Termination
Overview
This section provides background information on the termination process and the options that are available to members, depending on their individual circumstances. It also describes the procedures and forms employers must use when an OPTrust member terminates employment and/or membership in the Plan.
Termination of plan membership
To be eligible for a pension benefit from the OPSEU Pension Plan, an employee must first terminate their plan membership. An employee’s membership is terminated in the following circumstances:
The individual’s employment is terminated. This is defined as a complete severance of the employee-employer relationship, either before retirement, at retirement, or due to the death of the member.
The employee permanently moves to a non-OPSEU bargaining unit or excluded position with no break in employment and becomes a member of the Public Service Pension Plan (PSPP).
The employee is terminally ill and has a life expectancy of less than 24 months.
Note! An employee’s plan membership is not affected when they accept a temporary or acting assignment to a position that is covered by another pension plan.
In this section
This section of the Employer Manual describes members’ options – and the required procedures, forms and other documentation – when terminating Plan membership before retirement under 1) and 2) above.
Special provisions apply to members who are transferred to a new employer and join that employer’s pension plan as part of a divestment. For more information, please see the separate Divestments section.
Note! For information on retiring with an immediate pension under the OPSEU Pension Plan, please see the Retirement section of this manual.
Future sections of this manual will provide information on pension procedures relating to:
the death of a member before retirement,
disability pensions,
benefits payable to members with limited life expectancy.
Pension options at termination
Employees who terminate membership in the Plan may have one or more options regarding their OPTrust pension. The available options depend on a number of factors including the employee’s age, years of credit in the Plan and subsequent employment.
Pension options
Depending on the member’s circumstances, they may be eligible for one or more of the following options:
a deferred OPTrust pension, payable in the future;
a transfer of the commuted value of the deferred pension to a locked-in retirement savings arrangement, such as a LIRA (locked-in retirement account);
a transfer of his or her pension entitlement to another registered Canadian pension plan;
an immediate unreduced pension (at age 65 or under one of the Plan’s unreduced early retirement options) or an immediate reduced pension (available to members starting at age 55). For more information, see the Retirement section.
This section describes a number of termination scenarios and the pension options that may be available, depending on the details of the member’s case.
Deferred pension
Members who are not eligible for an immediate unreduced pension at termination have the option of taking a deferred pension, payable in the future. A deferred pension involves leaving the pension entitlement with the OPSEU Pension Plan and receiving an unreduced OPTrust pension, starting at the Plan’s normal retirement age of 65. The deferred pension amount is calculated as of the member’s date of termination, based on the member’s best 60 consecutive months average annual salary rate and credit and the OPTrust pension formula in effect at the time. Members who take a deferred pension at termination may later choose one of the following options:
receiving an unreduced pension from OPTrust at age 65;
receiving an early reduced pension from OPTrust, payable as early as age 55;
transferring the commuted value of the OPTrust pension entitlement to a locked-in retirement savings arrangement at a later date, any time before age 55;
transferring the OPTrust pension to another registered pension plan.
Note! An employee may be eligible to "grow-into" their unreduced early retirement pension. For more information, please see the Grow-in rights section.
Grow-in rights
Effective July 1, 2012, the Pension Benefits Act (PBA) provides for an enhanced benefit, "grow-in rights" for members and divested former members of some pension plans who:
satisfy certain eligibility requirements, and
have been involuntarily terminated without cause on or after July 1, 2012.
What are grow-in rights?
With this benefit, terminating members/divested former members can "grow-into" and start an unreduced early retirement pension on the date the former member would have been eligible for Factor 90 or 60/20, had their employment continued to that date.
The member's entitlement is based only on the credit earned to the date of termination.
Determining eligibility
Members who are involuntarily terminated on or after July 1, 2012 are entitled to grow-in rights if they meet specific criteria. A terminating member must:
qualify for an early unreduced pension before age 65, and
have 55 'points' on the date of termination.
'Points' = age + the greatest of the following: years of employment with the employer, period of membership in the Plan, or pensionable service in Plan
The employer must inform OPTrust and complete a Grow-In Rights Certification (OPTrust 3013) form. All pension entitlements with a termination date before July 1, 2012 are not eligible for grow-in rights.
Commuted value transfers
At or following termination, members may have the option of transferring the “commuted value” of their deferred pension entitlement from OPTrust to a locked-in retirement savings arrangement.
The commuted value of the member’s OPTrust pension is defined as the amount of an immediate lump-sum payment in today’s dollars that is estimated to be equal in value to the member’s future lifetime pension payable from the Plan.
