Summary
Active Members of the Pension Plan can purchase Prior Non-pensionable Employment (PNE) to increase their benefit at retirement if it qualifies to be purchased. Any Pensionable Service Buyback must be completed prior to a Member retiring or terminating employment.
A Member may apply for Pension Service Buyback, by either:
- completing the APPLICATION FOR BUY BACK OF PRIOR NON-PENSIONABLE EMPLOYMENT (Form #31) (instructions to complete Form #31 are on the reverse side of the form), or
- by selecting Employee Option “A”, when their Pension Plan Leave of Absence of Layoff Form (Form #43) is completed.
Upon receipt of the Application for Buyback, the MEBP Administration Office will provide the Member with the cost of the buyback, the payment options available and the applicable form(s) to be completed to complete the buyback.
The cost of buying back PNE service depends on when the election for buyback of service is made by the Member. In some situations, if the buyback election is made within a relatively short period of time after the PNE event occurs, the cost to purchase this service may be based on the Member 's pensionable salary, pensionable service and pension contribution rates in effect at the date of the event. If the election is made at a later time, the cost to purchase the PNE service will be actuarially determined.
The Member is under no obligation to purchase the missed service. If the Member decides not to purchase the service at this time, they can choose to complete this pension service buyback at any time prior to retirement or termination of employment – as long as a Form #43 has been filed at the MEBP Administration Office.
Members who are away from work for a period greater than 54 weeks and do not purchase missed service under the Pension Plan, will not receive qualifying service for the leave period. This may affect the date they can retire early with an unreduced pension benefit.
What qualifies for a Pensionable Service Buyback
Any approved period of service with a MEBP participating Employer that can be proven* and for which a Member does not already have pensionable service under another arrangement may be eligible for a Pensionable Service Buyback.
Examples of non-pensionable employment (PNE) that may be eligible for buyback are:
Probationary period of employment
- Full time employees becoming Members of the Pension Plan after a probationary period are eligible to purchase their probation period either by: - applying within 30 days of completing their probation period and paying the Employee and Employer required contributions for the probation period for the same length of time as the probation period was, or - applying at a later date but prior to retirement or termination of employment and paying the full actuarial cost by way of a lump sum payment or RRSP/LIRA transfer.
- Part-time, seasonal or casual employees becoming Members of the Pension Plan on a Voluntary basis, immediately following the probationary period, are eligible to purchase the probation period either by: - applying within 30 days of joining the Plan and paying the Employee and Employer required contributions for the same length of time as the probation period was, or - applying at any later date but prior to retirement and paying the full actuarial cost by way of a lump sum payment or RRSP/LIRA transfer.
- Part-time, seasonal or casual employees becoming Members of the Pension Plan on a Compulsory basis, may purchase their probationary period of employment as well as any other eligible service with that Employer, at any time prior to retirement by paying the full actuarial cost by way of lump sum payment or RRSP/LIRA transfer.
Bill C22 days (“Filmon Fridays”)
Unpaid Approved Leave of Absences, excluding periods of lay-off. (see Form 43)
Lower Rate Service: If a Member elected to contribute to the Pension Plan at the 'Lower Rate' for any of the years between 1977 and 1983, they are eligible to purchase the difference in service while contributing at the 'Lower Rate' by applying at any time prior to retirement and paying the full actuarial cost by way of a lump sum payment or RRSP/LIRA transfer.
* Acceptable Proof: The Employer must confirm in writing the period of leave on the appropriate MEBP form(s). If the Employer does not have a record of the service, a Member could provide pay stubs, T4, income tax returns, letters of offer or annual statements. CPP statements are not acceptable forms of proof.
Buyback Restrictions
If a termination of employment occurred and the Member is later rehired, any period of service prior to termination is not eligible for a Pensionable Service Buyback.
Under the Income Tax Act there are certain buy back maximums. When buying back service for periods on or after January 1, 1992, the total service being purchased cannot exceed five years plus up to 3 (three) years of maternity/parental leave, for a total of eight years.
For maternity leaves and other leaves of absence related to periods of parenting, as defined in the Income Tax Act, the buyback cannot exceed 12 months for any one period of parenting, and the cumulative period a member may buy back for periods of parenting cannot exceed 36 months.
Tax Considerations of a Pensionable Service Buyback
If a Member will be receiving Severance Pay or Retiring Allowance at retirement, a direct transfer, subject to Canada Revenue Agency (CRA) limits, may possibly be made from the Employer to the MEPP to complete the Pensionable Service Buyback without any income tax implications.
A Pensionable Service Buyback is considered a past service event and may generate a Past Service Pension Adjustment (PSPA). All PSPAs that are greater than $50.00 must be certified by the Canada Revenue Agency (CRA). The approval of this certification depends on whether the PSPA exceeds the Member’s unused RRSP deduction room at the end of the previous year by more than $8,000. CRA must certify the PSPA before benefits relating to the past service event can be applied to the Member’s pension account. The Member can pay the Buyback cost as soon as MEBP has applied for the PSPA to be certified. However, if CRA deny certification, the Pensionable Service Buyback will be revoked and any funds received to complete the buyback will be paid back to the Member in the same manner that they were received.
It is the responsibility of the Member to obtain, in writing, from Canada Revenue Agency the tax implications regarding the purchase of prior non pensionable employment.