Leaving your job before retirement?
Will you leave your job before you reach retirement age? If you leave your employment at an Ontario College or related employer, you will have to decide what to do with the pension benefits that you have earned during the course of your membership.
Your benefit depends on your length of membership and age. You are vested if you have at least 2 years of Plan membership or pensionable service when you leave. Being vested means you are entitled to a pension, payable at age 65.
Non vested option
Refund of contributions
If you have less than 2 years of pensionable service or Plan membership, you are entitled to a refund of your contributions plus interest as of your termination date. This refund can be transferred to your Registered Retirement Savings Plan (not locked-in) or taken in cash, which is subject to income tax.
Cash refunds are included as taxable income in the year you receive them. The lump sum withholding rates are 10% for payments up to $5,000, 20% for payments from $5,000 to $15,000, and 30% for payments above $15,000.
Vested options
The benefits you are entitled to will depend on a combination of your age and service. Identify your age and service combination from the list below to see your termination options.
Does one of these situations describe you?
I’m under age 55 with between 2 and 20 years of service in the Plan
You are entitled to either
- a move to another CAAT Pension Plan employer
- a deferred pension,
- a transfer of your commuted value
- a transfer to another employer’s pension plan
1. Move to another CAAT Pension Plan employer
If you immediately start employment again with a different College, your CAAT pension will seamlessly move along with you.
2. Deferred pension
A deferred pension is the pension you earned up to your termination date. By deferring your pension, you leave it in the Plan, where inflation protection is applied each year it is applicable. At age 65 you start pension payments and your pension is paid to you for the rest of your life. The pension includes survivor benefits and inflation protection. With a deferred pension, the CAAT Plan bears the investment and longevity risk.
This deferred pension is calculated the same way as any other, based on service and earnings. The earliest it can start is age 55, but it is designed to start at age 65 (the Plan’s “normal retirement age”). This means that there could be a reduction in your payments if you start them before age 65. Your pension would be reduced by 5% multiplied by the number of years that remain until you reach age 65. This is a permanent reduction to your payment to reflect it’s earlier start.
3. Commuted value
If you choose to transfer your commuted value out of the Plan, you will no longer be entitled to any benefits from the Plan.
The commuted value is what all future payments of your deferred pension are worth today in a lump sum. It is equal to your pension multiplied by a factor based on your age and current interest rates. It is not equal to the sum of your contributions and your College's matching contributions.
It is important to remember about a commuted value is that it is locked in - the funds must be used for your retirement income. That means the commuted value must be transferred to a locked-in RRSP.
Money cannot be taken from a locked-in RRSP before age 55, and all funds must be withdrawn or converted by age 71.
Once you have transferred your commuted value, you will be entirely responsible for subsequent investment returns, and you will receive no other benefits from the CAAT Plan.
Limits on commuted values
CRA places a limit on the amount of commuted value that you can transfer directly to a locked-in RRSP. If you choose the commuted value option and the CRA limit applies, you have two choices for the excess amount:
- You can take the excess in a lump sum, which is subject to income tax,
or- You can choose to receive the excess in monthly payments equal to the pension you are entitled to under the CAAT Plan.
Note that after December 31, 2012, you will no longer be eligible for a commuted value transfer if you are over age 50 with 20 years of service and therefore entitled to an immediate pension.
4. Transfer to another pension plan
If you become a member of another Canadian pension plan, and you have not transferred your commuted value to a locked in RRSP you may, subject to the approval of your new employer, be able to transfer the commuted value of your pension from the CAAT Plan directly to your new employer’s plan. This could be done either as a reciprocal agreement (for example, MOPPs) or as a PBA Transfer.
Reciprocal Agreement Transfers including MOPPs transfers
Each agreement specifies the cost and the amount of service the new plan will recognize. Since pension plans provisions vary, the transfer may result in less service in your new employer’s plan than the service you had in the CAAT Plan.
PBA Transfer
If the CAAT Plan does not have a reciprocal agreement with your new employer, a transfer may still be possible under Ontario's Pension Benefits Act ("PBA transfer"). A PBA transfer allows you to transfer the commuted value of your pension from the CAAT Plan directly to your new employer's plan. Your new employer will determine the amount of pensionable service that the transferred amount can buy, which will be the same or less than the pensionable service you had built up in the CAAT Plan.
When you terminate or retire, the Plan does an additional calculation to ensure that your contributions never pay for more than 50% of the value of your benefit.
When you leave, the Plan compares 50% of the commuted value of your deferred pension to the total amount of contributions you made (on which your College contributed a matching amount), with interest. If your contributions plus interest total more than 50% of your commuted value, then you are entitled to a refund of the difference, called excess contributions. This does not apply if you transfer directly to another College and may not apply if you transfer your pension benefits to another employer under a Reciprocal Transfer Agreement.
If you start College employment again and are re-enrolled in the Plan, you can ensure your periods of pensionable service are added together by simply repaying any refund of excess contributions you received, plus interest.
