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Return to work and suspension of payment of a retirement pension

Defined benefit plan

A member does not receive a phased retirement benefit...

The member can apply for suspension of payment of his or her retirement pension if he or she returns to work for an employer party to the plan that pays the pension. In that case, the plan must provide for and continue the accumulation of new benefits before the normal retirement age unless he or she is receiving a maximum pension. After the normal retirement age, he or she can continue to accumulate new benefits, if the plan so provides.

At the end of the pension suspension, the suspended payments are not paid retroactively. His or her retirement pension will be increased by an equivalent value that takes into account:

  • the suspension period prior to the normal retirement age, unless he or she was receiving an unreduced early pension
  • the suspension period following the normal retirement age

To that retirement pension will be added an additional pension resulting from the benefits accumulated during the suspension period. The additional pension will likewise be increased by an equivalent value for the period following the normal retirement age.

A helpful example...

A plan provides for a pension equal to 2% of salary for each year of service up to the normal retirement age of 65. The pension is not reduced if a member takes early retirement at age 60 or later.

A member's salary is 50 000 $ a year. He retires at age 60, after 25 years of service. He is therefore entitled to an unreduced pension of 25 000 $ (2% × 50 000 $ × 25 years). At age 63, he returns to work full-time and has payment of his pension suspended. He continues to accumulate benefits until age 65, which will give him an additional pension of 2 000 $ (2% × 50 000 $ × 2 years). He resumes his retirement at age 66.

His 25 000 $ pension is increased to 27 000 $ for the period from ages 65 to 66. His additional pension of 2 000 $ is also increased for the period from ages 65 to 66, to 2 160 $. As of age 65, he therefore receives a retirement pension of 29 160 $.

Thus his annual income is:

  • a pension of 25 000 $ from ages 60 to 63
  • a salary of 50 000 $ from ages 63 to 66
  • a pension of 29 160 $ as of age 66

A member receives a phased retirement benefit...

If a member returns to work for an employer who is party to the plan that pays him or her a retirement pension and he or she receives a phased retirement benefit, the retirement pension will be suspended. The suspension does not apply to the portion resulting from excess member contributions, additional voluntary contributions and transferred sums. That portion can, however, also be suspended if the plan so provides and the member makes an application for suspension.

At the end of the pension suspension, the suspended payments will not be made retroactively. The member's retirement pension will be increased for the suspension period prior to the normal retirement age, unless he or she was receiving an unreduced early pension. In addition, the newly accumulated benefits, if any, will provide an additional pension.

A helpful example...

A plan provides for a pension equal to 2% of salary for each year of service up to the normal retirement age of 65. The pension is reduced by 3% a year if the member retires before age 65.

A member's salary is 50 000 $ a year. She retires at age 60, after 25 years of service. She is therefore entitled to a pension of 25 000 $ (2 % × 50 000 $ × 25 years) reduced by 15%, which results in a pension of 21 250 $. She has no excess member contributions, no additional voluntary contributions and no transferred sums.

At age 63, she returns to work full-time and makes an agreement with her employer to receive the maximum phased retirement benefit. That benefit is 12 750 $ (60 % × 21 250 $). Her retirement pension must be suspended.

She continues to accumulate benefits up to age 65, which will give her with an additional pension of 2 000 $ (2 % × 50 000 $ × 2 years). She resumes her retirement at age 65.

Her 21 250 $ pension is increased to 24 715 $ for the period from ages 63 to 65. Thus her annual income is:

  • a retirement pension of 21 250 $ from ages 60 to 63
  • a total of 62 750 $ from ages 63 to 65  (a salary of 50 000 $ + a phased retirement benefit of 12 750 $)
  • a retirement pension of 26 715 $ as of age 65 (22 525 $ + 2 000 $).
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