Cash payments

In some situations, you are entitled to a cash payment (refund). Your defined benefit plan must provide for certain payments. Others may be offered as options.

Your plan must provide cash payments for:

Your plan may provide cash payments for:

Your plan also offers you different types of pensions.

Note that...

Generally, to obtain a cash payment (refund), you must make an application to your plan administrator. All refunds are taxable. However, it is possible to defer taxation if you can have the amounts deposited directly in an RRSP or a registered retirement income fund (RRIF).

Unless otherwise indicated, you are entitled to a refund at any time, even if you do not have a transfer right, if you meet all the required conditions.


Phased retirement: to reduce your number of hours worked before retirement

If you are still an active member, less than 10 years from the normal retirement age (for example, you are at least 55 if the normal retirement age is 65) and you reach an agreement with your employer to reduce the number of hours you work, you can receive a payment under your pension plan to offset the reduction in your employment income.

You can decide how much you want to receive under your plan, but it cannot be more than the smallest of the following amounts:

  • 70% of the reduction in employment earnings resulting from a reduction in the number of hours worked
  • 40% of the maximum pensionable earnings (MPE) under the Québec Pension Plan for the year in question ($24 640 in 2021)
  • your benefits under the plan

The payment must be made to you in a lump sum for the entire year, on the date of your choice. If you work hours are reduced during a period lasting more than one year, you can receive more than one payment, but not more than one in any single year.

The payment you receive is an advance on your retirement savings. Thus, your benefits will be reduced by the amount equal to the payment. Moreover, since you will still be an active member of the plan, you will continue to accumulate benefits by working during that period.

Note that...


Your employer cannot be required to grant a reduction in your work hours. If the employer refuses, you will not be able to benefit from this measure.

You do not have to take retirement at the end of a period of phased retirement unless the agreement you have with your employer requires you to retire at that time.

Phased retirement can be taken no matter how large or small the percentage of reduction in the number of hours worked.


A helpful example...

Caroline is 56 years old and earns $50 000 a year. She reaches an agreement with her employer to reduce the number of hours worked by 45%. As a result, her employment earnings will be reduced by $22 500, leaving her with an annual salary of $27 500. The amount credited to her account is $250 000.

In 2021, she is entitled to a maximum payment of $15 750 from the pension plan.

In other words, $15 750, which is 70% of the reduction in earnings, is less than 40% of the MPE in 2021, wich is $24 640. That is also less than the balance of her account.

Her income in 2021 could be as much as $43 250 ($27 500 + $15 750).

Note that...


There is another phased retirement measure; it can give entitlement to a cash payment. You cannot benefit from both measures simultaneously.

Advance on your retirement savings under the plan (between ages 55 and 65)

If you are between the ages of 55 and 65 and you are entitled to a pension under your plan (for example, because your active plan membership has ceased) but you do not want to receive your retirement pension right away, you can receive an advance on your pension by opting for a lump-sum payment.

The maximum annual advance

The maximum advance cannot exceed 40% of the maximum pensionable earnings (MPE) under the Québec Pension Plan in the year in which payment of your pension begins less the amount of any temporary pension from another pension plan, annuity contract or life income fund (LIF). In 2021, the advance cannot exceed $24 640.

A helpful example...

Suppose that your active plan membership ceases and you are entitled to a deferred pension of 1 000 $ a month, payable as of age 65. At age 58, you request and receive an advance of 10 000 $. At age 65, you will be entitled to an adjusted pension of 885 $* a month.

* This is a hypothetical amount. The actual amount would be based on actuarial assumptions that include interest rates, your sex and your age at the time the value of your benefits is calculated.

Value of your benefits is less than 20% of the maximum pensionable earnings under the Québec Pension Plan ($12 320 in 2021)

You can receive a refund of the value of your benefits when your active membership ceases if the value is less than 20% of the maximum pensionable earnings (MPE) under the Québec Pension Plan (12 320 $ in 2021). The benefits used to make the calculation do not include any additional voluntary contributions or transfers from another plan that have not been converted into a retirement pension. However, you cannot receive the refund if you are already receiving a retirement pension under the plan.

You can apply for a refund at the following times:

  • within 90 days following receipt of your statement of cessation of active membership, if you are more than 10 years away from the normal retirement age under the plan (for example, if you are under 55 and the normal retirement age is 65)
  • thereafter, once every 5 years, within 90 days following the anniversary of the date on which your active membership ceased

Your plan can, however, have provisions that allow you to receive a refund at other times.

Note that...


In this case, the plan administrator can decide to make a refund to you even if you have not asked for one. The administrator will inform you of the decision and you will have 30 days to indicate how you want payment of your benefits to be made (for example, by a transferring the refund to an RRSP or by a direct, cash payment). If you do not give instructions, the administrator will decide how to pay you (for example, by a direct, cash payment).


Non-residency in Canada

Regardless of the total value of your benefits under the plan and even if you have already started receiving a retirement pension under the plan, you can receive a refund of the value of your benefits or, if you are already receiving a pension, a payment that represents the value of your future pension payments. You must meet all 3 of the following conditions:

  • you have not lived in Canada for at least 2 years
  • your active plan membership has ceased
  • you no longer work for the employer who sponsors the plan.

Benefits in excess of tax limits on transfers

If you request a transfer of your benefits and the plan administrator finds that a portion of those benefits exceeds the amount that can be transferred tax-free, the excess must be paid to you. In this case, you cannot have the refund transferred directly to an RRSP for tax deferral purposes.

Additional voluntary contributions

Your additional voluntary contributions (if any) can be refunded to you if both of the following conditions are met:

  • your active plan membership has ceased
  • your additional voluntary contributions have not already been converted into an additional pension benefit.

You can ask for a refund of your additional voluntary contributions at the following times:

  • within 90 days following receipt of your statement of cessation of active membership, if you are more than 10 years away from the normal retirement age under the plan (for example, if you are under 55 and the normal retirement age is 65)
  • thereafter, once every 5 years, within 90 days following the anniversary of the date on which your active membership ceased

Your plan can, however, have provisions that allow you to receive a refund at other times.

Sums transferred from a previous plan

You can receive a refund of sums that you transferred from a previous plan if all 3 of the following conditions are met:

  • your active membership in your current plan has ceased
  • the sums in question could have been refunded to you under the rules of the plan from which they came
  • the provisions of your current plan allow such refunds.

Disability that reduces your life expectancy

If you are disabled, you can receive a refund of your benefits, in one or several payments, of all 4 of the following conditions are met:

  • you have a physical or mental disability
  • this disability reduces your life expectancy
  • you are already entitled to a pension under your plan (for example, your active membership has ceased)
  • your plan's provisions allows such a refund

Note that...


Disability can also give you entitlement to a pension.


Deferred pension with little or no indexation

If your plan membership ends before you are 10 years away from the normal retirement age (for example, if you are under age 55 and the normal retirement age is 65) and there is little or no indexation for your pension between the time you leave the plan and the time when you are 10 years away from the normal retirement age, you may be entitled to an additional pension benefit. If that is the case, you can receive a cash payment that corresponds in whole or in part to the value of that additional benefit, if your plan so provides.

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