I’m between age 55 and 65 with more than 2 years of service in the Plan
You are entitled to either
- an immediate early retirement pension
- a deferred pension,
- a move to another CAAT Pension Plan employer
- a transfer to another employer’s pension plan (if that plan accepts)
1. Immediate pension
You are eligible to start your pension right away. You will also receive a bridge benefit paid until you turn 65. If your pension is reduced, it will be reduced at 3% per year that you are away from your earliest unreduced retirement date. Your bridge benefit will be reduced at the same rate as your immediate early retirement pension.
Please note that if you are eligible for an immediate pension, and don’t make a decision, or don’t inform us of your decision for one year, you will lose the right to the immediate pension and your eligibility will shift to a deferred pension. If you start your deferred pension before age 65, it will be reduced by 5% per year you are under 65.
2. Deferred pension
A deferred pension is the pension you earned up to your termination date. By deferring your pension, you leave it in the Plan, where inflation protection is applied each year it is applicable. At age 65 you start pension payments and your pension is paid to you for the rest of your life. The pension includes survivor benefits and inflation protection. With a deferred pension, the CAAT Plan bears the investment risk.
This deferred pension is calculated the same way as any other, based on service and earnings. The earliest it can start is age 55, but it is projected to start at age 65 (the Plan’s “normal retirement age”). This means that there could be a substantial reduction in your payments if you start them before age 65. Your pension would be reduced by 5% multiplied by the number of years that remain until you reach age 65. This is a permanent reduction to your payment. Before choosing a deferred pension, you should carefully think about your future sources of income leading up to age 65.
3. Move to another CAAT Pension Plan employer
If you immediately start employment again with a different College, your CAAT pension will seamlessly move along with you.
4. Transfer to another pension plan
If you become a member of another Canadian pension plan, and you have not transferred your commuted value to a locked in RRSP you may, subject to the approval of your new employer, be able to transfer the value of your pension from the CAAT Plan directly to your new employer’s plan. This could be done either as a reciprocal agreement (for example, MOPPs) or as a PBA Transfer.
Reciprocal Agreement Transfers including MOPPs transfers
Each agreement specifies the cost and the amount of service the new plan will recognize. Since pension plans vary, the transfer may result in less service in your new employer’s plan than the service you had in the CAAT Plan.PBA Transfer
If the CAAT Plan does not have a reciprocal agreement with your new employer, a transfer may still be possible under Ontario's Pension Benefits Act ("PBA transfer"). A PBA transfer allows you to transfer the commuted value of your pension from the CAAT Plan directly to your new employer's plan. Your new employer will determine the amount of pensionable service that the transferred amount represents, which will be the same or less than the pensionable service you had built up in the CAAT Plan. This option is no longer available if you have already transferred your entitlement to a locked-in RRSP.
When you terminate or retire, the Plan does an additional calculation to ensure that your contributions never pay for more than 50% of the value of your benefit.
When you leave, the Plan compares 50% of the commuted value of your deferred pension to the total amount of contributions you made (on which your College contributed a matching amount), with interest. If your contributions plus interest total more than 50% of your commuted value, then you are entitled to a refund of the difference, called excess contributions. This does not apply if you transfer directly to another College and may not apply if you transfer your pension benefits to another employer under a Reciprocal Transfer Agreement.
If you start College employment again and are re-enrolled in the Plan, you can ensure your periods of pensionable service are added together by simply repaying any refund of excess contributions you received, plus interest.
I’m between 50 and 54 with more than 20 years of service in the Plan
You are entitled to either
- an immediate early retirement pension
- a deferred pension
- a commuted value transfer
- a move to another CAAT Pension Plan employer
- a transfer to another employer’s pension plan (if that plan accepts)
1. Immediate pension
You are eligible to start your pension right away. You will also receive a bridge benefit paid until you turn 65. If your pension is reduced, it will be reduced at 3% per year that you are away from your earliest unreduced retirement date. Your bridge benefit will be reduced at the same rate as your immediate early retirement pension.
Please note that if you are eligible for an immediate pension, and you delay the paperwork for one year, you will lose the right to the immediate pension and your eligibility will shift to a deferred pension. If you start your deferred pension before age 65, it will be reduced by 5% per year you are under 65.
2. Deferred pension
A deferred pension is the pension you earned up to your termination date. By deferring your pension, you leave it in the Plan, where inflation protection is applied each year it is applicable. At age 65 you start pension payments and your pension is paid to you for the rest of your life. The pension includes survivor benefits and inflation protection. With a deferred pension, the CAAT Plan bears the investment risk.
This deferred pension is calculated the same way as any other, based on service and earnings. The earliest it can start is age 55, but it is projected to start at age 65 (the Plan’s “normal retirement age”). This means that there could be a substantial reduction in your payments if you start them before age 65. Your pension would be reduced by 5% multiplied by the number of years that remain until you reach age 65. This is a permanent reduction to your payment. Before choosing a deferred pension, you should carefully think about your future sources of income leading up to age 65.
3. Commuted value
The commuted value is what all future payments of your deferred pension are worth today in a lump sum. It is equal to your pension multiplied by a factor based on your age and current interest rates. It is not equal to the sum of your contributions and your College's matching contributions.
The most important thing to remember about a commuted value is that it is locked in - the funds must be used for your retirement income. That means the commuted value must be transferred to a locked-in RRSP.
