doing business in canada - Davies Ward Phillips & Vineberg LLP

Retirement Plans, Employee Benefitsand Equity-Based Incentive and SavingsPlansRETIREMENT PLANSCanadians typically receive retirement income from three sources: government-administered pension programs,employer-sponsored retirement savings programs and personal savings.GOVERNMENT PENSION PROGRAMSCanada has many government-administered pension, benefit and welfare programs that provide a certaindegree of social security. Old Age Security ("OAS") provides pensions payable from age 65, subject to residencerequirements. Pensioners with high individual net incomes must repay part or all of the maximum OAS pensionamount. For those with low incomes, a Guaranteed Income Supplement and an Allowance (paid to spouses andcommon-law partners of pensioners) may also be payable. These benefits are financed out of general taxrevenues.The Canada Pension Plan ("CPP") is a compulsory, contributory, earnings-related plan for employees thatprovide basic retirement, survivor, death, and long-term disability benefits. For individuals employed or residentin Québec, the Québec Pension Plan ("QPP") is applicable and is substantially similar to CPP. The employee'scontribution under CPP or QPP is a percentage of earnings which is matched by the employer's contribution.CPP provides several possible types of benefits for employees who made a minimum contribution towards thePlan:• retirement pensions to contributors who have reached 65 years of age (or are between 60 and 64 yearsof age, subject to meeting certain requirements);• benefits to a surviving spouse and/or surviving dependant child of the contributor; and• disability benefits to a contributor who is no longer able to secure substantially gainful employment.Each of the employee's and employer's contributions for 2010 is 4.95% of pensionable earnings over $3,500, upto a maximum of $47,200 (maximum contribution payable in 2010 by each of the employee and the employer is$2,163.15).EMPLOYER-SPONSORED RETIREMENT SAVINGS PROGRAMSMany employers voluntarily offer private pension plans. These may be specific to a single employer, or multiemployerpension plans that are administered by boards of trustees. Generally, pension plans are definedbenefit, defined contribution or hybrid plans. They, like employment and labour matters generally, are governedby federal or provincial legislation depending on the nature of the particular business or undertaking. To qualifyfor preferential tax treatment, pension plans must also be registered under the federal Income Tax Act andcomply with the requirements of that Act.Federal and provincial pension benefits standards legislation sets out minimum standards applicable to pensionplans and specifies rules relating to many aspects of the pension arrangement, including:64 Retirement Plans, Employee Benefits and Equity-Based Incentive and Savings Plans