Millennial Weddings

The word ‘Millennial’ has recently become as popular as its predecessor ‘Generation X’. It’s a word that describes a modern, rootless, possession-ambivalent generation born in the early 1980s to the early 2000s. This generation is gaining importance; indeed its behaviour has reached the notice of the Whitehouse, who have researched the whole subject and produced a 15 chapter document on Millennials and their effect on the economy.My subject is the impact of Millennial behaviour on Wedding photography. Yes, Millennials are now the largest generation alive, but not just in the USA; Britain also has its fair share, and they are shaping the way in which we shop, use and create media.Am I a Millennial?Well apparently if you don’t a home, plan to get married much later in life and rely on loans to pay for anything expensive, then you may just be. Millennials want things simple, easy and now. They are adept at downloading and sharing online, especially photography. However, in stark contrast to their possession-loving parents and grandparents, they do not feel the need to own many physical objects, among them the wedding album. Who now actually owns a physical photo album?


I am a digital photographer and come from an age that was aware of film, but has embraced technology. I do very little printing, although I know I should! All the wedding couples I have worked with simply want the digital images and if I so much as mention printing they shudder! They seem to want a traditional wedding but inclusive of a hashtag/social media link which they can showcase online or on their mobiles using an app. Indeed, sometimes the wedding invites are via social media (we know which ones!).Please don’t misread my opinion on this way of life. I applaud their natural adoption and adaptivity to the technology that has surrounded them from day one. Without the millennial need for online material, I would not be here right now writing this or producing wedding images.Indeed, if it were not for the Millennial-driven social media boom, half the wedding opportunities I have been offered would not have existed, as they came through via the online social community. However, it does not seem to matter to the Millennial wedding guest if they are not good with a camera, because they have a phone, and they may just get lucky sometimes and capture something really special. The Millennial Generation is very creative and they are all pinning and blogging and tweeting for the world to see, helping the millennial bride plan her wedding, and producing reams of shots of the wedding for posterity (online).


A millennial wedding is an interesting mix of the modern (broad use of online media to arrange and record the day) and the traditional (the ceremony and celebration). The photography relies heavily on technology (Photoshop is now a must) but ultimately the photos, as always, must be properly composed and executed. Regardless of the generation and their changing desires – the wedding photographer had to get the shot right to begin with.

Are Non-Profits Prepared For Strategic Planning?

I wish I could count the number of times I have attended a non-profit strategic planning session, or discussed the need to have (or update) one in a board meeting, or been invited to serve as the facilitator. It has always – always – struck me that the strategic planning session should just be starting about the time that it is actually ending (e.g., too much time is wasted at the beginning and then a frenzy results at the end). The purpose of this article is to outline some observations over 30 years of strategic planning experience and to share suggestions that will improve the chances for a successful outcome.

Holding a Strategic Planning Session
At some point in time, every member of a non-profit board is going to hear the suggestion: “let’s hold a strategic planning session!” from a fellow board member or staff member. It’s not a bad idea but, unfortunately, it’s often a waste of time and produces no measurable outcomes. I want to share some observations and thoughts about strategic planning – invite debate – and see if we can come up with some guidelines that make the investment of time worthwhile. I have often said that strategic planning is a ‘process’ and not an ‘event’ – and I still very much believe that statement is true. However, maybe I should also add the caveat that a successful ‘process’ does indeed require an ‘event’ – or series of events – which is precisely the point. If you agree with my belief that the event often ends about the time it should be starting, then you would have to agree that additional follow-up after the event is required in order to create a meaningful strategic plan because the plan stopped short of completion during the original event. And a lot of time was used inefficiently, which also makes people reluctant to participate in the future.
 
A Working Document
Without a doubt, the primary way that I judge a successful strategic plan is by seeing a copy of it a year after the ‘event.’ If it’s a bit too dusty (which is often said in jest, but is true!) and if the pages are in pristine condition, then the event that created the plan was obviously not successful in motivating action. However, if the copy is dog-eared, marked up, added to, pages tagged, and otherwise well-used; then the event was super successful because a ‘process’ was indeed born and the need for ongoing action was instilled. In my opinion, successful outcomes are too rare in the strategic planning ‘implementation’ phase. The copy of the strategic plan that I described as a success is one that has become a working document, which is what planning is all about.
 