Money cannot be taken from a locked-in RRSP except for use in retirement. You cannot withdraw funds from a locked-in RRSP before age 55, and all funds must be withdrawn by age 71.
Once you have transferred your commuted value, you will be entirely responsible for subsequent investment returns, and you will receive no other benefits from the CAAT Plan.
Note that after December 31, 2012, you will no longer be eligible for a commuted value transfer if you are over age 50 and have 20 years of service and therefore entitled to an immediate pension.
Limits
CRA places a limit on the amount of commuted value that you can transfer directly to a locked-in RRSP. If you choose the commuted value option and the CRA limit applies, you have two choices for the excess amount:
- You can take the excess in a lump sum, which is subject to income tax,
or- You can choose to receive the excess in monthly payments equal to the pension you are entitled to under the CAAT Plan.
If you choose to transfer your commuted value out of the Plan, you will no longer be entitled to any benefits from the Plan.
4. Move to another CAAT Pension Plan employer
If you immediately start employment again with a different College, your CAAT pension will seamlessly move along with you.
5. Transfer to another pension plan
If you become a member of another Canadian pension plan, and you have not transferred your commuted value to a locked in RRSP you may, subject to the approval of your new employer, be able to transfer the commuted value of your pension from the CAAT Plan directly to your new employer’s plan. This could be done either as a reciprocal agreement (for example, MOPPs) or as a PBA Transfer.
Reciprocal Agreement Transfers including MOPPs transfers
Each agreement specifies the cost and the amount of service the new plan will recognize. Since pension plans vary, the transfer may result in less service in your new employer’s plan than the service you had in the CAAT Plan.PBA Transfer
If the CAAT Plan does not have a reciprocal agreement with your new employer, a transfer may still be possible under Ontario's Pension Benefits Act ("PBA transfer"). A PBA transfer allows you to transfer the commuted value of your pension from the CAAT Plan directly to your new employer's plan. Your new employer will determine the amount of pensionable service that the transferred amount represents, which will be the same or less than the pensionable service you had built up in the CAAT Plan. This option is no longer available if you have already transferred your entitlement to a locked-in RRSP.
When you terminate or retire, the Plan does an additional calculation to ensure that your contributions never pay for more than 50% of the value of your benefit.
When you leave, the Plan compares 50% of the commuted value of your deferred pension to the total amount of contributions you made (on which your College contributed a matching amount), with interest. If your contributions plus interest total more than 50% of your commuted value, then you are entitled to a refund of the difference, called excess contributions. This does not apply if you transfer directly to another College and may not apply if you transfer your pension benefits to another employer under a Reciprocal Transfer Agreement.
If you start College employment again and are re-enrolled in the Plan, you can ensure your periods of pensionable service are added together by simply repaying any refund of excess contributions you received, plus interest.
Commuted value or deferred pension?
Should you take the commuted value or defer your pension? Ultimately, the decision is yours. Although the commuted value option may be a good idea for some, keeping your pension benefit with the Plan has its advantages too.
Taking a commuted value: Your benefit leaves with you
If you choose a commuted value transfer, you give up the right to a guaranteed pension from the CAAT Plan and will have no further entitlement from the Plan. You will be required to invest the pension's value yourself and you will be responsible for whatever rate of return you are able to generate, keeping in mind that there are ongoing costs associated with managing an investment portfolio. This decision cannot be reversed. Since CRA limits the amount you can transfer to a locked-in investment, any excess that you take in cash will be taxed at your current marginal tax rate, which represents a reduction to your pension amount.
Taking a deferred pension: Your benefit stays in the Plan
If you defer your pension, your pension remains in the CAAT Plan. When you retire, you will receive a stable stream of retirement income for life, without having to assume any investment risk. Deferred pensions receive the applicable inflation protection amount paid to pensions in payment applied to it each year – even before you start,
Once you start your deferred pension, it is treated like every other pension in the plan. Along with inflation protection, there are survivor benefits for your spouse and, if you start your deferred pension early (before age 65), you will receive an additional benefit - the bridge benefit - until you turn 65.
You can not outlive your retirement income with a deferred pension.
Making your choice
If you terminate your employment, you will receive an Option Document that lists and explains all of your choices. We will also include any other forms that will need to be completed, depending on your options. It is always to your advantage to act quickly to complete and return your paperwork to us.
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Once you’ve returned your completed forms to us, your payments will be processed. If you choose an immediate early retirement pension and the paperwork is completed on time, you will receive your first pension payment the month after your retirement. Payments are made by direct bank deposit on the first business day of every month.
If you choose a deferred pension, you can make sure the process is a painless one by keeping in touch with us. We'll need to know if you move, get married or divorced so that we can update our records and ensure there is no delay when you are ready to start collecting your CAAT Plan pension. The notification must be in writing and you can make the change on the Pensioner Change Request form or by contacting us.
If you transfer to another college, please contact your Human Resources Department to advise that you have just transferred from another College.
If you choice includes transferring your pension to a new employers pension plan, be sure to start the process with your new employer as soon as possible. Many transfers have time limits, so it is to your advantage to act quickly.