DBplus Purchases

What is a pension purchase?

Purchasing additional pension is an important way to maximize your retirement income, from one, secure source. It may be worth it for you to consider a purchase as soon as possible. Purchases fall into two general categories:

  • If, during your membership, you have any periods during which you didn’t contribute, for example, on a pregnancy leave, or a period before you enrolled in the Plan, you can make a purchase to add these periods to your DBplus pension.
  • If you worked for an employer that does not participate in the CAAT Pension Plan, but that had a Canadian registered pension plan, you can make a purchase in respect of that membership, as long as the funds are in a registered retirement savings account, such as an RRSP or a LIRA.

How will a purchase increase my pension?

Your purchase in DBplus increases your pension, enabling you to retire with a larger pension, paid from one secure source. Not only that, any pension you purchase while contributing to DBplus will continue to grow throughout your membership as it receives AIW enhancement increases. When you retire, your whole pension, including the purchased portion, receives conditional inflation protection and survivor benefits, making it even more valuable.

What is AIW?

AIW refers to the Average Industrial Wage index, which represents wage inflation in Canada.


DBplus Pension Purchases - June 27 2019 Webinar

 


What can I purchase?

Identify your situation from the possibilities below to see your options.

Before joining the CAAT Plan, I worked for an employer that had a Canadian registered pension plan

You can purchase the period of membership with any Canadian registered pension plan. If your previous membership was in a defined benefit plan, you must have transferred the value of that pension into a registered retirement savings account, such as an RRSP or a Locked-in Retirement Account (LIRA).

The cost of the purchase is paid entirely by you, with no employer matching contributions.

The maximum amount you can contribute for the purchase is based on 18% of your T4 earnings for the period you are purchasing.

The funds for the purchase must come from a registered retirement savings account, such as an RRSP or a LIRA. This means the amount you can contribute for the purchase is limited to the calculated maximum, or the amount of funds in your registered retirement savings accounts, whichever is lower.

The Plan calculates the amount of pension you would receive as a result of the purchase using the guaranteed base pension formula and the purchase adjustment factor.

If you think this type of purchase may be appropriate for you, download the timeline below to help you get started.

Exceptions

Periods of membership in Group RRSPs and Deferred Profit Sharing Plans are not eligible for purchase in DBplus.

If your pension benefit is in a defined benefit pension plan, and still in your previous employer’s pension plan, you must transfer it to a registered retirement savings account before you can make the purchase in the CAAT Plan. You cannot purchase pension earned prior to 1992 with another employer’s pension plan if it was a defined benefit plan.

I took time off from work without pay on an approved leave of absence.

If you were away from work on an approved leave of absence, you can make a purchase for this period.

The maximum amount you can contribute for the purchase is equal to two times your total contributions for the period up to the allowable limits under the Income Tax Act. Your employer does not contribute. The contributions are calculated using your deemed earnings during the leave period, and the contribution rate in effect at the date of the leave.

The funds for the purchase must come from a registered retirement savings account, such as an RRSP or a LIRA. This means the amount you can contribute for the purchase is limited to the calculated maximum, or the amount of funds in your registered retirement savings accounts, whichever is lower.

The Plan calculates the amount of pension you would receive as a result of the purchase using the guaranteed base pension formula and the purchase adjustment factor.

If you make the purchase within six months after you return to work

  • The amount of pension you receive is calculated with a purchase adjustment factor of 100%, no matter how close you are to the normal retirement date (this is the same as having no purchase adjustment factor).
  • You will pay 100% of the purchase amount, with no employer matching contributions.

If you make the purchase more than six months after you return to work

  • The amount of pension you receive is calculated using the purchase adjustment factor based on how close you are to your normal retirement date.
  • You will pay 100% of the purchase amount, with no employer matching contributions.

The process depends on the timing of your purchase. Download the Purchase Timeline to get started:

I took time off from work without pay for a statutory leave of absence defined under the Employment Standards Act, 2000 (ESA).

You can make a purchase for this period.

The Plan calculates the amount of pension you would receive as a result of the purchase using the guaranteed base pension formula and the purchase adjustment factor.

