Pension FAQs

About CBIA/Lawyers Financial and CAAT

Why is CBIA/Lawyers Financial offering a Defined Benefit Pension Plan?

Our vision is to be the trusted provider of choice for insurance and financial products to the legal community, their families and employees in Canada. Our Board recognized that most lawyers and law firm employees do not have access to a defined benefit pension plan and they are determined to change that.

Why did CBIA/Lawyers Financial decide to join an existing pension plan versus building their own?

CBIA spent three years researching pension plans and considered both building it ourselves and joining an existing plan. The decision to join an existing pension plan was based on a number of factors including speed to market, plan stability, client experience, investment expertise and financial risk.

Why did CBIA/Lawyers Financial choose the CAAT Pension Plan’s DBplus design?

CAAT has been delivering secure lifetime pensions for over 50 years. In 2018 CAAT launched DBplus, a plan that allows private sector employers to join. DBplus combines the best features of DC plans (cost certainty) with the best features of DB plans (predictability and cost efficiency for employers and valuable lifetime benefits for members). 

Can I trust the strength and longevity of the CAAT Pension Plan?

Yes. The CAAT Plan is a highly respected industry leader that has been delivering secure, lifetime pensions for over 50 years. Joint governance by members and employers keeps the Plan’s focus on benefit security, equity and long-term sustainability. As of January 1, 2022, the Plan closed out 2021 with assets in excess of $15 billion and was 124% funded on a going-concern basis with a $4.4 billion funding reserve. Learn more about the CAAT Pension Plan.

What happens to my pension when market conditions fluctuate?

The CAAT Pension Plan is monitoring the potential impacts of COVID-19 and other world events. While these events have had a significant impact on many families, communities, and on global investment markets, it has no impact on the security of your pension from the CAAT Pension Plan. In DBplus, a member accrues a DB pension benefit that is calculated based on member and employer contributions. The total contributions are multiplied by an annual pension factor (currently at 8.5% per CAAT’s Funding Policy) to determine the guaranteed base pension each year. This DB benefit, often referred to as a “pension promise”, is a stable predictable source of retirement income that is guaranteed for a member’s lifetime – and does not fluctuate based on market conditions.

The strength of CAAT Pension Plan is outlined in its results for the 2021 year found here.

Where can I find information about CAAT’s investment strategy?

Comprehensive information about CAAT’s Investment Strategy – including investment policies, information about asset mix and performance, and Responsible Investing -- can be found on the website: https://www.caatpension.ca/investments

Law firm questions

Who in our firm is eligible to participate in DBplus?

The employer will determine which classes of employees may be eligible to join the plan (either legal or non-legal staff or both). Since partners are not employees of the firm, they are ineligible to join as employees of the firm, but may be able to join if they are employed by a Professional Corporation (see below).   

Is there a minimum number of law firm employees required?

No, as few as one person can participate in the pension plan, provided they are a sole practitioner or a partner of a firm, have a Professional Corporation in place and are reporting T4 earnings. There is no limit on the maximum number of employees.

Can an employee opt-out of participating in the pension plan?

No. All full-time employees within a class of employees eligible to join the plan, must participate in the plan. Subsequently, all new full-time employees must join on their date of hire or when their probationary period is complete. Part-time or contract employees have the option to join at any time (subject to mandatory enrollment requirements in certain jurisdictions). The employer must match the employee contributions.

NEW! Employers no longer have to enrol new/eligible employees until their probationary period is complete. The probationary period must be a bona-fide probationary period and cannot exceed two years. 

What are the roles and responsibilities of the law firm?

CAAT makes it as easy as possible, building on HR functions you’re already performing if you have a DB, DC plan, or a Group RRSP. Once you’ve enrolled your employees, you will simply deduct the monthly employee contributions, match them with the employer share and then remit to CAAT. The process is very similar to how you currently remit funds for CPP (Canada Pension Plan). You will let CAAT know if any employees are newly employed, on leave, have terminated employment, or retire so CAAT can manage their entitlements. Annually, you issue a tax receipt called a Pension Adjustment and confirm with CAAT the contributions so it can issue annual pension statements in the spring. CAAT will arrange for an Employer Services rep to connect with you so they can set you up on their system and provide training on what you need to know. Learn more about Employer Responsibilities.

Are employer and employee contributions mandatory?

