Henry and Cheryl Chen are clients of yours. Henry is $55$ years old and Cheryl is also $55$ years old. They are parents of two adult children that no longer require any financial support. They have been employed for $25$ years following graduating from an Ontario University, and have been Canadian residents their entire lives. Both have pension plans. Henry's tenure with his employer is longer than Cheryl's, therefore his pension plan, a Defined Benefit plan, would have provided for a higher pension income at age $65.$ Cheryl's pension is a Defined Contribution plan, but she has been employed with her current employer for $10$ years. They both have contributed to their RRSPs over the years and maxed out what was remaininh in RRSP contribution room. Henry and Cheryl have been long tenured clients of yours, so when Cheryl calls and shares the news that Henry has been recently diagnosed with an aggressive and what is being thought to be$,$ a terminal immunological disease, you are both suprised and saddened by this news. It goes wihtout saying that you are empathetic to their challenges ahead, and want to assist in anyway, you can in terms of their financial decisions and clarification of options available to them. Cheryl has questions and is giving you more than two weeks, in order to provide you with enough time to prepare options and recommendations given the significant changes that will result in Henry's health challenges going forward Shortly after the call you request and recieve the following information:

Henry's Defined Benefit Plan has the following stipulations:

$>$ Henry's DB pension Benefit is based on a formula: $=2\%$ x years of pensionable service x best $5$ years of income

$>$ All employees are eligible to recieve an unreduced pension based on a factor of $85,$ with a minimum retirement age of $55$ years of age.

$>$ Henry's pension has a survivor benefit of $60\%,$ for which Cheryl is listen on the plan Henry's pension stipulates that if a plan member dies prior to the eligibility period $($age $55-65)$ then there is an option to commute $100\%$ of the pension value to the surviving spouse. Conversely if a plan member dies during the eligibility period $(55-65)$ or after pension payments have begun, then their spouse would recieve $60\%$ of the commuted value, or of the pension payments going forward.

$>$ As a result of the seriousness of Henry's diagnosis he is going to stop working and has requsted a pension commutation calculation, as an option to consider. He was informed that he would be eligible to recieve an annual benefit of $$53,900$ at age $65,$ a commuted value at age $55$ of $$300,000.$

Present value factor at Henry's age $55$: $5\mathrm{.}5$

Henry's last $10$ years of Pensionable Income:

Age $54$: $$80,000$

Age $53$: $$78,000$

Age $52$: $$76,000$

Age $51$: $$76,000$

Age $50$: $$74,000$

Age $49$: $$75,000$

Age $48$: $$75,000$

Age $47$: $$74,000$

Age $46$: $$74,000$

Age $45$: $$73,000$

For the purposes of this case make the following asumptions:

They both have contributed to CPP at the maximum YMPE levels throughout their careers. All pension calculations and amounts should reflect $2024$ figures, which will require some research. The clients are very concerned about exposure considering how compromised Henry's immune system is$,$ and therefore have requested that you record your thoughts and recommendations in a video message, as they have always appreciated the meetings you have had in the past, the wish to recieve your thoughts and recommendations in this format, which will permit them to review it and take time to consider your thought, before responding.

$1.$ What amounts of CPP would be avaialable to Cheryl in $2024$ figures at age $60,$ and $65?$

$2.$ What if any other amounts would Cheryl be eligible to recieve should Henry predecease her?

$3.$ Please check the figure of $$53,900$ Annual Pension Benefit for Henry at age $65,$ to ensure its correct.

$4.$ How much of the commuted value that Henry would be eligible to recieve at age $55,$ could be transfered from the DB plan without any tax consequences at time of transfer?

$5.$ Should Henry and Cheryl consider commuting Henry's work pension now? Why or why not?