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Questions and Answers
What is a common employer goal in retirement plan design?
What is a common employer goal in retirement plan design?
Which factor does NOT impact the level of plan costs borne by a sponsor according to the text?
Which factor does NOT impact the level of plan costs borne by a sponsor according to the text?
What is a factor that may prompt an employer to revisit the design of their retirement plan?
What is a factor that may prompt an employer to revisit the design of their retirement plan?
In retirement plan design, what does 'indexing pensions to inflation' refer to?
In retirement plan design, what does 'indexing pensions to inflation' refer to?
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What step is typically involved in registering a pension plan?
What step is typically involved in registering a pension plan?
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Which characteristic is NOT typically considered in average employee group characteristics for retirement plan design?
Which characteristic is NOT typically considered in average employee group characteristics for retirement plan design?
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What is a key document required for pension plan registration?
What is a key document required for pension plan registration?
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What is one of the specific requirements for DB and target benefit plans during the registration process?
What is one of the specific requirements for DB and target benefit plans during the registration process?
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What is one key difference between the documentation requirements for a pension plan and a non-pension registered plan?
What is one key difference between the documentation requirements for a pension plan and a non-pension registered plan?
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Which external service provider assists in preparing submissions for pension regulatory authorities?
Which external service provider assists in preparing submissions for pension regulatory authorities?
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What is a common role of actuaries in establishing defined benefit pension plans?
What is a common role of actuaries in establishing defined benefit pension plans?
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Which entity is generally allowed to act as a custodian of a pension plan in Canada?
Which entity is generally allowed to act as a custodian of a pension plan in Canada?
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What is a key criterion considered when selecting a custodian/fund holder for a pension plan?
What is a key criterion considered when selecting a custodian/fund holder for a pension plan?
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What model is typically used for larger DC plans and involves separate vendors for custodial, administration, and investment services?
What model is typically used for larger DC plans and involves separate vendors for custodial, administration, and investment services?
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What type of agreement is required when considering an insurance contract as a custodian option for Canadian pension plans?
What type of agreement is required when considering an insurance contract as a custodian option for Canadian pension plans?
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What document is typically required for non-registered pension plan establishment but not for registered pension plan registration?
What document is typically required for non-registered pension plan establishment but not for registered pension plan registration?
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What type of information is generally required on individual annual pension statements for DB pension plans?
What type of information is generally required on individual annual pension statements for DB pension plans?
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Which of the following filings is required by plan sponsors after a pension plan is registered?
Which of the following filings is required by plan sponsors after a pension plan is registered?
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What must be reported for any past service adjustments in a pension plan?
What must be reported for any past service adjustments in a pension plan?
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Which type of pension plan requires the disclosure of transfer value of benefits and surplus rights?
Which type of pension plan requires the disclosure of transfer value of benefits and surplus rights?
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What form should be used for trust-funded pension plans when filing the Income Tax Return?
What form should be used for trust-funded pension plans when filing the Income Tax Return?
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For DC pension plans, what information is required on individual annual pension statements?
For DC pension plans, what information is required on individual annual pension statements?
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What is one of the responsibilities of an employer sponsoring a DC pension plan?
What is one of the responsibilities of an employer sponsoring a DC pension plan?
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What is a key difference in responsibilities between a DC pension plan sponsor and a DB pension plan sponsor?
What is a key difference in responsibilities between a DC pension plan sponsor and a DB pension plan sponsor?
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What are the rights of pension plan members in relation to retirement benefits according to the text?
What are the rights of pension plan members in relation to retirement benefits according to the text?
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When must a calculation of benefits for a member of an RPP be done?
When must a calculation of benefits for a member of an RPP be done?
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Which information is typically required in an annual information return (AIR) filing by a plan administrator?
Which information is typically required in an annual information return (AIR) filing by a plan administrator?
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What are the operational differences between pension plans and non-pension retirement plans as outlined in the text?
What are the operational differences between pension plans and non-pension retirement plans as outlined in the text?
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What is required for pension plan amendments as per the text?
What is required for pension plan amendments as per the text?
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What is an employer sponsoring a DC pension plan NOT responsible for?
What is an employer sponsoring a DC pension plan NOT responsible for?