If you make the purchase within six months after you return to work

  • The amount of pension you receive is calculated with a purchase adjustment factor of 100%, no matter how close you are to the normal retirement date (this is the same as having no purchase adjustment factor).
  • Your employer will match your contributions for the purchase.
  • The maximum amount you can contribute for the purchase is based on contributions calculated using your deemed earnings during the period, and the contribution rate in effect at the date of the leave. It must also be within the allowable limits under the Income Tax Act.

If you make the purchase more than six months after you return to work

  • The amount of pension you receive is calculated using the purchase adjustment factor based on how close you are to the normal retirement date.
  • You will pay 100% of the purchase amount, with no employer matching contributions.
  • The funds for the purchase must come from a registered retirement savings account, such as an RRSP or a LIRA. This means the amount you can contribute for the purchase is limited to the calculated maximum, or the amount of funds in your registered retirement savings accounts, whichever is lower.

Under the Employment Standards Act (Ontario) a statutory leave includes:

  • Family medical leave
  • Organ donor leave
  • Family caregiver leave
  • Critical illness leave
  • Child death leave
  • Crime-related child disappearance leave
  • Domestic or sexual violence leave
  • Sick leave
  • Family responsibility leave
  • Bereavement leave
  • Emergency leave, declared emergencies
  • Pregnancy leave *
  • Parental leave *

* Note that Pregnancy, adoption or parental leaves are statutory leaves covered under the Employment Standards Act, but they have different purchase processes. Refer below to “I took pregnancy, parental or adoption leave resulting from the birth or adoption of a child” for more information and to find the correct form to get started.

The process depends on the timing of your purchase. Download the Purchase Timeline to get started:

I took pregnancy, parental or adoption leave resulting from the birth or adoption of a child.

You may be able to make this purchase through regular deductions by your employer from Supplementary Unemployment Benefit (SUB) Plan payments you may receive during the leave period.

Making the purchase during your leave through the SUB plan

If you are entitled to receive SUB Plan payments from your employer, your contributions may be deducted directly from these payments. Your employer will match these contributions and your pension will continue to grow during your leave.

Your employer will provide you with the form that you will have to complete and sign. Generally it is to your advantage to purchase these leaves, however if you decide against it, you must complete the waiver section of the form and return it to your employer.

If you are not entitled to SUB Plan payments, or do not wish to have contributions deducted from your payments, you can make the purchase when you return to work.

Making the purchase when you return to work

You have the option to make the purchase when you return to work. The amount you can purchase is based on your deemed earnings during the period of leave, and the contribution rate in effect at the date of the leave.

The Plan calculates the amount of pension you would receive as a result of the purchase using the guaranteed base pension formula and the purchase adjustment factor.

If you make the purchase within six months after you return to work

  • The amount of pension you receive is calculated with a purchase adjustment factor of 100%, no matter how close you are to the normal retirement date (this is the same as having no purchase adjustment factor).
  • Your employer will match your contributions for the purchase.
  • You can use cash for the purchase.

If you make the purchase more than six months after you return to work

  • The amount of pension you receive is calculated using the purchase adjustment factor based on how close you are to the normal retirement date.
  • You will pay 100% of the purchase amount, with no employer matching contributions.
  • The funds for the purchase must come from a registered retirement savings account, such as an RRSP or a LIRA. This means the amount you can contribute for the purchase is limited to the calculated maximum, or the amount of funds in your registered retirement savings accounts, whichever is lower.

The process depends on the timing of your purchase. Download the Purchase Timeline to get started:

I worked for an employer that participates in the CAAT Plan before I joined the Plan.

You can make a purchase for any period during which you were working part time or on contract for an employer that participates in the CAAT Plan, before you became a member.

The amount you can contribute for the purchase is based on your total contributions plus the employer contributions for the period.

The maximum amount you can contribute for the purchase is based on 18% of your T4 earnings for the period you are purchasing.

You will pay 100% of the purchase amount, with no employer matching contributions.

The funds for the purchase must come from a registered retirement savings account, such as an RRSP or a LIRA. This means the amount you can contribute for the purchase is limited to the calculated maximum, or the amount of funds in your registered retirement savings accounts, whichever is lower.

The Plan calculates the amount of pension you would receive as a result of the purchase using the guaranteed base pension formula and the purchase adjustment factor.

