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Defined benefit pension plans

Understanding multi-employer defined benefit pension plans Add to ...

Some defined benefit (DB) plans are sponsored by many employers, not just one. These are called multi-employer plans and they allow employees who frequently switch employers within the same industry to continuously maintain their pension coverage.

For example, individuals working in a construction trade – who frequently move from project to project and employer to employer – might be covered by a single multi-employer pension plan that covers all trades. A portion of their hourly wage is automatically contributed to the plan.

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Plans can vary

Some multi-employer plans have relatively straightforward plan formulas and operate much like single-employer DB plans. Others are complex, with elements of both DB and defined contribution plans – these are often called target benefit plans. 

Target benefit plans

These plans guarantee a pension, but provide a “target” amount for the benefit. The actual benefit received could be higher or lower than the target, depending on the investment performance of the pension plan.

Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca

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