Yes. Employer and employees both contribute anywhere between 5% to 9% of an employee’s T4 earnings. Within this range, a contribution rate is selected that is affordable and sustainable to both the firm and their employees, and that also provides a meaningful pension to its members. 

Please note that through the Lawyers Financial program, Law Firms can begin to offer a DBplus pension plan with as little as a 3% contribution rate. The law firm must commit to increasing that rate by a minimum of 0.5% per year until they each a 5% contribution rate from both the employee and employer.

Is it mandatory that contributions are the same by employee and employer?

Yes, this is a requirement. Both employees and employers must contribute the same percentage of the employee’s T4 earnings.

What are the upfront and ongoing costs to a law firm to participate in DBplus?

Other than the contribution matching requirement based on employee T4 earnings, there are no additional fees for law firms. There are no fees for employees either. 

We’re interested! How do we get started?

If you’re interested in bringing DBplus to your firm, contact our pension specialist.

Law firm partner questions

I’m a partner in a law firm – not an employee. Can I participate in the DBplus pension plan?

To be eligible to participate in a pension plan, there must be an employer/employee relationship. You can set up a Professional Corporation (“PC”) to join the plan as an employee of your own PC. Remember that both you as an employee and your PC must each contribute 5% to 9% of T4 earnings. Find out more.

What happens if I join the plan as an employee of a law firm, but then I become a partner?

If you are enrolled in the plan as a lawyer of a law firm and then you become a partner, you can no longer participate in the plan as a law firm employee. However, you can continue participating in the plan if you have a Professional Corporation and report T4 earnings. In this arrangement the PC would act as the employer and you as the employee.

What happens to my pension if I leave my law firm employer, or become a partner in my law firm and do not set up PC and join the Plan?

When you leave a participating law firm employer,  and are not eligible to receive an immediate pension (age 50), you enter into an automatic extension of membership (EOM) period for 24-months after you have made your last contribution to the Plan. During the EOM period, your pension continues to grow with conditional annual cost-of-living (AIW) increases, based on the CAAT Pension Plan Funding Policy. During the EOM, you have options:

• You can transfer your pension to another employer’s registered Canadian pension plan (if permitted by the new employer, up to age 65). 
• If you reach age 50, you may retire and immediately begin receiving your pension (with an early retirement adjustment).
• You can defer your pension to a later date and collect secure pension payments when you retire.

After the 24-month EOM is complete, you have additional options: 

• You can keep your pension in the CAAT Plan as a deferred pension. Your deferred pension is the pension you earned up to the date you terminated your employment, plus more. Once the EOM period is complete, if you decide to defer your pension, your benefit will continue to grow with annual conditional inflation protection increases at a rate of 75% of the consumer price index (CPI), based on the CAAT Pension Plan Funding Policy. You’ll also have all the other advantages of a lifetime pension, such as survivor benefits for your spouse. Your pension remains in a secure, fully funded pension plan, ready for you when you retire.
• You can start your deferred pension at age 65, or as early as age 50. If you start before age 65, your pension will be reduced by a maximum of 5% per year for each year you are from age 65, based on the CAAT Pension Plan Funding Policy. This permanent reduction to your payment reflects the fact that you will receive it longer.
• Your can transfer the commuted value of your benefit out of the Plan, into an eligible retirement savings vehicle. You have six months from the end of the 24-month EOM to make this transfer, and you must be under age 50 to do so.    

If you begin working at another employer that participates in the CAAT Pension Plan during the EOM period or after you’ve deferred your pension, you are required to complete an enrolment form at the new employer confirming you are already a member and continue making contributions to the CAAT Pension Plan. 

About the DBPlus Plan

How are pension benefits calculated in DBplus?

The pension under DBplus is calculated based on member and employer contributions. Those total contributions are multiplied by an annual pension factor (currently set at 8.5%) to determine the guaranteed base pension each year. In addition, the pension includes cost-of-living increases based on the Average Industrial Wage (AIW), which are granted based on the funded status of the plan. 

What is the AIW (Average Industrial Wage)?

Your pension will receive an annual increase based on the Average Industrial Wage (AIW) index, as measured by Statistics Canada. The AIW increase is applied at the start of each year in which the member is a contributing member, subject to the CAAT Pension Plan Funding Policy. The AIW rate over the past 20 years has averaged about 2.2%. AIW enhancements, once added, become a permanent part of the promised pension. That means that the AIW enhancements are cumulative – each year’s enhancement is paid on top of the previous year’s total pension, plus enhancements. 