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What is one of the specific responsibilities of a DC pension plan administrator towards members who are approaching retirement?
What is one of the specific responsibilities of a DC pension plan administrator towards members who are approaching retirement?
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In terms of responsibilities towards retired members, when does a pension plan administrator communicate as per the text?
In terms of responsibilities towards retired members, when does a pension plan administrator communicate as per the text?
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What are the main service providers required for sponsors of small and mid-sized DC pension plans?
What are the main service providers required for sponsors of small and mid-sized DC pension plans?
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What is a common approach used by small and mid-sized Capital Accumulation Plans (CAPs) offered in Canada?
What is a common approach used by small and mid-sized Capital Accumulation Plans (CAPs) offered in Canada?
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What is one of the duties of a plan administrator related to the pension fund and the fund holder?
What is one of the duties of a plan administrator related to the pension fund and the fund holder?
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When selecting a pension fund investment manager, what should a plan administrator consider?
When selecting a pension fund investment manager, what should a plan administrator consider?
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What type of plan member records are typically kept for Defined Benefit (DB) pension plans?
What type of plan member records are typically kept for Defined Benefit (DB) pension plans?
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What is one of the responsibilities of a DC pension plan administrator under CAPSA Guideline No. 8?
What is one of the responsibilities of a DC pension plan administrator under CAPSA Guideline No. 8?
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Which organization provides guidelines for Defined Contribution Pension Plans in Canada?
Which organization provides guidelines for Defined Contribution Pension Plans in Canada?
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What is a key consideration for a plan sponsor when choosing an investment manager?
What is a key consideration for a plan sponsor when choosing an investment manager?
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What is NOT a necessary service provider for sponsors of small and mid-sized DC pension plans?
What is NOT a necessary service provider for sponsors of small and mid-sized DC pension plans?
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All changes to a pension plan must be filed, regardless of their impact on costs, liabilities, or plan solvency.
All changes to a pension plan must be filed, regardless of their impact on costs, liabilities, or plan solvency.
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The T3P form is used for filing Pension Plan Income Tax Returns for DC pension plans.
The T3P form is used for filing Pension Plan Income Tax Returns for DC pension plans.
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Annual pension statements for DC plans must include the transfer value of benefits and surplus rights.
Annual pension statements for DC plans must include the transfer value of benefits and surplus rights.
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DC pension plans are required to disclose personal rates of return to plan members on annual statements.
DC pension plans are required to disclose personal rates of return to plan members on annual statements.
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Past Service Pension Adjustments (PSPAs) are not required to be reported in pension plan filings.
Past Service Pension Adjustments (PSPAs) are not required to be reported in pension plan filings.
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Pension Adjustments (PAs) and Reversals (PARs) do not need to be reported in pension plan filings.
Pension Adjustments (PAs) and Reversals (PARs) do not need to be reported in pension plan filings.
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For DB pension plans, the interest rate on contributions is not required to be included on annual pension statements.
For DB pension plans, the interest rate on contributions is not required to be included on annual pension statements.
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DC pension plans are not required to include information about investment returns on annual pension statements.
DC pension plans are not required to include information about investment returns on annual pension statements.
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Plan sponsors do not have to file any CRA filings after a pension plan is registered.
Plan sponsors do not have to file any CRA filings after a pension plan is registered.
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The type of information required on individual annual pension statements is the same for both DB and DC pension plans.
The type of information required on individual annual pension statements is the same for both DB and DC pension plans.
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Study Notes
Factors to Consider when Designing a Retirement Plan
- Plan sponsors must balance constraints with sponsor and member goals.
- Various plan types are considered based on the sponsor's situation and goals.