Defining ‘Strategic’
From an analytical standpoint, one way to define something is to determine what it is not. Strategy is different from ‘tactical’ or ‘operational’ (which is actually performing a task). Strategy is more subjective and cerebral; it involves thinking about an issue in broader terms than usual; thinking about circumstances that do not currently exist (i.e., future oriented) and determining how to adapt the organization to benefit from those predicted opportunities or avoid anticipated threats. Often, it involves thinking about an issue totally differently than ever before (which is VERY hard to do). Strategy development is not the same as operations implementation. For example, when I have been invited to ‘do’ strategic planning for an organization, I always ask if there is an Operating Plan; i.e., if you don’t know how to perform your core business every day (Operating Plan), why would you want to spend time working on a future-oriented process (Strategic Plan)? Strategy (highly subjective) is the opposite of operational (highly objective/defined/specific). Objective is ‘cut and dried’ – there is a procedure/process/outcome that arises from certain actions, done at certain times, in a certain way to produce known/certain outcomes. We already know if we do these certain things what we will get. Most people can adequately perform what they are taught/instructed. However, developing strategy – even the process of thinking about it – is very different. A strategic planning session led by a ‘doer’ instead of a ‘strategist’ and ‘critical thinker’ will yield disappointing results; however, ‘doers’ can be very helpful in participating in the development of strategy if they are properly guided. A couple of very simple examples of strategic vs. operational issues will make the point:

Funding
Operational – How are we going to make payroll next month?
Strategic – How do we need to adapt our operations to comply/excel with the recent changes for non-profits by Congress?

New Program
Operational – We need to add a new program to our existing series.
Strategic – We need to add a new series to cover new topics that will take our organization in a new direction.

Operating Plans Are Important
Let me be quick to tout the benefits of an Operating Plan. Properly executed, an Operating Planning Session can provide or refine specific guidance/clarification/policy on any number of day-to-day issues that really can be a big help when running the organization. The primary difference between strategic and operating (which is a huge difference) is that operating plans deal with the ‘here and now’ – with processes and policies that will improve the current business function – strategic plans, simply put, engage the participants in thought processes meant to challenge the current business function by looking into the future and assessing opportunities, threats, weaknesses, and strengths. A good Operating Plan can minimize daily confusion/questions about the manner in which specific job functions should be conducted. The ‘event’ of operations planning – getting the appropriate team together to discuss, debate, and decide the issues – is, in-of-itself, a very worthwhile team-building and clarifying session (if properly planned and executed). While Operating Plans are beyond the scope of this article, I wanted to make sure they were mentioned in a positive context.
 
The Mission Statement and The SWOT Analysis
Unfortunately, most strategic planning sessions seem to begin with either a review of the mission statement or a SWOT analysis. Both are usually ‘deal-busters’ in that they bog down the process of innovative thinking for strategic planning. For example, unless the core business of the organization has been totally disrupted (e.g., by lack of funding or policy, political, social, or technology changes), then the existing mission statement should be in reasonably good condition. To delve into the mission statement – and debate specific words and placement within the text – sucks the life out of the planning session and can often pit individuals against each other right from the start over silly things like wordsmithing. Not only is this unfortunate, but I would suggest that it is totally unnecessary. How can you revise a mission statement until you go through the rigors of the strategic planning process and determine whether or not there are bona-fide strategic issues worth pursuing? My preference is to hold the mission statement for a separate planning meeting after the strategic plan has at least been through an initial rough draft process. Perhaps a good analogy is to look at the mission statement from the back end – maybe it should be thought of as more of an executive summary?
 
