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Defined Benefit Pension Plan


he teachers of Manitoba sub- scribe to a Defined Benefit Pension Plan.

Retirement benefits, under a de-

fined benefit pension plan, are based on a formula. Te formula provides for a specified percentage of earnings. Te employer, as well as the employ- ee, contributes to the plan. With this plan, the retiree knows ahead of time how much basic pension to expect at retirement. Tis discussion is primar- ily about the defined benefit pension plan and does not include COLA However, in the last year, there has

been much discussion about pen- sions, especially about the Defined Benefit Pension Plan. It is argued, in some circles, that those who partici- pate in the said plan, have a gold plat- ed pension and that it is too costly. Lately, there has been much talk about a Target Benefit Pension Plan

Marvin Krawec, Pension Chair

as the plan of the future. It is a hybrid between a Defined Benefit Plan and a Defined Contribution Plan. Tis said plan is inferior to what the

retired teachers subscribe to now. Te fact of the matter is that 75-80%

of the pension income is derived from investments. Te rest of the contribu- tion is divided between the employees and employers. Tose, who are in opposition to

a defined benefit pension plan, are disregarding the benefit of such a plan to the economy of this province and the country as a whole. A study done by a Boston Consulting Group, commissioned by four Ontario employee organizations, among them the Ontario teachers, found that those who receive pensions, under the defined benefit pension plan are less likely to collect GIS ( Guaranteed Income Supplement). Estimates are

that 10%-15% collect compared to 45-50% of other retirees. Te study also found that the defined benefit recipients

contribute between $14-

$16 billion annually to the government coffers through income tax, sales tax and property tax: between $7-$9 billion in income tax, $4billion in sales tax and $3 billion in property tax. In the years 2011-2012, defined

benefit plan beneficiaries spent be- tween $56 to $63 billion annually on durable and consumable goods. Defined Benefit Pensions had the

greatest impact on smaller rural towns. Approximately 9% of the total earnings are spent in the towns out- side of the major centres. Tis is cru- cial to the economy of those commu- nities. §

The fact of the matter is that 75-80% of the pension income is derived from investments. The rest of the contribution is divided between the employees and employers.

10 n KEEP IN TOUCH | Spring 2014


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