Your options if your employment ends before retirement
If you are under age 55, you can:
- choose a deferred pension (which means leaving your pension entitlement with OPTrust and having the right to a pension from OPTrust in the future)
- transfer the commuted value of your pension to another retirement savings arrangement such as a locked-in retirement account (LIRA) (for more information on commuted value)
- transfer your pension service to another pension plan under a reciprocal transfer agreement (see our fact sheet Transferring Your OPTrust Pension to Another Pension Plan for more details) , or
- use the commuted value of your pension to purchase a deferred life annuity, subject to the requirements of the Pension Benefits Act.
If the commuted value of your pension entitlement exceeds the maximum transfer limits under the Income Tax Act, you will be paid the excess as a cash payment less withholding tax. In certain limited circumstances, you may be able to transfer all or a portion of the cash payment to your RRSP, in which case it is not subject to tax.
If you are 55 or older, the commuted value of your pension cannot be transferred out of the Plan because you are entitled to receive an immediate pension. If you are not eligible for an unreduced early retirement provision when your employment ends you may choose to start your pension at any time between the ages of 55 and 65, however, your pension amount will be subject to an early age-reduction ( for more information on the age-reduced early retirement provision).
Your pension is payable without early age-reduction at age 65. If you choose to delay the start of your pension beyond age 65, there will be no actuarial increase.
You may also be able to transfer your pension service to another pension plan under a reciprocal transfer agreement. This is different from a commuted value payout.
For more information on the available options, refer to the OPTrust fact sheet Pension Options When Your Employment Ends.
You may qualify for grow-in rights under the Pension Benefits Act, if you are a contributing or a divested former member who has been involuntarily terminated without cause on or after July 1, 2012 and meet certain eligibility requirements.
If you are subject to a divestment (see definition here) the Pension Benefits Act imposes certain obligations and restrictions on your pension benefits, on the OPSEU Pension Plan and the pension plan of your new (successor) employer.
These obligations may provide protections regarding entitlement to early unreduced retirement. As a result of these requirements, you are not entitled to termination rights until you end your employment with the new employer.
If your new employer does not have a registered pension plan or only has a group RRSP, you are entitled to the termination rights described here.
In some situations when there is a divestment or change in employer, employees who are members of the OPSEU Pension Plan and who move to the “successor” employer in conjunction with the divestment or change of employer may be grandfathered. “Grandfathered” means that the affected employees are allowed to continue to contribute to the OPSEU Pension Plan and to accrue benefits until their termination or retirement from the successor employer.
Each divestment case has to be examined to determine how the Pension Benefits Act applies.
If, based on medical evidence satisfactory to OPTrust, you have a life expectancy of less than 24 months, you may end your membership in the Plan without terminating your employment and OPTrust will pay you the commuted value of your deferred pension in cash, less withholding tax, or transfer it to an RRSP. To receive this benefit, you must apply to OPTrust and submit the appropriate medical information. If you have an eligible spouse at the time of application, your spouse will be required to waive all future survivor benefits. You must also revoke any beneficiaries you have named.
Under the Pension Benefits Act, members may not contribute more than 50% of the commuted value of their pension for service after 1986. When OPTrust calculates the commuted value of your pension at termination of membership, we determine if the total of your contributions plus interest exceeds one half of the commuted value after 1986. If so, you are refunded the difference. For example: let’s assume you end your membership in the Plan and we determine the commuted value of your pension benefit to be $80,000. Assume you have made contributions of $45,000 including interest. Fifty percent of $80,000 is $40,000. In this case you would have an “excess” of $5,000, which OPTrust would refund to you in addition to your pension benefit valued at $80,000.
This refund is payable in cash, and is subject to withholding tax. In some cases you may be able to transfer it to an RRSP, in which case it is not subject to tax.