Ending Employment
If your employment with a Participating Employer ends before you are eligible to retire, you will receive the Commuted Value of the benefit you have earned as a member of the Pension Plan to your last date of employment. At that time, you may choose to:
- Leave your benefit in the Plan and receive a deferred pension, or
- Transfer the Commuted Value to a Locked-in Retirement Account (LIRA) subject to income tax rules, or to another registered pension plan (if such plan permits). Income tax rules may limit the maximum amount that can be transferred on a tax-sheltered basis.
If your new employer is a public sector employer, you may be eligible for a reciprocal pension transfer to the new employer’s plan. A reciprocal transfer agreement allows you to transfer funds from one pension plan for credit of pensionable service in another pension plan.
If your regular contributions plus interest add up to more than 50% of the Commuted Value of the pension you have earned under the Plan, you are entitled to the excess contributions.
If you elect a deferred pension, the excess can be converted to an increased pension that will be paid to you biweekly along with your deferred pension, paid to you as a lump sum taxable payment, or transferred to your personal RRSP or RRIF if you have available contribution room.
If you elect a Commuted Value transfer, the excess can be paid to you in cash (less withholding tax) or transferred directly on a tax-sheltered basis to your personal RRSP (Registered Retirement Savings Plan) or RRIF (Registered Retirement Income Fund), subject to Income Tax Act limits. If the transfer of your Commuted Value (including excess contributions) exceeds the Income Tax Act limit, the portion above the limit must be received as taxable income, although it may be transferred to an RRSP or RRIF if you have available contribution room.
Exception for small pensions—If your annual pension is not more than 4% of the YMPE (the Year's Maximum Pensionable Earnings, as set by the Canada Revenue Agency) for the year in which you terminate your employment, or the Commuted Value of your pension is less than 20% of the YMPE, it is considered a “small pension.” Small pensions are not locked-in and will be paid to you as a lump-sum cash payment (less withholding tax) or transferred to your personal RRSP (subject to Income Tax Act limits).
If you are a former Pension Plan member who is re-employed with a Participating Employer, and you have a deferred pension in the Pension Plan, your deferred pension will be cancelled and your Credited Service for this deferred pension will be added to the Credited Service you earn in re-employment. If you had received a refund of excess contributions (fifty-percent rule), those contributions must be repaid (with applicable interest) in order to receive the full value of your Credited Service.
You can collect a deferred pension starting at age 60 without any reduction. There is also the option to collect a deferred pension as early as age 55, and possibly even earlier; however all or a portion of your pension may be reduced. Your options are as follows:
- Members hired on/after April 11, 1992
- Can collect a deferred pension as early as age 55 if employment was terminated on/after May 31, 2010. The pension will be actuarially reduced if commencing between age 55 and age 60, or
- Can collect a deferred pension at age 60 if employment was terminated before May 31, 2010
- Member hired before April 11, 1992
- Can collect a deferred pension at age 55 or when age plus years of eligibility service total at least 80 (Rule of 80), if earlier. The portion of deferred pension for service on/after September 1, 2011 will be actuarially reduced if pension commences before age 60.
The deferred pension option can be a valuable one, for the following reasons:
- Once you start collecting a deferred pension, it continues for life
- Cost-of-Living adjustments are currently applied to deferred pensions
- A deferred pension includes survivor benefits, so it can help protect your survivors
- Your money remains in the Pension Plan under the oversight of a professional investment manager