- Average employee group characteristics are considered, including:
- Type of work
- Union membership
- Length of service and average age
- Employer goals in plan design include:
- Attracting talent in competitive markets
- Retaining employees or incentivizing early retirement
- Rewarding long-service employees
- Deferring compensation for executives and high earners
Plan Design Factors Impacting Sponsor Costs
- Level of plan benefits: modest or substantial
- Degree of cost sharing with members: contributory or non-contributory
- Defined Benefit (DB) plans:
- Indexing pensions to inflation
- Offering enhanced early pensions for qualifying employees
Factors that May Cause a Plan Sponsor to Revisit the Design of their Retirement Plan
- Workforce profile changes
- Industry competitiveness and trends
- Legislative changes
- Financial considerations
- New benefit trends, products, and technologies
- Government program changes
- Collective bargaining agreement impact
Plan Registration and Implementation Activities
Registering a Pension Plan
- Steps involved in registering a pension plan:
- Plan sponsor decides to establish a plan
- Selects service providers for plan design/registration
- Drafts plan documents
- Submits application with fees to authorities
- Plan approved by CRA and pension jurisdiction
Documents Required for Pension Plan Registration
- Prescribed application form
- Certified copy of plan document
- Certified copy of funding arrangement (trust agreement or insurance contract)
- Certified copy of board resolution adopting the plan
- Certified copy of collective agreement with employees (if applicable)
- Certified copy of any reciprocal transfer agreement
- Copy of plan member booklet
- Other relevant documents like declaration of trust
- Initial actuarial report (for DB and target benefit plans)
- Statement of investment policies and procedures (SIP&P) for relevant plans
Registration Requirements for a Pension Plan vs. a Non-Pension Registered Plan
- Pension plan registration: requires submission of various documents, involves specific documents mandated by pension standards legislation
- Non-pension registered plan establishment: involves similar steps as pension plans but with different documentation requirements
- DPSPs require documents like certified trust agreement and plan text
- Group RRSPs involve application to an RRSP issuer
Roles of Service Providers for Retirement Plans
Range of External Service Providers
- Consultants
- Actuaries
- Legal counsel
- Custodians/fund holders
- Insurance companies
- Investment managers
- Investment advisors for plan members
- Administrative service providers
- Communication specialists
Roles of Consultants, Actuaries, and Legal Counsel
- Assist in finalizing plan design
- Draft plan documents and board resolutions
- Review trust agreements or insurance contracts
- Prepare or review communication material for employees
- Aid in selecting other service providers
- Prepare submissions for pension regulatory authorities
Custodian Options for Canadian Pension Plans
- Trust within Canada, managed by either a Canadian corporation or a board of trustees meeting specific residency and independence rules
- Insurance contract provided by a company authorized for life insurance business in Canada
Role of Custodian/Fund Holder
- Holds plan assets and manages them
- Executes instructions from the administrator
- Provides accounting and maintains fund integrity
- Selection criteria:
- Reporting capabilities
- Service quality
- Compatibility with chosen investment manager
- Financial stability
- Experience
- Fees
Trust-Based and Insurance-Based Models
- Trust-based model:
- Used for DB, target benefit, and larger DC plans
- Involves separate vendors for custodial, administration, and investment services
- Offers access to various providers and investment managers
- Reduces conflicts of interest and ensures transparency
- Insurance-based model:
- Common for small and mid-sized DC plans
- Offers bundled services by insurers
- Provides convenience for sponsors with simplified management
- Grants access to multiple investment managers via insurer platform
Service Providers Required for Sponsors of DC Pension and Other Capital Accumulation Plans
- Larger DC pension plans:
- Trustees
- Custodians
- Admin service providers
- Investment managers
- Small and mid-sized CAPs:
- Often use bundled approach from Canadian insurers
- Reduces needed service providers
- Bundled approach: includes admin, custodial, trustee services in one, with access to various investment managers
- CAP sponsors may need qualified advisors for plan design and governance due to fiduciary responsibilities
- Some CAP sponsors retain advisors for providing investment advice to plan members
Plan Administrator's Duties
- Keep pension fund assets separate from fund holder's assets as per pension laws
- Define roles clearly in fund holder agreement
- Set up a trust if not already done, and supervise fund holder actions
