Contributing today for a secure tomorrow. Protecting your Pension Benefit: A Guide for Nominating Beneficiaries when Retiring

Transcription

1 Contributing today for a secure tomorrow Protecting your Pension Benefit: A Guide for Nominating Beneficiaries when Retiring

2 Contents Introduction 1 Choosing Your Best Pension Option 3 Beneficiary Options When Retiring 5 Other Things to Consider 7 Who Do I Contact If I Have Questions? 8 Disclaimer: Protecting your Pension Benefit: A Guide for Nominating Beneficiaries when Retiring is published for the Municipal Pension Plan by the Pension Corporation. This publication is based on the relevant plan rules, regulations and statutes respecting the pension benefits available under the Municipal Pension Plan. If there is a discrepancy between this publication and the relevant plan rules, regulations and statutes respecting the pension benefits available under the Municipal Pension Plan, the latter will apply. ii A Guide for Nominating Beneficiaries when Retiring

3 Introduction Your pension is a valuable asset that you and your employer have contributed to over the course of your career. By setting aside an amount from each paycheque, you have been able to ensure a secure and lifelong source of income. Now that you are approaching retirement and are reflecting upon your estate planning you will begin to realize one of the key aspects is your pension benefit. Not only will it provide financial security for you, it may also do the same for your loved ones, as well as other people or organizations in your life that you care about. In the event of your death, your pension can be a valuable and important benefit for those left behind. Being able to nominate one or more beneficiaries to receive your pension benefit when you die means you have options to protect your family, leave a legacy to your community and customize your estate planning the way you want. What does nominating a beneficiary mean? Your beneficiary is the person(s) or organization(s) that you choose to receive your pension benefits after your death. Your spouse is automatically your beneficiary if you are married or in a common-law relationship, unless your spouse signed a document waiving their rights to your future pension benefit. This means your ability to name other beneficiaries may be limited because under pension legislation your spouse has certain rights to your pension. You can also make your estate your beneficiary if you so choose or it will automatically become your beneficiary if you do not make a selection at all. The term nominate means to choose or name or designate, and in this situation refers to you choosing who or which organization receives any pension benefit due after your death. In the event of your death, the pension plan will refer to the most recent Nomination of Beneficiary (at Retirement) or Change of Beneficiary (for Retired Member) form on file (or to your will, if your executor indicates that beneficiaries are nominated in it) to process any remaining pension benefit payable. Ensuring the pension plan has up-to-date beneficiary information on file is the best way to ensure your final wishes with respect to your pension benefit are followed. This guide is intended to help you understand the options available when choosing or changing a beneficiary (or beneficiaries) for your pension. Since everyone s circumstances are unique, you are strongly encouraged to consult your financial advisor, estate planner and/or lawyer to determine the options that are best for you. The rest of this section will help you understand different types of beneficiaries, the nomination process, and whether or not the pension option you select at retirement will allow you to change your beneficiary. There are a number of nomination options listed in the following section Beneficiary Nomination Options, including nominating multiple or alternate beneficiaries and nominating an organization or trust, which you may wish to consider should they be available to you. Why is it important to nominate a beneficiary for pension purposes? Your pension is a valuable financial asset. Nominating a beneficiary (or a number of beneficiaries) ensures your wishes can be granted, in relation to what happens to your pension after you die. What are the different types of beneficiaries? Beneficiary A beneficiary is nominated to receive a post-retirement death benefit in the event that you die and there is a benefit payable. Each beneficiary can have one or more alternate beneficiaries designated, which means that if the beneficiary has also died at the time of your own death, an alternate(s) can be paid instead. A Guide for Nominating Beneficiaries when Retiring 1