Preparation For The Planning Session Is Critical
There is probably no exercise that requires more preparation than strategic planning. Why? Because the participants must be the right ones (those with authority and accountability), the purpose of the exercise must be made very clear (to stay ‘on point’ and eliminate confusion and fear), and the process must be known and engaging in advance (so participants can be prepared to contribute their very best). The most obvious difference between a private-sector strategic planning session and one for a non-profit organization is the inclusion of volunteers, namely the board of directors. The good news is that the planning session will include a diversity of opinion; the bad news is that most board members have probably been through some type of strategic planning before and have preconceived notions about the process based on their previous experiences (hence, the importance of preparing for the session in advance). I will discuss the dynamics of the volunteer participants in a later section.
 
I strongly recommend using an experienced professional outside facilitator (not a staff member, a board member, or a friend of a friend…) for at least three reasons:
 
(1) It is important to have 100% involvement of the entire board and staff members, so using participants to lead sessions or write on flip charts takes them out of the game.
 
(2) The selected facilitator must fully understand the main points presented in this article and have familiarity with applying them in actual planning sessions. (I will discuss some thoughts on selecting a facilitator in a later section.)
 
(3) You cannot be a prophet in your own land – your fellow board members and/or staff will resent you for being the strategic planning leader (even if you are experienced). Obtaining outside help eliminates this problem.
 
If possible, share copies of previous strategic plans (with the participants and the facilitator) as part of the preparation process that takes place well in advance of the event. Successful planning takes more time in preparation than it does in execution; this is a good rule of thumb to remember. If very little (or no) planning goes into the preparation, the participants will show up without direction and without having pondered creative solutions to some known issues to get their juices flowing; the event will likely be a disaster (and a waste of a lot of precious time).
 
Conducting The Advanced Preparation
Plenty of lead time is important; six months is not too long. Start by regularly discussing the need/desire of a strategic planning session at board and staff meetings. A letter to the board from the chair is a good way to officially announce that a strategic planning session is necessary. That letter should include a few examples of issues that are pressing the organization for strategic solutions. The board may wish to name a committee responsible for the planning (or, the board may already have a Strategic Planning Committee). Remembering that the plan is intended to be forward looking, it is important to involve up-and-coming board and staff members; their participation will be critical to the future implementation of the plan, so it is imperative they be involved in the development of it. Newer participants are often more reluctant to engage during the planning session because they conclude, perhaps rightly so, that there is a lot of history that they do not know. Remembering that strategic planning is forward looking, the facilitator must work hard to bring everybody into the dialogue because past history is less important than future strategy.
 
Let’s cover a few aspects of the advanced preparation checklist:
 
Participation
Remember that inviting the participants is easier than getting them to attend the session! This is one of the best reasons for beginning the discussions about the planning session six months in advance. My suggestion (this is a bit radical) is that it be made clear that if a participant cannot arrive on time and stay for the entire event, then they should not attend. This rule will make clear the importance of full participation. Reiterating this for several months prior to the session will make it less likely to have a misunderstanding on the day of the event. (If the organization is extremely proactive, then it already has a policy on board attendance and what is considered an excused absence.)
 
The Venue
How important is the selection of the place to hold the planning session? I would argue that it is more important than most people think (i.e., it is very important). I would strongly suggest that the venue be away from the normal meeting places. In addition, distractions like golf courses should be avoided; and, selecting a location where there is no cell phone reception takes care of a whole host of problems. Included in the selection of the venue are a number of other seemingly mundane issues, but planning in advance can make the difference between success and failure. A few examples:

  • Make sure the primary meeting room is extraordinary. It must be comfortable in every way, from the chairs to the location of the restrooms. If possible, select a meeting room with full technology tools; you want the session to be impressive.
  • Do not expect the attendees to bunk together. Secure enough rooms in advance to accommodate all of those who plan to attend. Private bathrooms are a must.
  • Food selections should be made in advance, particularly taking into account vegetarian preferences. Avoid caffeine and sugar as much as possible because studies have found that while both spike attention, there is ultimately an attention crash.
  • Decisions about alcohol, smoking, group recreation activities, etc. should all be made in advance. To keep things simple, I suggest avoiding all of the above.
  • Regular breaks – where some exercise is suggested and some quiet/alone time is provided – will increase the productivity of the output in the sessions. Make sure there is a printed agenda – distributed well in advance of the session – and spell out all events to the minute. Do not deviate from the schedule.