- Submit copies of fund holder agreement to CRA and regulator
- Ensure timely contribution remittance to pension fund
- Provide investment guidance
- Monitor investments to meet legal and plan requirements
- Ensure investments follow applicable laws
- Supervise fund holder's activities for compliance
- Provide necessary data for contribution reporting
- Instruct fund holder on pension fund payments
- Sign fund holder agreements, and maintain updated investment records
Considerations for Selecting a Pension Fund Investment Manager
- Plan sponsor's investment beliefs and principles
- Investment manager's style, objectives, and risk tolerance alignment with plan's SIP&P
- Stability and experience of the investment manager's organization
- Expertise and track record of key personnel
- Fee structure
Comparison of Administration Activities
Defined Benefit (DB) Pension Plans
- Plan member records:
- Dates: Birth, hire, plan entry, retirement
- Identification: Social Insurance Number (SIN), employee ID
- Financial history: Contributions, service, earnings
- Special circumstances: Leave, disability, pension credit
- Marital status: Spouse, beneficiary details, including benefit partition info
- Contact information: Member's current contact details
- Used for:
- Actuarial valuations
- Regulatory compliance reporting
- Generating annual member statements
- Calculating Pension Adjustments (PAs), Reversals (PARs), Past Service Adjustments (PSPAs)
- Asset calculation during marital/spousal breakdown
Defined Contribution (DC) Pension Plans
- Manage investments and plan operations
- Can delegate tasks but must oversee them
- Introduce plan to members
- Provide investment info and tools for CAP plans
- Communicate regularly with members
- Maintain the plan and funds
- Ensure legal compliance
- Submit required documents
- Enroll employees
- Monitor third-party providers and investment options
- Consider different defaults for variable benefits
- Provide clear information to members
Employer's Responsibilities under CAPSA Guideline No. 8
- Deduct and remit contributions to the pension fund on time and in the correct amounts
- Keep accurate records of each member's service and earnings
- Provide this information promptly to the plan administrator
Plan Sponsor's Responsibilities under CAPSA Guideline No. 8
- Establishing and maintaining the pension plan
- Ensuring there is a plan administrator
- Making necessary amendments to the plan and deciding if it should be terminated
- Ensuring all decisions related to the plan are properly documented and retained
Difference between DC and DB Pension Plan Sponsors
- DC plan sponsor: ensures members have investment options/info
- DB sponsor: manages investments
- DC sponsor activities include:
- Online access to plan docs/records
- Investor profile questionnaires for risk assessment
- Educational resources like videos
- Tools for retirement goal-setting and income conversion
Rights of Pension Plan Members
- Access to plan documents
- Receive annual statement of benefits
- Be notified of plan changes
- Get timely benefit statements for termination, retirement, death, or marital breakdown
Responsibilities of a DC Pension Plan Administrator
-
Inform about retirement options
-
Specify required actions and deadlines
-
Explain default options if no action is taken
-
Describe impact on investment options upon termination
-
Provide details on regulated retirement products
-
Help members make informed decisions
-
Disclose payable fees, including asset-based fees
-
Share fee information for funds moving out of the plan
-
Inform about unlocking options available at retirement### Steps to Register a Pension Plan
-
Plan sponsor decides to establish a plan and selects service providers for plan design and registration.
-
Drafts plan documents and submits application with fees to authorities.
-
Plan is approved by CRA and pension jurisdiction.
Documents Required for Pension Plan Registration
- Prescribed application form
- Certified copy of plan document
- Certified copy of funding arrangement (trust agreement or insurance contract)
- Certified copy of board resolution adopting the plan
- Certified copy of collective agreement with employees (if applicable)
- Certified copy of any reciprocal transfer agreement
- Copy of plan member booklet
- Other relevant documents like declaration of trust
- Initial actuarial report (for DB and target benefit plans)
- Statement of investment policies and procedures (SIP&P) for relevant plans
Registration Requirements for a Pension Plan vs. Non-Pension Registered Plan
- Pension plan registration: involves submission of various documents, specific documents mandated by pension standards legislation, and approval by regulatory authorities and CRA.
- Non-registered pension plan establishment: involves similar steps but with different documentation requirements, and registration with CRA by submitting required documents.