4 Alternate beneficiary An alternate beneficiary can be nominated to receive a benefit in the event that the beneficiary dies before you. How do I nominate a beneficiary when I am retiring? By filing a Nomination of Beneficiary (at Retirement) form (included within your Retirement Application Package, or available by contacting the Municipal Pension Plan). If you choose to nominate a beneficiary using the Nomination of Beneficiary (at Retirement) form you must make sure that the information is on file with the pension plan. You must sign and date your nomination in order for it to be valid. You can also name beneficiaries for pension purposes in your will. If you do so, it is important that you identify the pension plan by its full name, name the beneficiaries and alternates, and designate a specific percentage of the pension entitlement you want left to each beneficiary. You may wish to consult an estate planner, lawyer and/or other advisor for guidance on how to make sure your wishes are reflected in the most recent copy of your will or Nomination of Beneficiary (at Retirement) form on file. Will I be able to change my beneficiary after I have retired? Your ability to change your beneficiary or have multiple beneficiaries is based on the pension option selected at retirement for example, the pension option includes a guarantee period, and that period has not expired. Estate planning can be a complex matter given the unique needs of individuals and the sophisticated structure of many families these days. The decisions you make before you retire are important they will be with you, and possibly your spouse, for the rest of your lives. With the guidance of an estate planner, lawyer and/or other advisor, you (and your spouse, if you have one) can decide which pension option is right for you. Here are some things to consider: your age and your spouse s age your health and your spouse s health and life expectancy dependants, family and financial situation income needs and future plans, and other factors that may apply to your personal situation. All beneficiaries can have alternate beneficiaries designated. In the event of a marital breakdown after retirement, you should refer to legal counsel for advice and the plan for additional information. How do I change my beneficiary? In some cases you may not be able to, since your spouse may already be your beneficiary. If you are eligible to change your beneficiary, you can file a Change of Beneficiary (for Retired Member) form. If you choose to change a beneficiary you must make sure that the information is on file with Pension Services. You must sign and date your nomination in order for it to be valid. Alternatively, you can name beneficiaries for pension purposes in your will. If you nominate beneficiaries for your pension entitlement in your will, it is important that you identify the pension plan by its full name, name the beneficiaries and designate a specific percentage of the pension entitlement you want left to each beneficiary. You may wish to consult an estate planner, lawyer and/or other advisor for guidance on how to make sure your wishes are reflected in your will. 2 A Guide for Nominating Beneficiaries when Retiring

5 Choosing Your Best Pension Option In this section you can review a number of the pension options that you may wish to select at retirement, and how each one impacts your ability to nominate a beneficiary. In some cases you may not have a choice, since your spouse may already be your beneficiary. You may also wish to review the Choosing Your Best Pension Option guide on our website. Single Life No Guarantee Option no beneficiary allowed This pension option continues to pay a pension to you for as long as you live. The pension plan will not accept a nomination of beneficiary with a single life pension; the Nomination of Beneficiary (at Retirement) form is not required because there is no guarantee of payments following your death. Who can I nominate? No beneficiary allowed. Single Life Guaranteed Option no spouse, multiple beneficiaries allowed This pension option continues to pay as long as you live and has a guaranteed period. This means that if you die before the end of the guaranteed period, the remaining payments will be made to your nominated beneficiary(ies). You can change the beneficiary(ies) at any time because you did not have a spouse at the time you retired, or your spouse waived their rights to your pension. Who can I nominate? You may nominate one or more person, trustee or organization (e.g., society, charity, trust or corporation) as your beneficiary, or your estate. Single Life Guaranteed Option with a spouse, multiple beneficiaries allowed only if spouse waives beneficiary rights This pension option continues to pay as long as you live or the pension has an unexpired guaranteed period. This means that if you die before the end of the guaranteed period, the remaining payments will be made to your spouse or, if your spouse has waived entitlement, to your other nominated beneficiary(ies). You cannot change your beneficiary in the following circumstances: If you had a spouse at retirement, your spouse is still alive, and your spouse did not and does not waive their right to be your beneficiary. If you have a court order or separation agreement stating who the beneficiary must be. You can change your beneficiary in the following circumstances: Your spouse waived their entitlement to be your beneficiary at either the date of your retirement or after your retirement. Your spouse predeceases you. A Guide for Nominating Beneficiaries when Retiring 3

6 Who can I nominate? You may nominate one or more person, trustee or organization (e.g., society, charity, trust or corporation) as your beneficiary, or your estate. Joint Life Option no guarantee spouse beneficiary This pension option continues to pay as long as you live. If you predecease your spouse, they will receive the continuing remaining pension for as long as they live, based on the percentage option you and your spouse selected at retirement. You cannot change this beneficiary, even in the event of a death or marital breakdown, because you chose a pension that is based on both your lifetime and your spouse s lifetime. Who can I nominate? Nomination is not allowed: your spouse at retirement is automatically your beneficiary. Joint Life Option with a guarantee spouse beneficiary Alternate beneficiary(ies) to your spouse can be nominated for the guaranteed portion of the pension benefit while your spouse is alive. By nominating alternate beneficiary(ies), if your spouse predeceases you and then you pass away, any remaining payments of the guarantee portion will be paid to the alternate beneficiary(ies) instead of your estate. If your spouse dies before you and you have not nominated alternate beneficiary to your spouse, you will be able to nominate beneficiary(ies) for your remaining guarantee portion. Should you die without nominating an alternate or another beneficiary(ies), any remaining payments left in the guarantee period will be paid to your estate. Who can I nominate? You may nominate one or more person, trustee or organization (e.g., society, charity, trust or corporation) as your beneficiary, or your estate. Changing your pension option For all the options listed above, you have 60 days from when your pension is granted to possibly change your pension option. After that time your selection is final. If your spouse dies within 60 days of your pension being granted, you can change to any pension option because there is no longer a need to protect your spouse s entitlement to your pension. If your spouse dies after the 60 days, you cannot change your pension option. 4 A Guide for Nominating Beneficiaries when Retiring

