Leaving OPTrust Select Before Your Pension Begins
- Termination of Membership
- Your Options if Your Employment Ends Before Retirement
- Taking a Deferred Pension
Termination of Membership
As long as your employer participates in OPTrust Select, your membership in the Plan will continue until you reach the earliest of the following:
- termination of your employment
- November 30 of the year you turn age 71, which is the Income Tax Act limit for accruing a pension, or
If you are employed with more than one OPTrust Select employer, your membership does not end until you have terminated employment with all of them.
There is no option to stop contributing to OPTrust Select unless your membership in the Plan is terminated. The only exception is if you have a medically-diagnosed life expectancy of less than 24 months. More information here.
Your Options if Your Employment Ends Before Retirement
If you end your employment with your OPTrust Select employer before you retire, the options available to you will depend on your age:
- If you are under age 55 when you terminate employment, you have the option to leave your pension with OPTrust and start receiving it in the future. This is known as a deferred pension. You also have the option to transfer the lump sum commuted value of your pension out of the Plan.
- If you are age 55 or older when you terminate your employment, you have the option to start receiving an early age-reduced pension immediately or to defer your pension to a later date.
Taking a Deferred Pension
A deferred pension is normally payable at age 65 but you can elect to start your pension as early as age 55. If you start your pension before age 65, it will be permanently reduced because you will receive it longer.
If you defer your pension you will not be eligible for future upgrades before retirement or cost of living adjustments between the time your employment ends and the time you start your pension, but you will be eligible to receive any cost of living adjustments granted by the Board of Trustees after you start receiving your pension. If you defer your pension and later rejoin OPTrust Select, your pension will continue to grow and your prior service will be eligible for upgrades before retirement.
Lump Sum Commuted Value Transfer Before Age 55
A commuted value is the lump sum value of a deferred pension expressed in today’s dollars and estimated to be equal in value to your future lifetime pension. It is an actuarial calculation based on prescribed assumptions such as how long you are expected to live and what interest rates are expected to be in the future.
In most cases your commuted value must be “locked in”, which means the funds can only be used to provide you with retirement income. You can transfer your commuted value to a locked-in registered retirement savings arrangement, such as a locked-in retirement account (LIRA), or a life income fund (LIF). You may also use your commuted value to purchase an annuity from an insurance company or you may transfer it to another registered pension plan if that plan agrees to accept the funds.
There is one exception to the locking in rule, known as the “small pension rule.” If your annual pension is less than four per cent of the year’s maximum pensionable earnings (YMPE) or your commuted value is less than 20% of the YMPE in the year you terminate your membership, the funds do not need to be locked in and can be transferred to a registered retirement savings plan (RRSP) on a tax-sheltered basis, or paid in cash less withholding tax. If the small pension rule applies to you, this option will be included in your termination statement.
If you are age 55 or older, you are eligible to receive an immediate pension. More information about your options.
Commuted Value Transfer Limits
The Income Tax Act limits the amount you can transfer to a LIRA, LIF or to an insurance company to purchase an annuity. If your commuted value exceeds these prescribed limits, the amount over the limit is usually paid to you in cash less withholding tax, and added to your taxable income in the year you receive the funds. Transfers to another registered pension plan are not subject to these maximum transfer limits.
50% Contribution Refund
If the total of your contributions plus interest exceeds one half of the commuted value of your deferred pension, the difference will be refunded to you.
For example: If the commuted value of your pension benefit is $50,000 and your contributions plus interest equals $35,000, your contributions exceed one half of your commuted value by $10,000. You would be entitled to receive this refund at termination.
If you elect a deferred or immediate pension this refund is payable in cash and subject to withholding tax. If you transfer your commuted value out of OPTrust Select, you may be able to transfer all or a portion of your excess contributions directly to your RRSP on a tax-sheltered basis, subject to the income tax limits.
Buyback Contribution Refund
In some cases, you may also receive a refund of buyback contributions. If the cost of your buyback plus interest exceeds the commuted value in respect of the pension service you purchased, the difference will be refunded to you if you elect to transfer the commuted value of your pension out of OPTrust Select. This refund is not payable if you elect a deferred or immediate pension.
Re-employment with an OPTrust Select Employer
If you are a former OPTrust Select member with a deferred pension and you rejoin OPTrust Select, you will continue to accrue a pension benefit and receive one pension based on all your years of membership when you retire. If you received a contribution refund when you left your former employer, you must repay that amount, with interest, to OPTrust or your future pension will be reduced.
If you transfer your commuted value out of the Plan you cannot buy back that period of service if you rejoin OPTrust Select.
Re-employment with an Employer Under the Plan’s Primary Schedule of Benefits
If you are a former OPTrust Select member with a deferred pension and then join the OPSEU Pension Plan’s primary schedule of benefits you may use the value of your deferred OPTrust Select pension to purchase pension service in the primary schedule. Alternatively, you may choose to keep your OPTrust Select deferred pension separate from your benefit under the primary schedule of benefits. However, you will not have access to your OPTrust Select pension or any retirement options associated with your OPTrust Select pension until you terminate employment and membership in the primary schedule of benefits.
Looking for more information
Your Guide to OPTrust Select provides a summary of the features of your OPTrust Select pension. Please read it carefully as it contains important information that will be helpful at all stages of your career. Our Member Experience team is available to assist you if you have questions.