Length of the Planning Session
Determining the proper length of the session is important. I continue to believe that planning sessions end about the time they should be starting/continuing. Why? Because without a lot of advanced planning and attention to detail, the event begins sluggishly and does not naturally find a participative course until too late. However, I have never been to a multi-day ‘seminar’ that I thought was worth my time because I do not play golf and am not looking at seminars or planning sessions for my recreation and social outings. I feel strongly that the importance of the planning session should be kept paramount in the minds of the participants. There is no reason to draw things out just for the sake of having a lengthy planning session. How short is too short? A strategic planning session cannot be successfully held in one morning. How long is too long? Anything longer than a couple of days will cause a negative impact on the operations of the organization, given that the entire leadership team is at the strategic planning event. However, the best session I ever attended lasted the better part of three days. And, it was a Friday, Saturday, and Sunday (intentionally selected so as not to interfere with normal operations).
 
Planning Session Case Study
An appropriately sized inn was selected – in a rural area and about 90 minutes out of town – and the organization rented the entire facility. It was extremely well planned, in advance, and all contingencies were considered (private rooms, meals, walking trails, multiple meeting rooms, no cell service, personal time built into the agenda, etc.) Written materials had been distributed weeks in advance. The facilitating team (outside consultants) had met individually with each participant prior to the event; the five-person consulting team arrived Friday morning to set up. There were 24 participants (ranging from the CEO to new managers), who arrived after lunch on Friday, checked into their rooms, and were in place for the afternoon (opening) session at 3 p.m. on Friday. Another session was conducted after dinner on Friday evening and multiple sessions were conducted on Saturday. The event concluded at 2 p.m. on Sunday. Of special note is that every participant left the session with a copy of the draft strategic plan that commemorated the first session in the planning process. Updates were added as they became available in the days, weeks, and months to come. Goals and objectives were established to produce measurable outcomes and revised as necessary. Organization-wide communications were important, so assignments were made to brief the entire employee population on the plan and its iterative changes. This strategic planning event remains the best I have ever attended. Contrast this brief description with the planning events you have attended and you will see the difference that commitment can make. And, important to mention: the resulting strategic plan completely transformed the organization, as was intended (the organization reduced its service territory and its product offerings, opting to focus on its core strengths). A better outcome could not be imagined.
 
The Cost of Strategic Planning
I do not believe in the old saying, “you get what you pay for.” Instead, I believe you will get no more than you pay for and you might not even get that much if you are not fully engaged with the service provider. Good strategic planning is not cheap. Many for-profit organizations cannot afford it, so it is no surprise that the non-profit organizations struggle mightily with the cost. A common practice is to have a friend-of-a-friend conduct a 10 a.m. to 3 p.m. (with lunch!) planning session for free (or for a few hundred dollars). How successful is this approach? I would suggest not successful at all – and, potentially giving a negative impression to strategic planning because the session was so grossly inadequate. If this is true, then it is literally better not to have a strategic planning session that to have a bad one. Fees vary all over the board but, for example, the case study presented above cost $50,000 (negotiated down from $75,000 in conjunction with the experimentation of producing the draft plan during the session) – and that was over 15 years ago. I am familiar with a recent strategic plan for a non-profit organization – conducted by a national consulting firm specializing in the operations of that specific non-profit industry – and the cost was $75,000 about two years ago. However, take note: a donor sponsored 100% of the cost under the belief that without a strategic plan, the organization was in trouble. So, my suggestion would be to seek donor funding for the strategic planning costs. Also, I would suggest that the organization tout the existence of its strategic plan in its printed material and on its web site, thereby demonstrating that it is proactive and performs in a business-like manner, which can provide a competitive advantage during fundraising.