7 Beneficiary Options When Retiring The following types of nominations listed in this section may be applicable to you, depending upon the pension option you selected. Any benefits payable will be subject to: whether you had a spouse and the pension option selected at retirement and the terms and conditions of any separation agreement or court order. Nominating multiple beneficiaries If you die before the guarantee period expires, the remaining monthly pension payments will be paid to your beneficiaries. Your nominations can consist of a combination of persons, trustees or organizations (e.g., societies, charities, trusts or corporations) including alternate beneficiaries, or your estate. If you have more than one beneficiary, the shares of the pension plan benefit for all beneficiaries named must add up to 100 per cent. You can choose to give a different percentage to different beneficiaries, but the total shares must always add up to 100 per cent. Your spouse cannot be nominated as one of a number of multiple beneficiaries because under pension legislation your spouse has certain rights to your pension and will be your sole beneficiary. You may only nominate multiple beneficiaries if your spouse waives their rights to a minimum 60 per cent lifetime survivor benefit and beneficiary rights by submitting Form 2: Spouse s Waiver of 60% Lifetime Survivor s Benefit and/or Beneficiary Rights from a Pension Plan or Annuity After Payments Start. Unless you specify otherwise, if you have nominated more than one beneficiary and one of those beneficiaries dies, the surviving beneficiary(ies) will share the deceased beneficiary s portion of the pension benefit. If you wish to nominate multiple beneficiaries, you must attach a separate sheet that includes all the same information found within Section C of the Nomination of Beneficiary (at Retirement) or Change of Beneficiary (for Retired Member) forms. The additional sheet must include your printed name and signature and include the same date written on the form. Nominating alternate beneficiaries You may want to consider nominating an alternate beneficiary(ies) in the event that your beneficiary(ies) should predecease you and you have not updated your nominations. For example, you want your spouse to be your beneficiary, but in the event that both you and your spouse die, you want your two children as alternate beneficiaries to receive equal amounts of any benefits payable from the pension plan. In the event your spouse dies before you during the guarantee period, the pension plan will pay any benefit payable to your children. You may name more than one alternate for a beneficiary. If you are naming alternates to a beneficiary, the percentages allocated to those Allocation for alternates Moira (50%) Munro 70% Magda (20%) Kimberley Kara 20% Kevin (20%) Bob* 10% Beneficiaries Alternates * If Bob predeceases Kimberley and Kimberley did not update her nomination before her death, because there is no alternate named, the percentage allocated to Bob would be divided equally between Munro and Kara. A Guide for Nominating Beneficiaries when Retiring 5

8 alternates must add up to the amount you re giving the original beneficiary. You can choose to give a different percentage to different alternate beneficiaries, but the total shares must always equal the same total percentage that has been allocated to their respective beneficiary. Please see the following example to learn about allocating benefits to alternate beneficiaries: If an alternate beneficiary should predecease you, you may want to take this opportunity to evaluate your options and determine if you would like to submit new alternate beneficiary(ies). If there are no beneficiary(ies) or alternate beneficiary(ies) nominated at the time of your death, the pension benefit will be paid to your estate. Your alternate beneficiaries cease to have entitlement if you predecease your beneficiary. For instance, if you die and your spouse starts receiving a beneficiary pension, your nominated alternates are no longer entitled to a benefit upon the death of your spouse. The benefit would be paid to your spouse s estate, provided you selected a pension with a guarantee period and your spouse dies during the guarantee period. Here are some scenarios to help you understand how alternate beneficiaries work at retirement: You retire and select a Joint Life pension with a guarantee period. Your spouse is the beneficiary and you have named two alternate beneficiaries. Scenario 1: While you are in receipt of your pension, your spouse dies. When you pass away there is still time left in the guarantee period. Since your spouse has died, your alternate beneficiaries are promoted from alternates to beneficiaries and receive their share of the benefit entitlement. Scenario 2: You pass away while in receipt of your pension. Your spouse is your beneficiary and starts receiving the pension benefit. Your spouse dies during the guarantee period and the remaining benefit is paid to your spouse s estate. Beneficiaries cannot further nominate beneficiaries for themselves. For information on nominating beneficiaries before retirement, please see Protecting Your Pension Benefit: A Guide for Nominating Beneficiaries before Retiring. Nominating a trustee You may want to consider nominating a trustee for your minor children (under the age of 19). In the event of your death, if no trustee has been nominated for your minor child, any pension benefit will be payable to the Public Guardian and Trustee of BC. The pension benefit is then managed by the Public Guardian and Trustee of BC until the child reaches age 19. If you decide to nominate a trustee for your minor beneficiary at retirement, the trustee nomination will remain in effect even after your beneficiary turns 19. Once the beneficiary turns 19, you must complete a Change of Beneficiary (for Retired Member) form and nominate the beneficiary for them to receive the pension benefit directly. Nominating an organization If you die before the guarantee period expires and you have listed an organization as your beneficiary, the remaining monthly pension payments will be paid in a lump sum to the organization. If you live beyond the guarantee period, there will be no pension paid to your beneficiary when you die. The organization must exist at the date of your death. If the organization no longer exists, the pension benefit will be paid to your alternate, and if you have no alternate, the pension benefit will be paid to your estate. It is important to be clear about the exact name of the organization you choose to nominate as a beneficiary to ensure your pension benefit is provided to the desired organization. For example, you may want to nominate a local chapter or branch of a specific organization (e.g., Vancouver chapter / downtown branch, 123 Any Street). 6 A Guide for Nominating Beneficiaries when Retiring

