Life events with pension implications

Death

Prior to retirement

If you die prior to retirement, your spouse is entitled to the value of the pension benefit accrued.

Payment options include a lump sum less withholding tax, transfer to a Registered Retirement Savings Plan (RRSP), or an immediate or deferred pension. If you do not have a spouse, or you and your spouse have signed a waiver form, a lump sum payment will be made to your beneficiary, or if you have not designated a beneficiary, to your estate.

After retirement (minimum guaranteed payout)

If you die after retirement, any death benefit will depend on the form of pension you chose at retirement. However, there is a minimum guaranteed payout that applies to every form of pension except the single life pension with no guarantee. The minimum payout is your own required contributions plus interest at retirement, less any excess contributions paid and all pension payments made.

Disability

While you are receiving benefits under the University of Waterloo long term disability plan, you will continue to accrue credited service under the pension plan but you will not be required to make contributions. Your salary in effect when you commenced receiving disability benefits (pre-disability salary) could receive a cost-of-living adjustment (COLA) on May 1 each year based on the Pension and Benefits Committee deciding to award an appropriate adjustment to pre-disability salaries.

Should your disability continue to your normal retirement date (age 65), your long-term disability benefit ceases and your pension commences. The calculation of your pension will be based on your final average of your COLA adjusted pre-disability salary and your credited service including the years and months when you were receiving total disability benefits.

Termination

Once Human Resources has received a notice of termination from your department indicating that you are terminating, the pension area will prepare and mail an option form to your home address. Please ensure Human Resources has your forwarding address and personal email address before you leave campus.

You must return the completed option form and paperwork within 60 days of receipt. If your completed form is not returned in this time frame, you will be entitled to the default option.

The University must fund 50% of the value of your pension at termination or retirement. If your required contributions plus interest at your termination date exceed 50% of the value of your pension, the excess contributions belong to you. This “excess” will be refunded, less tax at source. This refund can be electronically deposited into your Canadian bank account if you provide a “void” cheque when you return your signed option election form.

If you elect a deferred pension, it is your responsibility to inform us of changes to your address, beneficiary and spousal status to ensure our records are up-to-date for the eventual payment of your pension.

Before choosing an option on termination, you are advised to discuss the issue with a financial advisor, and if you have any questions about your options, feel free to contact the pension team at pensions@uwaterloo.ca.

Prior to age 55

If your employment with the University of Waterloo terminates prior to age 55, you will have the deferred pension and locked-in transfer options outlined below. However, if your deferred pension is less than 4% of the Year's Maximum Pensionable Earnings (YMPE), or the value of your pension is less than 20% of the YMPE, the value of your pension will be paid to you in cash less withholding tax, or you can request the full amount be transferred to a RRSP without being locked-in. This is referred to as the small pension rule.

  1. Deferred pension

    • Leave your pension accrual in the plan to commence receiving a monthly pension when you turn 65. You can opt to begin the pension as early as age 55, in which case the pension will be reduced since you will receive it for a longer duration, compared to if you commenced receiving it at age 65.

    • If you start receiving your pension prior to age 65, the pension will be reduced by ⅓% for each month of early commencement between the ages of 60 and 65 and by ½% for each month of early commencement between the ages 55 and 60. For example, if you elect to start receiving your deferred pension at age 55, the reduction will be equal to ⅓% x 60 months between 60 and 65 (20%) plus ½% x 60 months between 55 and 60 (30%), for a total reduction of 50%.

  2. Locked-in transfer

    • A transfer of the value of your accrued pension to your new employer's Canadian Registered Pension Plan (RPP), a Canadian registered Locked-In Retirement Account (LIRA), or if you are 54, a Canadian registered Life Income Fund (LIF). You and the organization receiving the funds must sign a Locking-In Agreement to certify that the transferred funds will be administered in compliance with the requirements of Ontario’s Pension Benefits Act and the Income Tax Act (Canada).

After age 55

If your employment with the University of Waterloo terminates after age 55, you will have the immediate pension and deferred option outlined below. However, the small pension rule applies if your deferred pension is less than 4% of the Year's Maximum Pensionable Earnings (YMPE), or the value of your pension is less than 20% of the YMPE. Then the value of your pension will be paid to you in cash less withholding tax, or you can request the full amount be transferred to a  RRSP without being locked-in.

  1. Immediate pension
    • Commence receiving a monthly pension on the first of the month following your termination date. The pension is calculated based on your final average earnings and credited service under the pension plan as of your date of termination and will be reduced by 1/2% per month for each month your pension commencement date is prior to age 62.
  2. Deferred pension
    • A monthly pension commencing on your normal retirement date. The pension is calculated based on your final average earnings and credited service under the pension plan as of your date of termination. You can elect to commence receiving a reduced pension on the first day of any month up to your normal retirement date. The reduction is 1/2% per month for each month your pension commencement date is prior to age 62. During the deferral period the pension will be eligible for an annual cost-of-living adjustment, subject to approval by the Pension and Benefits Committee each year.

Leaving Canada permanently

Pension cannot be transferred to another country – it must be transferred to a registered vehicle in Canada. If you plan to leave Canada to take up residency in another country, you should set up an RRSP with a financial institution before you leave Canada if you are entitled to a transfer of your pension.

Under pension legislation, once the pension is transferred out and once you are a non-resident of Canada for two years (as defined under the Income Tax Act), you can make an application to the institution that received the transfer to withdraw the full amount in cash, less withholding tax. We encourage our members to check for tax treaties between countries.

Marriage breakdown

Pension is considered family property and pension legislation provides entitlement to a member's former spouse of no more than 50% of the benefit that accrued during the marital relationship. If you and your former spouse agree to split your pension and require payment be made from the UWaterloo pension plan while you are still an active member, you must request that the University determine the value of your pension for marital breakdown purposes. There is a $600 administration fee to request this value. The University is required to pay your spouse’s portion only if appropriate legal documents have been filed with Human Resources and the administration fee has been paid. For further information, please contact pensions@uwaterloo.ca or ext. 32785.