 
Selecting a Strategic Planning Consultant
The case study above mentions a five-person consulting team. This was part of an experiment that required that number of consultants because the end product, as explained above, was a draft copy of the strategic plan in the hands of every participant. This required the appropriate technology to be on hand (PC, projector, screen, copiers, etc.) and a typist who was the fastest I have ever seen. Part of the experiment was to enable the participants to be fully engaged in the conversation by not taking notes; instead, everything that was said was typed on the PC and projected on the screen. During breaks, the consulting team would group suggestions into logical sections. One consultant handled all contingencies. The other three took turns facilitating the various sessions to offer a distinct change of pace. During lunch on the closing day, copies were made for all participants and reviewed in the final session before adjournment. Admittedly, this was extreme; however, it certainly was effective. Generally speaking, however, find a consultant from a reference, meet with the person (or persons) to determine if you have a good personality fit (important), discuss the specific scope of work, ask for references (and check them), and ask to review copies of other strategic plans the consultant has led (these may be proprietary, but a reference can provide you with a copy – or at least let you look at a copy – so you can see the actual work product and evaluate it). Make sure that the consulting fee includes preliminary work and follow-up work. Also, make sure that the consultant’s background is a good fit for the type of organization (some people believe that a good facilitator can facilitate anything, but I disagree; there are always strengths and weaknesses in a person’s knowledge base).
 
The Dynamics of the Planning Session
The biggest challenge for any planning session is to keep the group ‘on point’ (i.e., on the subject) and to involve, ideally, everybody in the group in the dialogue. Speaking of ‘dialogue,’ the word is not interchangeable with ‘discussion’ – you want a dialogue not a discussion – the word discussion is derived from percussion which indicates ‘banging, striking, scraping, etc.’ (precisely the wrong connotation) and is usually an informal debate (also the wrong connotation). Dialogue, on the other hand, is a conversation and an exchange of ideas (not a debate). Managing personality differences, tenure differences (who knows what because of how long they have been associated with the organization), starting on time (even if everybody is not present!), ending on time (i.e., following the agenda), and recording the comments of the participants are rightful expectations for the client to have of the facilitator/consultant. Basic issues of respect (we are all adults) is the responsibility of each participant. I have never attended a strategic planning session where there was not at least one person who did not want to be there – and, unfortunately, it was obvious through words and body language – which projected a certain amount of negativity on the entire group. In cases such as this, it is up to the CEO to determine how the situation should best be handled; I recommend removing the negativity from the session.
 
Next Steps for Successful Implementation
Too often (if not the majority of the time!) “what happens at the strategic planning retreat stays at the strategic planning retreat…” While this may work in Vegas, it is a sorry outcome for serious strategic planning! Information must be shared after the retreat. My experience indicates that success comes from follow-up, follow-up, and more follow-up. I suggest a “champion” – an individual (or very small team) that will manage the implementation of the strategic plan – with unimpeded, direct access to the CEO. (If the CEO is not fully supportive then the strategic plan is doomed to failure.) Most importantly, I suggest that everyone involved understand, accept, and embrace the unequivocal fact that additional changes will be needed during the implementation phase. This is as it should be. Documenting these changes (and why), revising goals and objectives, timelines, assignments and providing printed copies to be inserted into all the individual strategic planning notebooks is the best way I know to keep the entire team involved in the process. (Remember, we are striving for a process, not an event…)
 
Conclusions/Recommendations
The purpose of this article was to share some observations over 30 years of strategic planning experience and to share suggestions for pre-planning that will improve the chances for a successful outcome. I remain concerned that the non-profit sector (more so than the government sector or the private sector) is typically not ready for strategic planning because they don’t have the funds to do an adequate job and the pre-planning is not thorough. A successful outcome from this article would be to get non-profit leaders to think about the subject of strategic planning more seriously – and to halt any existing plans until key elements of this article are at least considered. Entire books are written on the subject of strategic planning, so this article does not portend to be conclusive, only to make clear the importance of strategic planning and doing it right. Feedback and comments are invited.

How Does My Defined Benefit Pension Plan Work?