To be eligible for a commuted value transfer, the member must
be under age 55, and
not be entitled to an early unreduced pension from OPTrust (i.e. Factor 90 or 60/20).
Important! Insured Benefits Coverage Members who choose a commuted value transfer are not eligible for post-retirement insured benefits coverage provided separately by the Government of Ontario. The cost of these benefits is not included in the commuted value amount.
Transfers to the PSPP
When members terminate from the OPSEU Pension Trust, they may be eligible to transfer credit to their new pension plan. Special transfer arrangements exist for members who leave the OPSEU Pension Plan and become members of the Public Service Pension Plan (PSPP), administered by the Ontario Pension Board (OPB).
Bargaining unit status and membership in the PSPP
Members of the PSPP include management and excluded staff and employees represented by other non-OPSEU bargaining agents in the Ontario Public Service (OPS) and certain provincial government agencies.
Bargaining unit status is a criteria used in determining whether an employee is eligible for membership in the OPSEU Pension Plan or the PSPP. As a result, a permanent change in an employee’s employment and/or bargaining unit status can result in a change in plan membership. For example, if an OPS employee who is represented by OPSEU accepts a permanent non-bargaining unit position, he or she would cease to be a member of the OPSEU Pension Plan, and would be automatically enrolled in the PSPP.
Note! An employee’s plan membership is not affected when they accept a temporary or acting assignment to a position that is covered by another pension plan.
Mandatory versus optional transfers
Under the rules of both Plans, when a change in a member’s employment or bargaining unit status results in a change of pension plan affiliation, the transfer of their accumulated credit from the former to the new plan may be either mandatory or optional. This depends on whether the employee moves to the new position without terminating his or her employment.
Mandatory transfers to the PSPP
A mandatory transfer from the OPSEU Pension Plan to the PSPP may be required whenever an employee moves directly from a position in the OPSEU bargaining unit to a management, excluded or AMAPCEO position without terminating employment.
Some employers, such as post-2012 receiving and authorized employers and the OPTrust employer, are excluded from the provision.
In this case, the member’s pension credit in the OPSEU Pension Plan is automatically transferred to the PSPP once OPTrust receives the completed Transfer of Membership Between the OPSEU Pension Plan and the Public Service Pension Plan (OPTrust 1040) form.
Important! The employer must complete a Transfer of Membership Between the OPSEU Pension Plan and the Public Service Pension Plan (OPTrust 1040) form whenever a member moves permanently from a position in the OPSEU bargaining unit to a management, excluded or AMAPCEO position.
Optional transfers to the PSPP
If there is a break in service between the employee’s membership in the OPSEU Pension Plan and their enrolment in the PSPP, transferring credit from OPTrust to the OPB is optional.
To complete an optional transfer to the PSPP, the employee must:
have been a member of the OPSEU Pension Plan and subsequently terminated employment;
be entitled to a deferred pension benefit or a refund of contributions from the OPSEU Pension Plan;
not be receiving a pension from the OPSEU Pension Plan;
become a member of the PSPP;
complete and submit a request to the OPB and OPTrust to transfer this service.
Important! Employers should remind members that there is a strict 24-month time limit for submitting an application to transfer credit from the OPSEU Pension Plan to the PSPP.
Termination procedures
Employers must complete the following procedures to terminate a member from the OPSEU Pension Plan.
If the member is transferring to the PSPP with no break in employment, as a result of a change in bargaining unit status, a different form is used at step one of the termination procedures.
Step one: Complete the required OPTrust form
A. For terminations of employment or divestments – complete the Termination of Membership – Application For Entitlement (OPTrust 1012) form
the member's signature is not required on the Termination of Membership form.
Important! Termination while on LTIP: When a member is terminating his or her plan membership while on LTIP, the employer should state “Member on LTIP” in the final salary section of OPTrust's Termination of Membership (OPTrust 1012) form, rather than entering a salary amount. The collective agreement salary for the position may be different from the final salary on LTIP.
B. In the case of mandatory transfers to the PSPP – complete the Transfer of Membership Between the OPSEU Pension Plan and the Public Service Pension Plan (OPTrust 1040) form
This form requires the signatures of both the member (to satisfy release of information requirements) and the employer representative.
Step two: Complete additional forms and provide required documentation
OPTrust also requires the following forms and documents for terminating members. This information may be submitted to OPTrust at the same time as the Termination of Membership form or at a later date.
Employers should request that members provide this information to OPTrust. If the member does not submit the required forms and documents, a delay in processing their entitlement may result.