Medicus & HOOPP Multi-Employer Pension Plans

The idea of a new pension generates a lot of excitement for those of us without one. Most of us know people with great defined benefit pension plans that they get as part of their employment. In contrast, self-employed professionals and many employees are fully on their own to plan and pay for their retirements.

Pensions are not a free lunch. They are paid for by employees directly and also partially in lieu of higher pay by their employers. I say partially because employers also like how pensions serve to retain talent – so they compromise. An incorporated professional or business owner can also buy into a pension. However, who pays is pretty simple. They do. I previously looked beyond the HOOPP-la at the major pension-type options for incorporated business owners [credit for that premium-grade pun: Stephen on the PFI Facebook group].

In this post, I will hone in on the Multi-Employer Pension Plan (MEPP) option. Two MEPP products have recently been marketed specifically toward physicians.

Medicus^(TM) from MD Financial is available in most provinces, with the goal of being available nationwide.

The Healthcare of Ontario Pension Plan (HOOPP), associated with the Ontario Hospital Association, opened an option for incorporated physicians.

There are others directed at business owners in other fields. For example, companies like Blue Pier also administer MEPPs for incorporated business owners in any sector. I am not going to endorse one option over another. However, I will use Medicus^(TM) & HOOPP as examples for you to consider whether an MEPP should play a role in your retirement planning. The answer depends heavily on your preferences and situation.

What is a Multi-Employer Pension Plan?

An MEPP is a type of group registered pension plan (RPP). Another type of RPP available to incorporated business owners is an individual pension plan (IPP). The same pension legislation governs these RPP options, but they have some important differences. The main advantage of an MEPP or IPP is found by using the defined benefit (DB) pension flavor. So, I will only discuss them in that context. To set the scene, I review some major differences between an MEPP, IPP, and the non-pension comparator – an RRSP/RRIF. I put 16-18% for the MEPP contribution to make it comparable, but it is driven by the benefit rather than income. I will expand on that later.

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IPP vs MEPP Contributions

An IPP is owned by a single corporation that pays for its management and assumes the liability for meeting the pension DB payout. That liability can be an advantage. Due to the actuarial calculations, an IPP often allows shifting more tax-exposed money invested through a corporation into a fully tax-deferred and sheltered pension relative to an MEPP or an RRSP. That generally occurs over the age of 40 (due to a shorter growth timeframe to cover the liability). Further, you could strategically do an actuarial calculation during a downturn or locate low-returning assets in an IPP to shift extra into it.

In contrast, an MEPP is a group plan. A corporation pays for its employees to be members. Each year, the corporation and employee contribute a certain amount to the pension. That amount buys a proportionate amount of future benefit. There is a maximum pension contribution allowed each year based on the DB.

In contrast to an IPP, there is no upward adjustment of contributions for an MEPP due to a shortened timeline to retirement. There is no single retirement date – it is a group. However, if underperforming, the pension could elect to increase contributions from employers rather than constrain benefits.

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Pension & RRSP Contributions

When you contribute to a pension, it reduces your contribution room towards other options. The maximum pension contribution/benefit room is shared across pensions if you have more than one. Each year, a maximum defined benefit is set by CRA. The maximum benefit is 2% of the contribution. For example, in 2025, the maximum annual benefit is $3757. So, the maximum contribution is $3,756.67/0.02=$187,833 for a 2%/yr benefit. This is comparable to the 2026 RRSP contribution limit, based on the 2025 income ($33,810/0.18 =$187,833).

The pensionable amount of income is based on the benefit. So, a pension with a 1%/yr benefit would increase the benefit for a salary up to $375,666. However, the retirement benefit is not greater than $3756.67/yr. That is not an advantage.

Contribution to a pension also reduces RRSP contribution room using the pension adjustment. The pension adjustment formula interestingly allows for one to make the full pension contribution and still leave $600 of RRSP room. So, using a pension and RRSP allows you to defer taxes and shelter $600 more each year compared to either alone.

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IPP & RRSP End-Game

When an IPP pensioner-owners die, the assets belong to the corporation. What happens next depends on other assets and liabilities in the corporation and the estate planning used to pass the assets on to beneficiaries. You could also commute the IPP pension while still alive. That shifts money from the IPP partially into an RRSP and the excess as a lump sum personal taxable payment. An incorporated business owner could plan their compensation to be lower that year to keep the personal tax bill down. This is usually the optimal compensation and IPP strategy.