Download the Purchase Timeline to get started:

I was a member of the CAAT Plan, then terminated before vesting and took a refund of my contributions.

If you return to work with an employer that participates in the CAAT Pension Plan, you can make a purchase for this period.

The cost is paid entirely by you, with no employer matching contributions.

The maximum amount you can contribute for the purchase is based on 18% of your T4 earnings for the period you are purchasing.

The funds for the purchase must come from a registered retirement savings account, such as an RRSP or a LIRA. This means the amount you can contribute for the purchase is limited to the calculated maximum, or the amount of funds in your registered retirement savings accounts, whichever is lower.

The Plan calculates the amount of pension you would receive as a result of the purchase using the guaranteed base pension formula and the purchase adjustment factor.

Download the Purchase Timeline to get started:

I was a member of the CAAT Plan, then terminated and transferred the commuted value of my pension out of the Plan.

If you return to work with an employer that participates in the CAAT Pension Plan, you can make a purchase for this period.

The cost is paid entirely by you, with no employer matching contribution.

The maximum amount you can contribute for the purchase is based on 18% of your T4 earnings for the period you are purchasing.

The funds for the purchase must come from a registered retirement savings account, such as an RRSP or a LIRA. This means the amount you can contribute for the purchase is limited to the calculated maximum, or the amount of funds in your registered retirement savings accounts, whichever is lower.

The Plan calculates the amount of pension you would receive as a result of the purchase using the guaranteed base pension formula and the purchase adjustment factor.

 Download the Purchase Timeline to get started: 

I left my job and filed a grievance. I have returned to work.

If before your grievance was resolved, your contributions were refunded or the commuted value of your pension was transferred out of the Plan, you can purchase the period of the grievance by repaying any amounts you received or transferred out when you return to work. The Plan will calculate the amount you must contribute, which will include interest charges. If this cost is more than the current worth of the amount you received, due to investment fees or losses, you are responsible for the difference. You will pay 100% of the cost with no matching contributions from your employer.

The funds for the purchase must come from a registered retirement savings account, such as an RRSP or a LIRA. This means the amount you can contribute for the purchase is limited to the calculated maximum, or the amount of funds in your registered retirement savings accounts, whichever is lower.

I was laid off with recall rights and have been recalled.

While waiting to be recalled, if you did not receive a refund of your contributions or transfer the commuted value of your pension benefit out of the Plan, you can purchase the layoff period as an unpaid leave of absence when you return to work.

The maximum amount you can contribute for the purchase is equal to two times your total contributions for the period up to the allowable limits under the Income Tax Act. Your employer does not contribute. The contributions are calculated using your deemed annual earnings during the leave period, and the contribution rate in effect at the date of the leave.

The funds for the purchase must come from a registered retirement savings account, such as an RRSP or a LIRA. This means the amount you can contribute for the purchase is limited to the calculated maximum, or the amount of funds in your registered retirement savings accounts, whichever is lower.

The Plan calculates the amount of pension you would receive as a result of the purchase using the guaranteed base pension formula and the purchase adjustment factor.

If you make the purchase within six months after you return to work

  • The amount of pension you receive is calculated with a purchase adjustment factor of 100%, no matter how close you are to the normal retirement date (this is the same as having no purchase adjustment factor).

If you make the purchase more than six months after you return to work

  • The amount of pension you receive is calculated using the purchase adjustment factor based on how close you are to the normal retirement date.

I had a work stoppage relating to collective bargaining.

You can make a purchase for this period.

The funds for the purchase must come from a registered retirement savings account, such as an RRSP or a LIRA. This means the amount you can contribute for the purchase is limited to the calculated maximum, or the amount of funds in your registered retirement savings accounts, whichever is lower.

The Plan calculates the amount of pension you would receive as a result of the purchase using the guaranteed base pension formula and the purchase adjustment factor.

If you make the purchase within six months after you return to work

  • The amount of pension you receive is calculated with a purchase adjustment factor of 100%, no matter how close you are to the normal retirement date (this is  the same as having no purchase adjustment factor).
  • The maximum amount you can contribute for the purchase is equal to two times your total contributions for the period up to the allowable limits under the Income Tax Act. Your employer does not contribute. The contributions are calculated using your earnings at the start of the work stoppage and the contribution rates in effect at the date of the leave.