The Defined Benefit Plan used to be the standard for pension plans. Over the last 10 years, many companies have been phasing out these plans in favour of Defined Contribution Plans. Some companies may give you the option of switching between them as well, or converting from one type to another. This article is focused on the Defined Benefit Plan. If you start working for a company today, you will most likely be offered a Defined Contribution Plan unless you work for the public sector, a unionized environment, or a company with a long standing defined benefit plan.

How do I know the difference between the two plans? See the definitions below. The words in bold are terminology you will often see in the discussion of defined benefit pension plans.

Defined Benefit and Defined Contribution Plans Defined

A defined benefit plan is a pension plan where the future payout in retirement is defined by a set formula when you join the company. It is a calculation that usually includes your highest average salary, time working in the company, and how much money was contributed by you and the employer. The money is invested on your behalf and the firm is responsible for risk if something goes wrong. There is usually an implied rate of return that is guaranteed by your employer each year, which is the investment rate of return your money would earn if you could see your pension plan in a bank account.

A defined contribution plan is where the money you pay into the plan is defined: the amount contributed either by you or on your behalf by the company. It is a set dollar amount based on your salary in the year that you are working. You can think of it as the company (and sometimes you and the company) contributing to your pension account. This is similar to a Registered Retirement Savings Plan (RRSP) account, except that it is locked in. Locked in means that the money is in your name and you are entitled to the money, but cannot withdraw it unless there is a very exceptional circumstance. (i.e. this is the only money I have and I need to pay my bills). Also like an RRSP Account, you get to choose the investments in the defined contribution scenario, and you are taking the risks. If you invest in a fund and it loses money, you must deal with the consequences. It is for this reason that it is good to have a plan. If you are in a situation where you have a defined contribution account, you will have to make the decisions.

I know that I have a Defined Benefit Plan, What Now?

The good news is that defined benefit plans tend to work without many decisions being made on your part. This article is designed to make you aware of how they work so that you can be aware of potential changes and make decisions such as benefits changes, whether to stay at your employer a certain number of years, whether to transfer your pension to another institution, or convert to another type of plan (i.e. The Defined Contribution Plan). You may also be given warning if the promises that were made to you when you joined the pension plan get changed by the time you actually receive payment in retirement.

How Does It Work?

A defined benefit pension plan is basically a giant bank account, covering retirement for many employees in an organization over a long period of time. The employees and the employer contribute money every year, and this money is collected in this account. The entity that manages this bank account is called the plan sponsor. This account is typically run separately from the company operations, or from the institution it represents. For example, the GM pension plan is a separate entity from GM the corporation. The only relationship the pension plan and the underlying company should have is for company contributions, adding money to increase funding of the plan, or removing money over and above the projected amount needed to pay the present and future pensioners. If there is any other money transfer between the pension plan and the company, this should be monitored as it may signal funding problems, or a permanent change in the structure of the pension plan (for example company mergers, amalgamations or division split off from the parent company).

Once money is deposited into this bank account, it is invested for a long period of time to ensure that there is enough money to pay the future obligation. The amount of money promised to future pensioners is tabulated, and this amount is discounted back to the present, using an interest rate called a discount rate. This means that an equivalent amount of money invested in the current year is calculated to equal this expected future obligation. The calculation of the future obligation determines an expected rate of return which is the return necessary for the money sitting in the bank account to pay the future obligation and operate the pension plan. How do they know how much they will have to pay? This is where the actuary comes in. The actuary estimates how long people will contribute and withdraw money from the pension plan based on life expectancy, economic conditions, expenses of running the plan, the investment returns and inflation among other things to come up with a projected benefit obligation. The current health of the plan overall is measured using an asset-liability study, which is exactly what it sounds like – a study of the assets (money expected to be generated by the plan) and the liabilities (money that is expected to be paid out by the plan), or the funding situation of the pension plan. There can different versions of this calculation due to varying assumptions. If you are very keen, you can find the assumptions in the financial reports of your pension plan and see what the variations are. Since these calculations are projecting way out into the future, a small change in an assumption will mean a big change in the result. Keep an eye on this over the years to see what trends may be impacting the numbers. This asset-liability study also determines whether there is a surplus in the plan, or it isoverfunded (more money in the plan that the most current estimate requires to cover the future obligation) or a deficit in the plan, or it is underfunded (less money in the plan than the most current estimate requires to cover the future obligation). If a deficit becomes too large and stays there for a period of time, the plan may become insolvent. This is very similar to a company that goes insolvent because it ran out of cash and couldn’t sustain its business any longer. If this happens, the government may bail out the plan, but this depends on the jurisdiction, funds available and willingness of the government. The alternative is to wind up the planand whatever money is left over is divided among the stakeholders (the pensioners, contributors and entities that operate the plan). This is similar to a bankruptcy proceeding for a corporation.