Roles of Service Providers for Retirement Plans
Consultants, Actuaries, and Legal Counsel
- Assist in finalizing plan design
- Draft plan documents and board resolutions
- Review trust agreements or insurance contracts
- Prepare or review communication material for employees
- Aid in selecting other service providers
- Prepare submissions for pension regulatory authorities
Custodian Options for Canadian Pension Plans
- Trust within Canada, managed by either a Canadian corporation or a board of trustees
- Insurance contract provided by a company authorized for life insurance business in Canada
Role of Custodian/Fund Holder
- Holds plan assets and manages them
- Executes instructions from the administrator, provides accounting, and maintains fund integrity
- Selection criteria: reporting capabilities, service quality, and compatibility with chosen investment manager
Trust-Based and Insurance-Based Models
Trust-Based Model
- Used for DB, target benefit, and larger DC plans
- Involves separate vendors for custodial, administration, and investment services
- Offers access to various providers and investment managers
- Reduces conflicts of interest and ensures transparency
Insurance-Based Model
- Common for small and mid-sized DC plans
- Offers bundled services by insurers
- Provides convenience for sponsors with simplified management
- Grants access to multiple investment managers via insurer platform
Service Providers for Sponsors of DC Pension and Other Capital Accumulation Plans (CAPs)
- Larger DC pension plans: trustees, custodians, administrative service providers, investment managers
- Small and mid-sized CAPs: often use bundled approach from Canadian insurers
- Bundled approach: includes administration, custodial, trustee services in one, with access to various investment managers
- CAP sponsors may need qualified advisors for plan design and governance due to fiduciary responsibilities
Plan Administrator's Duties
- Keep pension fund assets separate from fund holder's assets
- Define roles clearly in fund holder agreement
- Set up a trust if not already done, and supervise fund holder actions
- Submit copies of fund holder agreement to CRA and regulator
- Ensure timely contribution remittance to pension fund, and provide investment guidance
- Monitor investments to meet legal and plan requirements
- Ensure investments follow applicable laws
- Supervise fund holder's activities for compliance
- Provide necessary data for contribution reporting
- Instruct fund holder on pension fund payments
- Sign fund holder agreements, and maintain updated investment records
Considerations for Selecting a Pension Fund Investment Manager
- Plan sponsor's investment beliefs and principles
- Investment manager's style, objectives, and risk tolerance alignment with plan's SIP&P
- Stability and experience of the investment manager's organization
- Expertise and track record of key personnel
- Fee structure
Administration Activities Associated with Defined Benefit (DB) Pension Plans, Defined Contribution (DC) Pension Plans, and Non-Pension Registered Retirement Plans
Plan Member Records for DB Pension Plans
- Records are kept for active, disabled, inactive members, pensioners, and survivors of deceased members
- Data includes: dates, identification, financial history, special circumstances, and marital status
DB Plan Administration Activities
- Actuarial valuations
- Regulatory compliance reporting
- Generating annual member statements
- Calculating Pension Adjustments (PAs), Reversals (PARs), Past Service Adjustments (PSPAs)
- Asset calculation during marital/spousal breakdown
Responsibilities of a DC Pension Plan Administrator
- Manages investments and plan operations
- Can delegate tasks but must oversee them
- Introduces plan to members
- Provides investment information and tools for CAP plans
- Communicates regularly with members
- Maintains the plan and funds
- Ensures legal compliance
- Submits required documents
- Enrolls employees
- Monitors third-party providers and investment options
- Considers different defaults for variable benefits
- Provides clear information to members
Responsibilities of an Employer That Sponsors a DC Pension Plan
- Deduct and remit contributions to the pension fund on time and in the correct amounts
- Keep accurate records of each member's service and earnings
- Provide this information promptly to the plan administrator
Role of the Plan Sponsor under CAPSA Guideline No. 8
- Establishing and maintaining the pension plan
- Ensuring there is a plan administrator
- Making necessary amendments to the plan and deciding if it should be terminated
- Ensuring all decisions related to the plan are properly documented and retained
Differences between DC and DB Pension Plan Sponsors
- DC plan sponsor: ensures members have investment options and information
- DB plan sponsor: manages investments
Rights of Pension Plan Members
- Access to plan documents
- Receive annual statement of benefits
- Be notified of plan changes
- Get timely benefit statements for termination, retirement, death, or marital breakdown
Responsibilities of a DC Pension Plan Administrator to Plan Members
- Inform about retirement options
- Specify required actions and deadlines
- Explain default options if no action is taken
- Describe impact on investment options upon termination
- Provide details on regulated retirement products
- Help members make informed decisions
- Disclose payable fees, including asset-based fees
- Share fee information for funds moving out of the plan
- Inform about unlocking options available at retirement
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