DBprime Purchases

What is a service purchase?

Purchasing pensionable service is an important way to maximize your retirement income, and possibly retire earlier with an unreduced pension, so 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 an unpaid leave of absence, you can make a purchase to add these periods of service to your DBprime 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 transfer those pension credits into the CAAT Plan.

How will a purchase increase my pension?

Your purchase in DBprime will increase your pensionable service, which is a factor in the calculation of your pension when you retire. More pensionable service will mean a larger pension.

By purchasing any past periods of leave or other eligible service, you can increase your pensionable service and reach certain early retirement milestones sooner.

These milestones are based on a combination of age and pensionable service. You become eligible for an early unreduced pension when:

  • your age + service = 85, or
  • you are at least 60 years old with at least 20 years of service.

Having more pensionable service could mean retiring with an unreduced pension sooner, or with a smaller reduction if you choose to retire with a reduced pension.


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

If you earned a pension in another Canadian registered pension plan, you might be able to bring that service into the CAAT Plan.

The cost, which is paid entirely by you, is the actuarial cost, based on your current salary. You can make the purchase using cash or an RRSP transfer. Even if the funds from your previous employer have been transferred to a Locked-in Retirement Account (LIRA), the service will still be eligible to be purchased.

Transferring service into the CAAT Plan cannot result in more service than you had in your previous plan.

The transfer process is different, depending on whether your pension is still with your previous employer's pension plan, or was transferred into your registered retirement savings account.

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

  1. Transfer from a former employer's pension plan - Benefit with former pension plan
  2. Transfer from a former employer's pension plan - Benefit transferred out of former plan

Exceptions

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

Periods of employment that took place before 1992 cannot be purchased using cash or an RRSP transfer-- the funds must be transferred directly from the previous 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 either with cash or through an RRSP transfer.

The cost depends on when you make the purchase:

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

  • The cost is two times your regular contribution based on the contribution rates in effect at the time of the leave, and your deemed earnings during the leave period.
  • You will pay 100% of the cost with no matching contributions from your employer.

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

  • You’ll pay the higher of the full actuarial cost or two times regular contributions, based on the contribution rates in effect at the time of purchase.
  • You will pay 100% of the cost with no matching contributions from your employer.

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

  1. Unpaid Leave of Absence purchase - within six months from end of leave (PDF)
  2. Breaks in CAAT Pension Plan Service - after six months from end of leave (PDF)

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 either with cash or through an RRSP transfer.

The cost depends on when you make the purchase.

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

  • The cost will be your regular contributions based on the contribution rates in effect at the time of the leave, and the deemed earnings during the leave period.
  • Your employer will match these contributions.

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

  • You'll pay the higher of the full actuarial cost, or two times regular contributions, based on the contribution rates in effect at the time of the purchase.
  • You will pay 100% of the cost with no matching contributions from your employer.

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 Service Purchase Timeline to get started:

  1. Employment Standards Act Leave of Absence - within six months from end of leave (PDF)
  2. Breaks in CAAT Pension Plan service - after six months from end of leave (PDF)

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

You can buy this service through regular deductions by your employer from Supplementary Unemployment Benefit (SUB) Plan payments you 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. You can continue to accumulate pensionable service and benefit from the matching contributions your employer makes 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 you 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. In that case, the cost will depend on when you make the purchase, and you can pay with either cash or a transfer from your RRSP.

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

  • The cost will be your regular contributions, based on the contribution rates in effect at the time of the leave, and the deemed earnings during the leave period.
  • Your employer will match your contributions.

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

  • You'll pay the higher of the full actuarial cost, or two times regular contributions, based on the contribution rates in effect at the time of the purchase.
  • You will pay 100% of the cost with no matching contributions from your employer.

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

  1. Pregnancy, Adoption or Parental Leave Service Purchase – within six months from end of leave (PDF)
  2. Breaks in CAAT Pension Plan service - after six months from end of leave (PDF)

I worked full time on a contract for a CAAT Plan participating employer before I became a Plan member.

"Pre-enrolment service" is a special category of employment contract (full time Sessional, Appendix D, or Full-time contract) that you can purchase in respect of full-time service with a participating employer prior to January 1, 2014, provided you became a regular (i.e. non-contract) full-time employee with no break in employment. Your employer will pay the employer's share of contributions. Your current employer will make the payment, based on current earnings, regardless of which participating employer you were at when you acquired the service.

You can make your portion of the payment either with cash or through RRSP transfer. If you buy the service within six months of becoming a regular full-time employee, you'll pay regular contributions based on your salary at the time you choose the purchase. If six months have passed, you’ll pay the higher of 50% of the actuarial cost, with your employer paying an equal amount, or your share of the contributions, based on the contribution rates in effect at the time of the purchase.

Once you sign the purchase form, you'll have 90 days to make full payment at the quoted cost. If the payment is made after 90 days, the amount owing will be recalculated.

Download the Service Purchase Timeline to get started (PDF)

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 full-time member.

You pay 100% of the actuarial cost of the purchase, with no employer contributions.