If money is in an IPP when the corporation owner-beneficiary dies, it may be used for a spousal benefit. After the second death, the residual assets go to the corporation and form part of the estate.

An RRSP with money in it at death can be passed over to a spouse with continued tax deferral. After the second death, it would form part of the estate.

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What happens with an MEPP when you die?

If an MEPP member dies before retirement, the commuted value of the pension may be passed over to their surviving spouse and added to their RRSP. There may also be an option to keep the money invested via the pension as a survivor benefit. Once retired, the benefit continues until the pensioner dies. It may then pass over to a spouse. That option may not be free. You may have “paid” for it by accepting a lower baseline benefit per dollar contributed.

Some MEPPs also have a guaranteed period. For example, with HOOPP, a single person who dies within the first 15 years of collecting benefits would have the remainder of the benefits for that period paid to their designated beneficiaries. If they had a spouse, it covers the first 5 years if both spouses die. So, if both spouses die in year 3 of retirement, two years’ worth of benefits are paid to the designated beneficiaries. Otherwise, when the pensioner (and their spouse, if they have paid to have a spousal survivor benefit) in an MEPP dies, any excess assets are kept in the group plan to fund other members.

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MEPP Management

The pension provider manages an MEPP pension, which may allow for economies of scale for the investment and administrative costs. However, that is not a slam dunk; it depends on how efficiently the pension is run and the cost-effectiveness of its investment strategy. Investment returns still matter and are affected by costs and strategy.

However, there is an important difference with an MEPP. If investment returns exceed requirements, you do not get the excess directly. The MEPP provider may give an inflationary benefit increase if things go well, but that is discretionary. The overfunded pension does provide increased security that your promised benefits will be paid. Pension managers are conservative in matching their assets to their obligations. That helps make your benefit secure, but it also makes them less likely to put excess returns into your hands when they can use it as a safety net for their obligations.

An IPP or RRSP is basically an investment account. The investments could be managed by your financial advisor, a firm, or you could DIY invest. One of the extra costs of an IPP in practice is that most people pay the extra cost for investment management. That could eat much of the advantage unless you are someone who already gets a net benefit from an advisor. It would be possible to pay an actuary to help with the pension paperwork and DIY invest the IPP money. However, options are currently very limited. Whether using an IPP or an RRSP, if your account grows larger than your baseline needs, you benefit directly.

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Risk Pooling Advantages of an MEPP

Buying into an MEPP pools your risks with the group. Relinquishing control and pooling risk may be an advantage for those who would otherwise invest very conservatively. It may also be an advantage if you would otherwise be investing through a high-fee advisor and products that would make it hard to match the pension manager’s outcome. If you DIY invest but struggle with doing so in a disciplined and evidence-based way, then insulating some of your money from that may also be beneficial.

How much you can safely spend in retirement also depends on how well your investments grow. It may also fluctuate depending on when your portfolio experiences good and bad returns. If you keep spending normally despite a large market drawdown in early retirement, it may shorten the survivability of your portfolio because there is less money invested to ride markets back up. Since a group plan has people retiring and contributing all the time, it mitigates that sequence risk. There are also other ways to mitigate sequence risk.

Pooling with others may also be beneficial if you live longer than expected. The cost of a pension for its benefits is based on the “average” pensioner. If you live longer and collect more benefits, that stability comes partially from the residual assets that weren’t used to fund those who died earlier than average. If you die younger than average, then it works against you. However, you are dead. So, you may not care.

Medicus Contribution & Benefit

As you may have gleaned from the previous section, the appeal of an MEPP is that you know how much you are paying, you don’t have to worry about the investing details, and you are promised a steady future income stream in return. So, when considering an MEPP, you need to consider what you are paying, the promised benefit, and the likelihood that they will deliver on it. Medicus is only open to physicians and has a pretty straightforward formula.