Is there inflation protection?

Yes. In retirement, conditional inflation protection increases equal to 75% of the Consumer Price Index (CPI) will be applied to pensions based on the CAAT Pension Plan Funding Policy. These enhancements are cumulative, and once granted, cannot be taken away.

As an employee, can I contribute more or less than the established rate?

No. Employer and employee contributions must match, so neither the employee nor the employer can contribute more than the predetermined rate on a monthly basis.

As an employee, can I contribute one-time lump-sum amounts?

Eligible one-time lump-sum amounts are only permissible when purchasing additional pension. Learn more about purchasing additional pension. 

Can the annual pension factor change?

Yes. The annual pension factor is subject to change based on the CAAT Pension Plan Funding Policy. The Plan is currently within Level 4 of the Funding Policy. At Level 5, the annual pension factor could be increased to 9.5%.

Is my retirement pension secure?

Yes. Under the CAAT Pension Plan, you’ll earn a defined benefit pension that will be payable to you monthly in retirement for your lifetime. Like many large pension plans, your pension will continue to grow after you’ve retired through annual conditional inflation protection increases. Once granted, these increases cannot be taken away.  

As a jointly sponsored pension plan (JSPP), member and employer representatives have an equal say in plan decisions about benefits, contributions, and funding. This joint governance structure is recognized internationally as a model for success in keeping defined benefit pension plans sustainable.

Are there survivor benefits with DBplus?

Pre- and post-retirement benefits are available to either your eligible spouse or if there is no eligible spouse, to other designated beneficiaries. Find out more about Survivor Benefits. 

Can I purchase additional pension in DBplus?

Once enrolled, members can purchase additional DBplus pension for eligible periods of employment with a participating employer, so long as it is permittable under Canadian pension and tax laws. In general, to be eligible: the purchase must be tied to periods of employment (after 1990); the funds must come from a registered retirement vehicle (e.g. LIRA, RRSP, Group RRSP, or Defined Contribution plan); and the amount you can contribute for a purchase is limited by the Income Tax Act to 18% of T4 earnings for the period being purchased. Depending on your earnings, additional limits may apply.

Note that when transferring funds into the CAAT Pension Plan, your financial institution must allow for such a transfer, and purchases for periods of employment in which you may already have an associated defined benefit entitlement will not be permitted.

The purchase process includes: getting an estimate, submitting a pension purchase application, getting your purchase quote, making an election and confirmation from CAAT. 
More details are available at: https://www.dbplus.ca/en/members/all-about-your-pension/pension-purchases/

How does early retirement affect my benefits?

You can retire as early as age 50. If you retire before age 65, an early start adjustment will apply to your pension. This permanent reduction reflects the fact that, by starting your pension early, you will receive it for a longer period of time than if you start at age 65. In DBplus, the early start adjustment rate is based on the Plan’s Funding Policy. It is a maximum of between 3% and 5% for each year that you are under age 65.

What happens to my pension if I choose to work beyond age 65?

You can continue working and contributing to the Plan past age 65 without any interruption to your membership. You simply continue to work, make contributions to the Plan, and watch your pension grow. Pursuant to the Income Tax Act, by November 30 of the year in which you turn 71, you will have to stop contributing to the Plan, and start collecting your pension by December 1 of that year, even if you continue working.

How do I get an estimate of what my pension benefits would be?

Your DBplus pension is based on the contributions you make to the plan, the contributions from your employer, and conditional cost-of-living (AIW) enhancements. We encourage you to try the DBplus Value Tool to get an estimate of future contributions in DBplus and see how they result in a valuable lifetime retirement income. The DBplus Value Tool will also allow you to model different retirement scenarios, including custom retirement dates and rates of wage growth. Estimate your pension.

Once enrolled, if I have a question, do I ask my law firm administrator or go to CAAT?

Call the CAAT Plan with questions about your pension. HR questions around payroll, etc. should be directed to your firm’s HR department. 

 

Disclaimer: This FAQ is for informational purposes, and where there is a conflict between this document and the Plan documents, the Plan documents will apply.

CAAT Pension Plan is a trademark of Colleges of Applied Arts and Technology Pension Plan.