Public Sector Pension Plan Changes in Effect on January 1, 2013
Employees who become new plan members on or after January 1, 2013 are subject to different Public Service Superannuation Act (PSSA) rules and contribution rates (employee and employer rates) than those who became plan members prior to 2013. Therefore, there is a need to distinguish between these two distinct groups of plan members.
These changes ensures that appropriate benefits can continue to be paid to plan members at a fair cost. The Government of Canada remains committed to ensuring the long-term sustainability and financial integrity of all public sector pension plans.
The normal age of retirement for new employees who become plan members on or after January 1, 2013 is increased from 60 to 65 and all other age-related benefit thresholds are also increased by five years. Plan members subject to the post-2012 plan provisions are referred to “internally” as Group 2 members, while those who remain covered under the pre-2013 plan rules are referred to as Group 1 members.
Types of pension benefits for plan members who begin participating in the plan on or after January 1, 2013 - based on age and pensionable service:
| If you leave the public service | and you have… years of pensionable service | you will be entitled to |
|---|---|---|
| at age 65 or over | at least 2 years | an immediate annuity, an unreduced monthly pension payable immediately. Since you have already reached age 65, you will only receive the lifetime pension; the bridge benefit will not be paid. |
| at age 60 or over | at least 30 years | an immediate annuity, an unreduced monthly pension payable immediately. |
| between ages 55 and 65 | at least 2 years | a deferred annuity, an unreduced monthly pension payable at age 65; or an annual allowance, a monthly pension payable at age 55 at the earliest. The allowance is reduced to take into account the early receipt of the pension. The reduction is permanent, except if you become disabled and are entitled to an immediate annuity prior to reaching age 65. |
| prior to age 55 | at least 2 years | a deferred annuity, a monthly pension payable at age 65; or an annual allowance, a monthly pension payable at age 55 at the earliest; or a transfer value, the actuarial present value of your future pension benefits, payable in a lump sum. The amount within the limits set by the Income Tax Act must be transferred to a locked-in registered retirement savings vehicle, to another registered pension plan (if such plan allows it), or to a financial institution to buy an annuity. |
| prior to age 65 because of a disability and you qualify for a medical retirement | at least 2 years | an immediate annuity, an unreduced monthly pension payable immediately. The bridge benefit is payable from the time you start receiving your pension until age 65, or until you become entitled to Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) disability benefits, whichever is earlier. |
| at any age | less than 2 years | a return of contributions with interest. |
Note:
For pension eligibility purposes, a year of part-time service counts as one year of pensionable service. Pension benefits are adjusted to reflect the assigned part-time hours of part-time work compared to the full-time hours of the position.
Re-employment
Generally, if you were a member of the public service pension plan prior to 2013 and you retire with an immediate annuity, deferred annuity or annual allowance entitlement, you will continue to be covered under the pre-2013 pension plan terms if you are later re-employed in the federal public service and you become a plan member again on or after January 1, 2013. This means that you will be eligible to receive an unreduced pension at age 60 with at least two years of pensionable service, or at age 55 with at least 30 years of service.
However, in the following situations, plan members who were participating in the public service pension plan before January 1, 2013, will not remain covered under the pre-2013 plan terms if they become re-employed in the federal public service and are again required to participate in the plan on or after January 1, 2013. This includes plan members who, on leaving the public service:
- received a return of contributions for all periods of pensionable service;
- received a transfer value; or
- transferred their pension credits under the public service pension plan to a new employer's pension plan under general portability rules or a Pension Transfer Agreement.
Every plan member is covered by either the pre-2013 or post-2012 plan rules and pension benefits are determined accordingly for all of their pensionable service. It is not possible to have a combination of Group 1 and Group 2 service.
Contributions
The Public Service Superannuation Act (PSSA) was amended effective January 1, 2013 to allow the contribution rates for all active PSSA members to gradually increase over time in order to attain an employer:employee cost-sharing ratio of 50:50.
In addition, new employees who become public service pension plan members on or after January 1, 2013 (also referred to as Group 2 members) will contribute at a different rate than employees who became plan members prior to January 1, 2013 (also referred to as Group 1 members).
Employee rates - Group 1 members
Effective January 1, 2016, pension contributions are required at a rate of 9.05% on all pensionable earnings up to the yearly maximum pensionable earnings (YMPE) and 11.04% on pensionable earnings over the YMPE. As the YMPE for 2016 is $54,900, the maximum amount of pension contributions payable at the 9.05% rate is $4,968.45.
Employee rates - Group 2 members
Effective January 1, 2016, pension contributions are required at a rate of 7.86% on all pensionable earnings up to the yearly maximum pensionable earnings (YMPE) and 9.39% on pensionable earnings over the YMPE. As the YMPE for 2016 is $54,900, the maximum amount of pension contributions payable at the 7.86% rate is $4,315.14.
It is important to distinguish between these two distinct plan member groups. The consequence of errors could be significant, as plan members could be over or underpaying their pension contributions if placed in the wrong group.
Please note that compensation advisors are responsible for the following when commencing pension contributions:
- Applying the public service pension plan rules of eligibility to start contributions, and to input the appropriate pension type codes.
- Contacting the Employer Support Services at the Government of Canada Pension Centre for further assistance on the eligibility rules and general questions on the pre-2013 and post-2012 pension plan rules.
Your Public Service Pension and Benefits
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