guaranteed Income Supplement is an additional benefit paid to lower income Canadians. When applicable, it is payable from age 65. Information on all government benefits is presented for information only. For specific information on these benefits, contact your local Human Resource Centres of Canada office.

Personal savings Personal retirement savings are an important building block in your retirement income. Many people use registered retirement savings plans (RRSPs) to build these savings. You can make taxdeductible contributions to a personal or spousal RRSP, up to specified limits. Your RRSP contribution limit is set by Canada Customs and Revenue Agency (CCRA). The total you can contribute for the year—your “contribution room”—depends on your earned income, your Pension Adjustment, and any Pension Adjustment Reversals you may have. CCRA lets you know your RRSP contribution room on the Notice of Assessment you receive when

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you file your income tax return. You can carry forward unused contribution room. This may allow you, for example, to contribute a larger amount to your RRSP in a future year. You can turn your RRSP into income at the same time you retire from CBS, if you wish. Or, you can maintain the RRSP until the end of the year in which you turn 69. At that time, you have to convert it into retirement income. You may wish to discuss the options available for converting your RRSP into retirement income with your personal financial advisor.

Some questions and answers What’s a Pension Adjustment?

A Pension Adjustment—or PA—is the approximate value of the benefits you’ve earned under this plan in a year. The Income Tax Act limits the tax-deductible contributions that you can make to retirement savings plans in any year. The amount is 18% of your earned income in the previous year, up to an annual dollar limit, minus the previous year’s PA. This percentage is the total amount you can save under all tax-sheltered retirement plans, including this plan and your personal RRSPs.

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The PA isn’t related—in a dollar-for-dollar sense—to the amount you and CBS pay into the plan. Instead, these benefits are calculated in a manner set out in the Income Tax Act. Here’s how your PA is calculated. 9 times benefit earned (according to pension formula, from November 1, 1997, 1.6% x your pensionable earnings)

minus $600

If not already a multiple of a dollar, the PA is rounded to the nearest dollar. Here’s an example of how the PA affects the calculation of RRSP contribution room.

Last year, Cheryl’s salary was $50,000 and her maximum tax-shelter room was 18% of $50,000, or $9,000. Her PA from the DB plan was $6,600.

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1.6% × $50,000 = $800 (9 × $800.00) - $600 = $6,600 $9,000 – $6,600 = $2,400 This year, Cheryl can contribute the difference, $2,400, to her RRSP.

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What’s a Past Service Pension Adjustment?

When the pension plan is improved retroactively, or when pensionable service is credited retroactively, a past service pension adjustment (PSPA) may be issued. The PSPA equals the increase to the sum of the past pension adjustments (PA) resulting from the plan amendment or additional service. The PSPA reduces your unused RRSP room.

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Glossary There are a number of words and phrases that have very specific meanings when used to describe the plan. Here’s an explanation of those special terms, to help you understand the plan better. Annualized earnings Your basic pay, for the purposes of this plan, is always calculated on a full-time equivalent, annual basis for those who work on a less-than-full-time basis. Annuity An annuity is a regular monthly pension that you buy from an insurance company. Beneficiary In all provinces and territories, pension laws require that your spouse, if you have one, receive plan benefits in the event of your death. In certain provinces, your spouse may sign a form waiving benefits payable in the event of your death before retirement. If your spouse signs this waiver, then you can name someone else as your beneficiary.

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...................... If you don’t have a spouse, you can name anyone as your beneficiary. If you don’t designate a beneficiary, your estate becomes your beneficiary. You may name a minor child as your beneficiary. However, the plan cannot pay benefits directly to a minor, because minors can’t legally sign a release. You may wish to appoint a guardian or trustee to receive the benefit and handle the child’s affairs until he or she reaches the age of majority. In Quebec, however, the court will appoint a tutor for the child after your death; any trustee appointment made during your lifetime will merely record your wishes. For up-to-date definitions of spouse in each province, call Morneau Sobeco at 1 877 252 4442 or check the web site at cbsdbpension.hroffice.ca.

Best average earnings The average of your five consecutive years of highest annualized earnings while working for CBS (if you’ve worked less than five years, the average of your actual annualized earnings). Deferred pension When a pension is deferred, pension payments start at a future designated age. This pension is still based on your best average earnings and the number of years of completed pensionable service.

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Earnings For the purposes of the plan, your earnings are made up of your basic pay and do not include bonuses, shift premiums, or overtime pay. Locked-in Your benefits are locked-in once they are vested. When benefits are locked-in, the money must be used to provide a pension or pension-like payout (for example, an annuity) or transferred to a locked-in retirement plan. You cannot generally make lump-sum cash withdrawals when benefits are locked-in. Pensionable service Service while you are a member of the plan, during which required contributions to the plan are being made by you or on your behalf. If you work less than full time, pensionable service is prorated, based on your actual earnings over the full-time equivalent earnings. Value of your pension The value of your pension is an estimate of the amount of money it would cost, in today’s dollars, to purchase the amount of pension you’re entitled to.

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Vesting/vested Vesting refers to your right to receive a pension from the plan, paid for with your contributions and CBS’s contributions. Your benefits are locked in once they are vested. Generally, your benefits are vested once you’ve been a plan member at least two years. In certain provinces, another date applies related to continuous service (unbroken employment in Canada with CBS and the Canadian Red Cross Society, including approved periods of leave of absence and disability). If you work in …

Your benefits are vested once you’ve been a plan member for at least two years, but …

New Brunswick

no later than the date you complete 5 years of continuous service

Manitoba or Saskatchewan

no later than the date you complete 2 years of continuous service

Benefits for all employees who were members of the Canadian Red Cross Pension Plan on November 1, 1997 were immediately vested on joining the CBS DB plan.

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YMPE YMPE stands for Year’s Maximum Pensionable Earnings. This is the amount the government sets each year, and uses to base your contributions and those of CBS to—as well as benefits from—the Canada or Quebec Pension Plan. The government revises this amount every year, based on increases in average weekly earnings in Canada

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