Contributions

Contributions represent the money put into the pension plan by you and your employer. The contribution amount is usually based on a percentage of salary, and consequently the payout in retirement is also based on your salary. The specific calculation of the payout will vary for each plan – this should be checked with your employer. The retirement calculators provided at your workplace are very handy for figuring out your projected retirement monthly payout. Since the numbers are projecting well out into the future, unless you are within 5 years of your retirement, the numbers will likely change by the time you actually receive payments. The ratio of money you are contributing versus the employer will vary by plan and over time. Generally, the less you contribute, the better off you are if you receive the same benefits. Check your pay stub to make sure that the amount deducted equals the amount that should be deducted. If it is not, ask why. There may be some additional deductions or changes to the percentages that you may not be aware of. In some plans, you don’t see what the employer contributes – you only see what you have contributed. If you know the percentages of both parties, you can figure out how much you are actually getting. Also, for tax purposes, the company will reflect contributions from both parties on your tax slips, as the total dollar amount will impact RRSP contribution room and tax planning. Changes to contributions and benefits are usually reflected after union contract negotiations, or after asset-liability studies are carried out which determine how much money the plan will need to pay the pensioners, and how much you the contributor will need to pay.

Vesting

“Vesting” or “Vesting Period”is the time after which you are entitled to benefits or payment, either now or in the future. When you first join a pension plan, the first vesting period is the time when you are entitled to the employer contributions. It could be your first day of employment, or months and years out into the future from your first day of employment. There may be other vesting periods – times at which you are entitled to pension payments, or health benefits as well as pension payouts. Many defined benefit pension plans will include access to health insurance, and how much is covered is typically what you receive when you are working – but this varies and must be verified with your employer. There may be a vesting period for when you can take early retirement. This is usually called early retirement rather than vesting, but the idea is the same. If you stop contributing to the pension plan, you will lose anything that is not vested. Note that you may leave the company and return to the company but continue contributing in your absence. Whatever is vested can either be taken with you, or received as a deferred payment in the future. The tabulations that are done with the retirement calculators always assume you will contribute all the way up to your retirement without interruption. If you leave earlier, you need to calculate a deferred payment, where you input the start and stop date of your contributions, and how much money you put in over this period. If you are familiar with the concept of an annuity, this is very similar.

Indexing

When most pension calculations are done, it is assumed that there is no inflation in the numbers. If you see the term “real rate of return”, this interest rate would include inflation, and would equal the nominal rate of return, or typical interest rate that is quoted, minus the inflation rate. As an example, if you received a 5% return on your mutual fund last year, and the inflation rate was 2%, your real rate of return would be 5%-2% or 3%. Why does this matter? Typically pension payments are fixed – once a payment is calculated upon reaching retirement, it stays the same throughout retirement. The problem is that when you retire, you are supposed to have enough money to pay your expenses with this pension payout. If the rate of inflation is 2% every year up to your retirement, this is like saying you can buy 2% less stuff every year. If the promised pension payment is $2000 per month today, and you retire in 20 years, this 2% inflation rate would reduce the amount of stuff you can buy by 40% (2% x 20 years). If this continues while you are retired, say another 20 years, this money will now buy 80% less stuff than today. Imagine paying bills with 80% less money! Indexing raises the payout calculations by the amount of the inflation rate to prevent this erosion of monetary value from happening. Inflation is actually a very personal thing – the price increases of the stuff you personally spend your money on, is what will impact you the most. The pension plans assume that you buy the same quantity of stuff and in the same proportions as the average, or quoted inflation rate. This is likely not true, but it is better than no indexing at all. Some pension plans also have a maximum amount that they will index, or will not fully index but only partially. Check with your employer for the calculation to verify.

