Government of Nova Scotia, Canada
Glossary

Annualized Salary

Your annual rate of pay, or the salary you would have received had you worked a full year.

Average Industrial Wage

An average of Canadian weekly wages and salaries, published by Statistics Canada.

Commuted Value

This is an amount that is calculated using actuarial methods to produce a present value that, if invested at a certain rate of interest until your retirement, will provide enough money to purchase an annuity in the same amount as the pension that you accrued under the Defined Benefit plan.

CRA

Canada Revenue Agency. A federal agency responsible for the administration of the Income Tax Act.

Custodian

A trust company responsible for receiving contributions, holding the contributions in trust, and making distributions from an RCA.

Deferred Profit Sharing Plan

A savings plan in which employer contributions are allocated to each participating employee's account. Contributions are usually a defined percentage of profits earned by the business and are paid from profits. These plans are registered with the Canada Revenue Agency. Contributions under a deferred profit sharing plan can reduce your RRSP contribution room.

Early Retirement Age

This is the earliest age that a member may retire under a registered pension plan. Usually it is the first day of the month coinciding with, or immediately following, the month in which the member attains age 55, or 10 years before the normal retirement age.

Income Tax Act

Federal legislation which governs all areas of taxation of income, including income from pension plans and all other registered retirement savings vehicles.

LIF

A life income fund, which is a registered retirement income fund (RRIF) into which locked-in pension funds can be transferred from a pension plan or a LIRA. Monthly or annual payments of pension income can be paid from a LIF.

Locked-In

Pension funds are locked in after two years of plan membership. These funds can not be withdrawn in cash or used to provide you with a pension income before the earlier of age 55 or the early retirement age under the plan from which the funds originated.

LIRA

A locked-in retirement account, which is a registered retirement savings plan (RRSP) into which locked-in pension funds can be transferred from a pension plan.

Pension Adjustment

An annual amount that is reported to the Canada Revenue Agency on T4 slips for defined benefit, defined contribution, and deferred profit sharing plan members.

For a defined contribution or deferred profit sharing plan, the PA amount is the total of all employee and employer contributions, plus forfeitures allocated to the member's account.

For a defined benefit plan, the amount represents the equivalent dollar value of the benefit accrued under the pension plan. RRSP room for the following year is reduced by this amount. The formula for a PA is: 
(9 x annual accrued pension) - 600

For example:

If you earn $500 in pension during the year, the PA reported on your T4 slip for that year will be $3,900. Your RRSP room for the following year will be reduced by $3,900.

Pension Benefits Act

The legislation in the province of Nova Scotia that governs private sector and municipal government pension plans that have members in Nova Scotia.

Portability

The right to transfer a pension plan entitlement (locked-in or not locked-in) out of a pension plan and into a LIRA, LIF or other registered retirement savings arrangement.

RCA

Retirement Compensation Arrangement. A supplemental pension plan that is subject to the Income Tax Act only.

Reciprocal Transfer Agreement

An agreement between two employers that contains provisions enabling the transfer of pension credits between the pension plans of the two employers.

Reference Rate

An interest rate that is calculated using a long-term bond rate that is issued by the Government of Canada. The reference rate is used when calculating maximum payments from a LIF and will always be 6% or greater.

Regulations

The detailed rules which describe how the provisions of the Pension Benefits Act must be applied in practice.

RRSP

A registered retirement savings plan to which pension funds can be transferred or contributed.

YMPE

Year's Maximum Pensionable Earnings, as defined by the Canada Pension Plan (CPP). This amount represents the maximum earnings threshold on which contributions to CPP may be made, (i.e. In 2011, if you make $60,000 per year, you would only contribute to the CPP on the first $48,300 of your earnings).