9 To process a payment to an organization(s) upon your death, we will require the organization s ninedigit Canada Revenue Agency registration number. While this is not a mandatory section of the form, providing the number at the time you nominate the organization(s) will help ensure timely payment to your beneficiary(ies). Nominating a trust You may want to nominate a trust as your beneficiary. A trust is an arrangement where a trustee is designated to hold or manage property in the best interests of a beneficiary. If you die before the guarantee period expires, the benefit would be payable to the trust. The trust would then distribute the pension plan benefits in accordance with the instructions set out in the trust. To process a payment to a trust upon your death, we will require the Trust Account Number. A Trust Account Number is issued by Canada Revenue Agency and starts with a T followed by an eight-digit number. This is not a mandatory section of the form, but providing the number at the time you nominate the trust will help ensure timely payment to your beneficiary(ies). Nominating your estate You may list your estate as your beneficiary. Then, within your will, set out your final wishes for how any pension plan benefits are to be divided, listing beneficiaries, alternate beneficiaries and any terms that may apply to the payment of benefits to the beneficiaries. If you have no valid beneficiaries nominated at the time of your death, your estate is your beneficiary. Distribution of the pension plan benefits is then the responsibility of the executor, and is independent of the pension plan. Other Things to Consider Wills As an alternative to completing a Nomination of Beneficiary (at Retirement) or Change of Beneficiary (for Retired Member) form, you may want to consider outlining your wishes for your pension benefit in your will. Within your will, you must name the Municipal Pension Plan, specify how your pension plan benefits are to be divided, and list beneficiaries and alternate beneficiaries. If you have more than one beneficiary, the shares of the pension plan benefit for all beneficiaries named must add up to 100 per cent. You can choose to give a different percentage to different beneficiaries, but the total shares must always add up to 100 per cent. Payment If you predecease your spouse and he or she is the beneficiary of a joint life pension option, your spouse will receive a monthly pension for the rest of his or her life, based on the option you selected at retirement. If you choose a single life pension option and you pass away during the guarantee period, your beneficiary(ies) will be able to choose either a monthly pension or a lump-sum payment of the commuted value for the remainder of the guarantee period. Estates and organization(s) (e.g., societies, charities, trusts or corporations) receive the commuted value in a lump sum. In order to process payments from your pension account when you die, the pension plan will refer to either of the most recent Nomination of Beneficiary (at Retirement) or Change of Beneficiary (for Retired Member) forms on file. If your will was signed more recently than either of these documents, and clearly A Guide for Nominating Beneficiaries when Retiring 7

10 identifies the Municipal Pension Plan by name, the pension plan will refer to the will in order to process payments. Tax and estate advice If you have questions about your personal financial situation, you should seek independent financial or legal advice. If you have questions about your tax situation, please contact Canada Revenue Agency. It is also strongly recommended that you and your spouse obtain independent legal advice about your individual rights when dividing a pension or any other family assets. The Municipal Pension Plan cannot provide advice on any of these matters. Who Do I Contact If I Have Questions? Before you receive your first pension payment, contact: Municipal Pension Plan PO Box 9460 Victoria BC V8W 9V8 Phone: Victoria Toll-free in Canada/U.S Fax: MPP@pensionsbc.ca After you ve retired, contact: Municipal Pension Services PO Box 9460 Victoria BC V8W 9V8 Phone: Victoria Toll-free in Canada/U.S Fax: Retired@pensionsbc.ca 8 A Guide for Nominating Beneficiaries when Retiring MPP NOB Guide when retiring