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Average Cost of Future Benefit

Medicus contributions are 18% of the pensionable earnings. That results in a 2%/yr benefit in the future. So, the maximum benefit is $3757/yr (the max allowed by legislation). There is a very important wrinkle that is found on page 10 of their member guide. That benefit is not necessarily indexed to future pensionable earnings. Their literature shows a non-indexed benefit during accrual. However, they have stated on one of their webinars that the benefit could be indexed depending on the funded status of the pension. This makes a major difference.

Pensionable earnings have historically risen slightly faster than the rate of inflation (about 0.5%/yr faster). So, it would represent $3757/yr of buying power in “nominal dollars”. In the future, $3757 will buy much less than it does today, due to inflation. The earlier you buy that benefit, the more its buying power when you get it has been eroded by inflation. The benefits you buy later will have eroded less. If the pension is well-funded, and the board approves, they could make inflation-adjustments which attenuates the issue. So, how that performance and decision-making unfolds in the future is critical.

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Inflation Indexing vs Not = Massive Buying Power Difference

For example, over a 25-year period, buying the maximum annual benefit with a 3%/yr increase. Let’s just assume that is the same as inflation to keep it simple. Your accrued benefit would be $131,618/yr in nominal dollars. The maximum pensionable earnings, based on the maximum benefit increase of 3%/yr for 25 years, would be $366,950. So, the average benefit you have compared in “future dollars” works out to about 1.43%/yr per year in the plan. Much less than the original 2%/yr, if it had been indexed to inflation. This illustration is adapted from their member guide, although they don’t calculate the average benefit per year in the plan for you (I added the red column). I also added the columns that include full inflation adjustments on the right half.

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Current Cost For Future Benefit

Another way to look at it is that your 18% contribution today buys a 2%/yr nominal benefit. That is a $9 cost per $1/yr of buying power if you retire now. If they are able to index the benefit to inflation during your accrual years, the cost stays at $9.

However, at 3%/yr inflation, the cost is $10.48 per $1/y of buying power five years from now if they do not fully index the benefit. If you don’t retire for 35 years, without indexing, the cost is $26.14 today for $1/yr of future buying power. The benefits that you buy each year closer to retirement would be the most cost-effective because their real value has not been eroded by inflation. This model contains an important message. Yes, starting earlier means a larger benefit. However, you could pay disproportionately more early on with Medicus if they do not index. You must have faith that they will.

Alternatively, decide how much benefit you want in retirement. Then, work backward to figure out how long before retirement you need to start contributing to get that. In the interim, perhaps use your RRSP. That decreases the potential exposure to inflation if they do not index. However, if you do later decide that you want a larger benefit that requires contributions over many years, it could become more expensive to buy it retro-actively. For example, if you require 20 years of contributions, the cost to “buy-back” those 20 years near retirement would be expensive and likely require the transfer of most or all of your RRSP to the pension.

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Benefit Changes in Retirement

Once in retirement, the benefit may or may not increase. Again, that will be subject to approval by Medicus’ pension board based on the pension’s funded status. If the pension portfolio is overfunded (due to strong returns and contributions relative to liabilities), they plan to increase benefits with inflation. If the pension is in deficit, then benefits could be decreased to keep the plan viable.

HOOPP: Cost & Benefit

HOOPP has been around for a long time. It has many existing members from a variety of healthcare professions. Membership is primarily through large employers, like hospitals. So, there is a much more complex cost/benefit relationship. Beyond MD had a detailed podcast about HOOPP recently, but I will highlight the big stuff. I also model the cost and benefit in more detail.

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OHA Membership

HOOPP comes with an extra annual cost to be an Ontario Hospital Association member. If you are not already a member, that is ~$1250/yr. The cost applies to the years that the corporation contributes to the plan, not during retirement. That said, the HOOPP pension has some features that may make it worth the extra cost to some people.

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Different Cost & Benefit Tiers

HOOPP has a two-tiered contribution and benefit system. It uses the government-set Yearly Maximum Pensionable Earnings (YMPE), which is also used for the Canada Pension Plan (CPP). In 2025, the YMPE is $71,300. This is much less than the maximum pensionable earnings based on the Pension Act, and HOOPP contributions and benefits can also go up to a much higher level than that.

They use another structure called a Retirement Compensation Arrangement (RCA) structure for incomes resulting in a benefit over the amount covered by the Pension Act. That doesn’t really matter to you as an end-user; you just have contributions to buy the benefits. However, that is how they manage to exceed the pensionable income that a straight-up pension like Medicus or an IPP covers.