Download the Service Purchase Timeline to get started (PDF)

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 previous period of membership.

The cost to you is the full actuarial cost, with no employer matching contributions.

Download the Service Purchase Timeline to get started (PDF)

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 of membership.

The cost to you is the full actuarial cost, and there is no employer contribution.

If you are buying service accrued before 1992, payment for it must come from a transfer from an RRSP. If you are buying service accrued after 1991, payment can generally be with cash or through a transfer from your RRSP.

Download the Service Purchase Timeline to get started (PDF)

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 by repaying any amounts you received or transferred out when you return to work. The Plan will calculate the cost, 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.

You will have the choice of paying with cash or through RRSP transfer, unless you are buying back service accrued before 1992. In this case, payment must come from an RRSP or another Registered Pension Plan.

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. You can use either cash or an RRSP transfer. You will pay 100% of the cost with no matching contributions from your employer.

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

Your cost will be two times your regular contributions based on the contribution rates in effect at the time of the leave and your deemed contributory earnings during the leave period.

  • You will pay 100% of the cost with no matching contributions from your employer.

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

You will pay the higher of two times your contributions, based on the contribution rate at the time of the purchase, or the actuarial cost.

  • You will pay 100% of the cost with no matching contributions from your employer.

I had a work stoppage relating to collective bargaining.

For any strike period that occurs after January 1, 2018, the cost of purchasing the service will depend on when the purchase is made. You will pay 100% of the cost with no matching contributions from your employer.

If you make the purchase within six month from the end of the strike

You pay two times contributions based on your salary at the start of the work stoppage and the contribution rates in effect during the strike.

If you make the purchase more than six months after the end of the strike
You pay the higher of two times contributions, based on the rates in effect at the time of the purchase, or the actuarial cost.

Read information about the 2017 faculty strike.


Completing a purchase

What does a purchase cost?

The cost of a purchase will depend on when you choose to make it.

If you make a purchase within six months after the end of your leave, the cost is two times your contributions.

If you wait longer than six months, the cost is the greater of two times your contributions (based on the rates at the time of the purchase) or “actuarial” cost, which means the true cost of adding that amount of service to your pension. Generally, the longer you wait, the more the leave costs.

The cost of a purchase depends on a variety of factors

For some purchases, the cost is equal to the contributions you would have made if you were working. For others, the cost will be two times your contributions, reflecting your share and your employer’s share.

In most cases, usually after a six-month deadline for choosing to buy service has passed, the cost will be the higher of the contributions cost, based on current contribution rates, or the current actuarial cost. This is the cost of the increased pension relating to the additional service - the value needed today to pay the pension in the future.

However, as your age, earnings and years of membership increase, so will the cost of the purchase. If you don't meet the original payment deadlines, you may also find that the cost that you've been quoted will be recalculated - this is because the combination of your age, earnings and years of membership are increasing all the time.

How to pay for your purchase

With a couple of exceptions, you are responsible for the full cost of the purchase, with no contributions from your employer. Remember that during your regular active service, your employer contributes the same amount as you.

In most cases, payment will be in a lump sum. You may have the choice of paying by cash, or by a transfer from your RRSP (there are situations where you could be restricted to one or the other).

You can choose to make the purchase up until you retire or leave your job.

Once you sign the purchase form, you will have 90 days to make full payment at the quoted cost. If the payment is made after 90 days, the amount owing will be recalculated.

Tax Implications

In the same way your regular CAAT Plan contributions are tax deductible, a service purchase will be deductible if you pay in cash and have RRSP contribution room. This "room" for the current year is determined by your Pension Adjustment (PA) amount - that is, the deemed value, calculated by your employer, of the pension benefit you earned in the previous year.

A Past Service Pension Adjustment (PSPA) is the deemed value of the additional benefit created by the purchase - it reduces your RRSP contribution room. To create room for the purchase within your RRSP, you may need to withdraw some funds from it, which will be considered taxable income in the year the funds are withdrawn, or you may need to transfer funds from your RRSP to purchase the leave.

At the same time, keep in mind that a purchase may affect your PA amount. If you pay for a leave of absence before April 30 of the year after the year the leave ends, it will be included in the PA reported for the period.

If you choose to buy the leave after April 30 of the following year, we will have to calculate a PSPA and send it for approval to the Canada Revenue Agency before the purchase can be completed.

Note that PAs have been used since 1990. These calculations are not required for service periods before that year. However, there are some other tax issues, such as the pre-1990 deductibility limit of $3,500, which you would need to consider.

Federal law places a maximum on the amount of post-1990 unpaid leaves of absence you can purchase. The total amount is 5 years, plus an additional 3 years for  pregnancy or parental leave.

Your decision to purchase service will be affected by the issues of tax deductibility, PAs and the possibility of a PSPA.

Restrictions

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

Although pre-1992 service can be purchased, it must be transferred directly from the previous plan–it cannot be purchased using cash or through an RRSP transfer.

Funds from Group RRSPs, and Deferred Profit Sharing Plans (DPSPs) are not eligible to be transferred into the CAAT Plan.

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