Early Retirement Special Features

Most plans have an option to retire early. They will usually combine how long you have worked there, or years of service with your age and determine a threshold for qualification for early retirement. If you retire early, the rules may change. They may give you a reduced pension for a period of time, or some other benefit. This is highly specific to your employer, so do the homework on this one. These features also change over time. The more the employer wants you to retire, the better an offer they will provide. Another indicator is that the more money the pension plan has, or the better the funding situation, the lower the contributions will be and the better the early retirement terms will be. The closer you are to retirement, the more these features will impact you. Retiring early is a very personal decision, as it will affect your retirement plan, tax status, income and employability. Make sure you plan carefully if you are offered early retirement, and do what is best for your needs.

RRSP Effect

The government views all of your pension accounts together when it comes to contribution room. The RRSP room that you are allowed will include defined benefit pension plan room, as well as all other types of retirement accounts. As an example, if you are allowed $12000 worth of RRSP room, and the defined benefit plan contributes $10000 in the relevant tax year (note that this includes your contributions and those of the company), you would have $2000 left for additional contributions to another type of retirement account.

What About the CPP?

The CPP contributions are also accounted for with your defined pension plan. The employer will account for the CPP limits when calculating your defined pension contributions. When you retire, the pension calculator that you use to determine how much money you receive in retirement accounts for CPP entitlements as well. How this accounting is done will depend on your salary and the CPP contribution calculations for the year in question. This would be another question for your employer. When you are retired, you would receive the CPP Payment and the Defined Benefit Pension payment separately, and the Old Age Supplement (OAS) if applicable.

What if I Leave the Company?

If you leave the company and you are vested, you can leave the money with your former employer, or take it with you to another institution. If you leave it with your employer, you will be able to receive it when you reach retirement age – this is called a “deferred payment”. It may also mean a series of payments over time – this is something I would ask the employer, especially if you will be retiring in the next 10 years. Since it is a pension plan, it will remain locked in until you are of retirement age. It would be kept separate from other non-locked in assets that you might have – like RRSPs, Tax Free Savings Accounts (TFSAs) or non-registered (cash) accounts. There are situations when you can combine locked in accounts from different employers into a single account. This should also be discussed with your current employer.

You can also combine defined contribution and defined benefit plans together in certain situations – if your current employer has a way of calculating the value of the contributions between the two (or more) types of plans. This is also possible between defined benefit plans of different types. Please ask your employer for the rules of their pension plan upon arriving or leaving a job to make sure you have all of the options open. You can also manage pension money yourself once you leave the employer. The money would go into a Locked in Retirement Account (LIRA), which can be managed by the same financial institutions that manage RRSP accounts. You can also turn this money over to a financial planner or broker if you believe they can manage your money more effectively than you can. There are usually time restrictions on making these transfers, and rules of protocol to follow, so please ask your company when you leave the firm and get the proper procedure so you can implement this strategy if you want to.

What If I Am Not Vested Yet?

If you leave the company before the vesting date – your funds will be returned to you but employer contributions will be kept by the company. For information purposes, keep track of how much you and the company contribute from when you joined the plan in the event of mistakes. As an aside, always keep your statements and print out hard copies of your records in case of issues with accessing your internet based accounts or loss of history. At the very least, have the records stored in your personal hard drive so they can be accessed without restriction. This is also a good idea for tax purposes. You want to be able to recreate your account situation from start to finish without relying on the internet, or any other parties to supply you with information.

In summation, the defined benefit pension plan is an integral part of your retirement. Even though it is managed by your employer, you should know what is going on and make decisions when appropriate.