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HOOPP Contribution Rates

HOOPP contributions have been constant for many years but could be changed by the pension board depending on the pension’s funded status. They are 6.9% under the YMPE and 9.2% above the YMPE. The employer contributes 126% of that. For an incorporated professional, you pay both the employer and the employee parts. So, under the YMPE, it is a 15.6% contribution for a 1.5%/yr benefit. If you retire under the age of 65, then there is a bridge benefit for the YMPE benefit to make it 2%/yr until age 65. Above YMPE, it is a 20.8% contribution for a 2%/yr benefit.

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Benefits Indexing While Contributing

HOOPP also has an important difference from Medicus. The benefit is based on the average of your best 5 consecutive years of earnings/contributions. So, you could conceivably have five years of higher earnings/contributions driving a higher benefit. To prevent gaming of that, you set a base salary when you join and can only increase it by consumer price index (CPI) +1%/yr. So, you cannot accrue a bunch of years with low contributions and then crank it to max for five years. If you reduce your pensionable income, the benefit bought by that year is reduced proportionately.

In contrast to Medicus, the HOOPP benefit is based on the best five consecutive years of income. If those years were during your early career, then there would still be the issue of erosion due to inflation. However, if those are your final five years, then those early benefits get bumped up closer to “real dollars”.

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Benefits Indexing in Retirement

For both Medicus and HOOPP, benefit adjustments could be made if the pension is over or under-funded. Both pensions are currently very well funded. More on that later. HOOPP has given cost of living adjustments (COLA) based on CPI for those in retirement for many years now. Further, while their promise is a 1.5%/yr benefit below YMPE, they have been able to enhance that to closer to 2% (not just for a bridge to 65, but for everyone). That is not a guarantee moving forward, but markets have certainly been kind for the last 15+ years. If the pension were to have distress, it would have to do some combination of paying only their minimum benefit without COLA, increasing employer contributions, and adjusting their portfolio.

Medicus vs HOOPP: Bang for Bucks

Comparing Medicus versus HOOPP’s cost for the benefit is a bit tricky, given all the variables and discretionary benefits to compare. Before retirement, Medicus contribution rates are lower than the cost of HOOPP plus an OHA membership. However, the Medicus benefit is in nominal dollars. Unless they index it to inflation, it may represent much less than a 2%/yr benefit in buying power further into the future. The HOOPP benefit costs more initially, but if your best five years are just before retirement and you increase your pensioned salary along the way, the benefit becomes much more cost-effective than Medicus.

Once collecting in retirement, whether the benefit keeps pace with inflation depends on the inflation level, pension performance, and whether the pension managers decide to provide a COLA increase. The initial contribution rates and benefits are summarized below.

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Comparing Cost vs Benefit

These pensions are set up very differently. For Medicus, the result is more uniform and predictable. Benefits that you buy just before retirement are about $9 per dollar of retirement buying-power. Those that you bought 35 years before retirement may cost way if they do not index ($26 in my model with 3%/yr inflation) or stay relatively cheap at $9 if they do. A shorter contribution time before retiring takes less of that risk of whether they index or not, but results in a smaller pension benefit.

HOOPP could have a similar cost problem if you were to have your five highest earning years early on and then decrease how much you pensioned later. The cost would be slightly higher than Medicus for the base benefit below YMPE. However, with their historical enhancements or while using the bridge benefit, the cost is quite comparable.

Fortunately, most people using HOOPP would likely start with a pensioned income and increase it each year by inflation plus 1%. That is how the pension was meant to work. Those final five years boost the benefit from earlier years. The longer you pay into the pension, the bigger that effect is. Once you commit to it, contributing as long as possible and increasing your pensioned income each year can make it very cost-effective. For example, pensioning $250K in today’s dollars would cost $10 for $1/yr buying power if you retire 5 years after starting. If you pensioned that income plus increases for 35 years, it would be $8 per $1/yr of retirement buying power.