If you make the purchase more than six months after you return to work

  • The amount of pension you receive is calculated using the purchase adjustment factor based on how close you are to the normal retirement date.

Exceptions

For the 2017 faculty strike, there is no change to the costing method: the cost to purchase that strike will not change, and the purchase will result in the restoration of the lost 2017 service, regardless of when the payment is made, or which design you are earning a pension in when you make the purchase.

Read information about the 2017 faculty strike.


Completing a purchase

What does a purchase cost?

In DBplus, purchases are treated like contributions. You make contributions for the period you are purchasing, and the Plan calculates the amount of pension you would receive as a result of the purchase, using the pension formula and the purchase adjustment factor.

Unlike your regular contributions, which your employer matches, you are responsible for the entire cost of your purchase (with some exceptions).

In some cases, if you make a purchase within six months of your return to work, the purchase adjustment factor is not used. See above for details.

What is a LIRA?

LIRA stands for locked-in retirement savings account. It is used to lock in pension funds from past periods of membership in a registered pension plan.

The maximum amount you can contribute for a purchase is limited by the Income Tax Act to either 18% of your T4 earnings for the period, or the amount you have in your registered retirement savings accounts, whichever is lower.

Once the purchase amount has been determined, the funds must come from a registered retirement savings account, for example an RRSP or LIRA. If your registered accounts have an amount equal to or more than the calculated purchase amount, you can contribute the entire purchase amount. If your registered accounts have an amount that is less than the calculated amount, you can only contribute up to the amount available in your registered accounts. 

The amount of pension you receive as a result of the purchase depends on a variety of factors

The purchase adjustment factor is applied to all DBplus pension purchases. It depends on the number of years you are away from normal retirement at the date of the purchase.

  • If you make a purchase when you are more than 25 years from your normal retirement date, the adjustment factor is 100%.
  • If you are less than 25 years from your normal retirement date, the 100% adjustment is decreased by 1.4% per year, calculated on a day-by-day basis, reducing the purchased benefit.

This means the closer you are to your normal retirement age, the less pension your purchase will result in. For example, if you were to make a purchase and you were 20 years from your normal retirement date, the purchase adjustment factor would be 93% (100% - (1.4% x 5 years)).

How to pay for your purchase

The funds for a DBplus purchase must come from a registered retirement savings account such as an RRSP or a LIRA. You are responsible for arranging the transfer, as well as any fees that your financial institution may charge.

You are responsible for the full cost of any purchase.

If you are making a purchase of a leave protected under the Employment Standards Act within six months of the end of the leave, your employer is required to contribute to the purchase.

Once you sign the purchase form, you will have 90 days to make full payment. If the payment is made after 90 days, the amount of pension you will receive will be recalculated with a revised purchase adjustment factor.

Tax Implications

Nearly all DBplus purchases are made using funds in tax-sheltered registered retirement saving accounts. If your funds came from these accounts, there are no tax implications for your DBplus purchase, however you will not be able to reclaim the RRSP room from the purchase – in effect, you are moving your tax-sheltered funds from one registered savings account into another.

The amount you can contribute for a purchase is limited by the Income Tax Act to 18% of T4 earnings for the period being purchased. Depending on your earnings, additional limits may apply.

Exceptions

Purchases for statutory leaves covered under the Employment Standards Act may be purchased using cash, if the purchase is completed within six months of your return to work. In this case, the amount will be reflected in your Pension Adjustment, or a Past Service Pension Adjustment may be required.


Restrictions

If you have already retired or terminated employment, you are not eligible to make a pension purchase, unless you are rehired and resume membership in the Plan.

Purchases under DBplus are only permitted for employment periods that occur after 1990.

In addition, you cannot purchase pension earned before 1992 from another employer’s pension plan if it was in a defined benefit pension plan.

Periods of membership in Group RRSPs and Deferred Profit Sharing Plans are not eligible for purchase in DBplus.

You can use funds from an RRSP, LIRA, Group RRSP, Deferred Profit Sharing Plan, or Defined Contribution plan to make a purchase for a period of employment with an employer that participates in the CAAT Plan, such as a leave.

We suggest you seek independent advice from a financial advisor, particularly around the tax implications of purchases.