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  • Writer's pictureearmar4

Comparison of AFM-EPF to the Canadian Musicians Fund

The pension system in Canada is quite different from the US. The Canadian Fund is not subject to an ERISA-type law that prohibits earned benefits from being reduced. If the projected funding falls below a certain level the benefits can and must be adjusted. This means no MPRA-type application process. If benefits need to be cut to restore healthy funding; the trustees are authorized and required to do it. This prevents the severe underfunding that has taken place in the US. See below:

Musicians Pension Fund of Canada, page 6 or 7 of each of their financial reports going back at least to 2013:

“Under the Ontario Pension Benefits Act (the OPBA), our plan is considered a multi-employer pension plan (MEPP). In this type of plan, employers make contributions based on rates negotiated through unions. Since employer contributions are fixed by negotiations (and cannot be varied simply because plan assets become insufficient to pay promised benefits), it is possible that the plan may have to be changed to reduce benefits already earned and even pensions that are currently being paid.”

“Contributions are negotiated with employers by the AFM/CFM and its Locals. Therefore, it is not possible to seek additional contributions in the event that either: (i) assets are not

sufficient to pay for pension benefits earned or (ii) current contributions are not sufficient to pay for current benefits being earned. Accordingly, pension legislation and the Plan rules require the Trustees to make changes to the Plan’s promised pension benefits based on affordability, when necessary.

Canadian law also limits how much tax-sheltered retirement savings an individual can have.

“The Income Tax Act requires pension adjustments to be reported in respect of all contributions made to any pension plan. Each year, your employer(s) must report the amount of employer contributions on your T4 in the box entitled “Pension Adjustment”. This amount is used to reduce your Registered Retirement Savings Plan (RRSP) contribution room in the year following the year of the T4. (An RRSP is a tax-exempt savings plan registered with the Canadian government. The T4 tax slip is where retirement savings are reported).

The fund is not your Employer and therefore does not report Pension Adjustments (PAs). It is not the fund’s responsibility to ensure Employers’ compliance with the Income Tax Act.

The idea behind the Pension Adjustment (PA) is that everyone should have similar access to tax-sheltered retirement savings, whether they are earning a pension through a registered pension plan or are saving for retirement through their personal RRSP, or both. If you’re already earning a pension through your employer and the AFM/CFM-sponsored registered pension plan, then your ability to save through your RRSP needs to be limited in some way to reflect your registered pension plan participation. This is why the Pension Adjustment (PA) exists.”

These variables along with the sheer size difference between the Canadian fund and the AFM-EPF (the Canadian fund has fewer than 14,000 participants, the EPF has over 50,000) make this an apples to oranges comparison at best.

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