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Pension vs Buying an Annuity

The main reason that people buy into an MEPP is for a predictable retirement income. The alternative is to invest normally (like in your RRSP or IPP) and then buy an annuity at retirement. An annuity is a contract. So, the payout is known, and there are no discretionary decisions based on funded status. That is more predictable than a pension, but that certainty is costly. Buying a joint annuity (spousal benefit) at age 65 and indexed to increase by 2%/yr runs about $22 for $1/yr of retirement buying power.

The annuity is potentially a much more expensive way to buy an income stream than a pension. If that is what you really want, it may require a larger RRSP or IPP to buy it with. Building a large account requires you to take investment risks, stay disciplined, and keep costs low. Of course, if you can do that, you may also be okay with some income fluctuations and uncertainty rather than buying an annuity.

Choosing Medicus, HOOPP, or Neither

Just like the rest of investing, there is not a free lunch here with pensions. It is also not just about the costs. While I took a stab at estimating the cost for the benefit you receive, it is going to be variable. You are also accepting higher costs in exchange for more predictability. That is what a pension is all about. You pay a premium, but in return, you get predictable future income and convenience. Whether that is worth it to you depends on a few factors.

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Your Investing Profile

If you can accept investment risk, invest in a disciplined and cost-effective way, are willing to accept some sequence risk, or are okay with adjusting spending in retirement based on how that goes – you are more likely to have more wealth generation using an IPP or an RRSP/RRIF. You pay a cost to have the investing and risk management handled by a group pension, and it gives you a more predictable income stream in retirement.

If you have a low risk tolerance and would otherwise invest conservatively and then buy an annuity, an MEPP may be very attractive. You might be able to have a higher risk and return when you are insulated from the investments by the pension manager. You don’t see that directly, but it underpins the ability to make inflationary increases. Annuities are truly guaranteed (a contractual income), but that makes them very expensive. A strong pension plan is a more cost-effective alternative if you are seeking that type of income stream assurance.

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The Pension’s Profile

When considering a pension, it is not just about which one promises the most benefit for your contribution. It is also about which one is more likely to deliver on that promise.

Both Medicus and HOOPP are professionally managed pensions. They have both kept their investment management costs reasonable. The investment management cost is 0.45%/yr plus the pension management costs for Medicus. I have unofficially heard the total is <0.8%/yr. In their most recent report, HOOPP’s total investment costs were 0.64%/yr plus 0.11%/yr plan admin costs (0.75%/yr total). So, they are likely similar in cost.

The impact of fees is also not as clearly visible of a relationship as it is with personal investing. With a pension, if the fees excessively drag on performance, that would impact the pension’s funded status. The funded status impacts discretionary benefit increases. If extremely poor, they decrease benefits or increase contribution requirements.

Medicus has only been around a few years (in a great market until the Trump Dump) but was overfunded for its liability (pre-dump). That is great so far, but it is not a long track record. HOOPP is huge ($123 billion) and has been around for 65 years. HOOPP is overfunded by 111% and currently pays 80% of its benefits using investment returns. That is reassuring.

Pensions are conservative on what they promise as benefits relative to what they collect. They also invest in a way to cover their liabilities as the priority. So, while both pensions are reasonable, HOOPP has a much longer track record and a deeper member/asset pool. That scale and performance underpins their ability to offer benefit increases while working, and COLA while collecting in retirement.

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Not a Pension Emergency

Pension providers try to create a sense of urgency. “Join now to get a bigger pension benefit”. That is true, but as a self-employed business owner, you pay for that benefit. It is not an emergency and should be a carefully considered decision. With Medicus, buying more benefits than you need early could be worse if they do not index to inflation. Waiting to buy them later could cost more due to buy-back costs. So, it is important to consider how much income you want to pensionize at retirement and work back from there to determine when you should start buying into the pension.

When used as intended, HOOPP can be cost-effective. However, that requires you to keep increasing your pensionable income each year, and the benefit of that grows with more time. Conversely, it could be detrimental if you jump in early and then scale back. It is worth considering carefully before you get married to it. Or put on the golden handcuffs.

The most important thing to do in your early career is to pay some salary from your corporation. There are other good reasons to do that anyway. What would I do? Use my RRSP before age 40. When over the age of 40, I’d weigh whether an IPP, MEPP, or RRSP is the best route. Then, if I decide that an MEPP is the right option, the final step is choosing which one to buy into. I will unpack what I think are some of the core questions to ask yourself when considering a pension next week.