Pension transfer agreements: Transfer out

A Pension transfer agreement (PTA) Out allows you to increase your pension assets under your current employer's plan by transferring from the Public Service Superannuation Act (PSSA) to their plan, an amount equivalent to the actuarial value: Glossary of the benefits earned in respect of your pensionable service credits under the PSSA.

On this page

• Making the decision to transfer out
• The administrative process
• Related link

Making the decision to transfer out

In this section

• Criteria
• Issues to consider

Criteria

Time limits associated with pension transfers

You must begin the pension transfer process by submitting a request for estimate within the time limits as prescribed in the agreement, or within one year from the date a Pension transfer agreements: Glossary (PTA) is signed between your former and current employers; whichever is later. Please note that an estimate can only be provided if a PTA exists.

Eligibility

The following criteria allow you to determine whether you are eligible to take advantage of a PTA:

• You are a participant under your current employer's pension plan when you make the estimate and transfer request;
• You were subject to the Public Service Superannuation Act (PSSA); have ceased to be employed with the federal public service and have not received a return of contributions or any other benefit in respect of the service to be transferred;
• You sign and forward your application to transfer within the time limits prescribed in the agreement.

If you have left the federal public service before reaching two years of continuous service, you may still be able to take advantage of a PTA.

There are no age restrictions applicable to the PTA provision. However, since the actuarial calculation for a pension transfer takes your age into consideration, proof of age is required before the funds are transferred. If there is no proof of age documentation on file, the pension centre for federal employees will request a copy of your birth or baptismal certificate.

A medical examination is not required with respect to the transfer of funds out of the PSSA under a PTA.

Issues to consider

You should not assume that the amount of funds available from the Public Service Superannuation Act (PSSA) will be sufficient to credit you with all of the pensionable service credits accumulated under your current employer's pension plan. There may be differences between the pension benefits provided by each plan and also differences in the actuarial assumptions each plan uses in the pension transfer calculation.

You should also consider how long you intend to remain with your current employer and whether you may return to the public service in the future. When transferring back into the public service, the amount available from your current employer may not be sufficient to purchase all the service that was originally to your credit under the PSSA.

As you review your options, it is important to consider both the costs involved, the tax implications, and the eligibility requirements. Consideration must also be given to factors such as inflation protection (pension indexing: Glossary), age and service thresholds for pension benefit entitlement, survivor benefit provisions, health and dental care plans, and projected career and retirement date expectations.

The administrative process

In this section

• Estimates
• The transfer process
• Roles and responsibilities
• Process overview timelines
• Possible reasons your request may be delayed

Estimates

Why is an estimate important

The estimate stage is critical because it provides you with information to assist in making the decision whether to proceed with a pension transfer. The existence of an agreement between employers does not necessarily mean that a transfer of your pension credits will be advantageous to you. You should contact your current employer for information regarding your pension benefits under their plan and compare these with the pension estimate provided by the pension centre for federal employees when you terminated your employment with the public service.

How do I request an estimate

Contact the human resources office of your current employer to obtain a pension transfer estimate. They will provide you with the Appendix A/A2—Request for transfer estimate form - depending on the terms of the Pension Transfer Agreement (PTA).

When you receive the appropriate appendix, complete and sign the applicable part of the form. If your current plan administrator is the "Commission administrative des régimes de retraite et d'assurances (CARRA)" or "l'Université du Québec", complete and sign the personal information data in the middle section of the appendix and send the original copy to the pension centre for federal employees and a copy to your current plan administrator. This Employee's Authorization will give the Pension Centre permission to provide your current employer with the information required to calculate your pension transfer estimate. Once your portion of the appendix is completed and signed, you must send the form to the pension centre for federal employees. The Pension Centre will complete Part III and return the form to your current employer where the pension transfer estimate will be prepared. It is recommended that you keep a photocopy of this appendix for your records. Normally, this form must be received by the Pension Centre within the time limits prescribed in the agreement or one year from the date the PTA is signed, whichever is later.

It should be noted that only service already paid for will be included in the amount available for transfer. If you have outstanding elective service payments or deficient Public Service Superannuation Act (PSSA) contributions, you will be given an opportunity to remit these amounts so that all of your service is included.

The estimate

Your current employer will send you the Appendix B/B2—Request for transfer of service credits. This form represents your pension transfer estimate and is to be considered an estimate only. This appendix will indicate the estimated amount available for transfer from the PSSA and how much service may be purchased under your current employer's pension plan.

The purpose of a pension transfer estimate is to provide individuals with a sense of what monies are required and are available as of a certain point in time; however, they are still only estimates. Should you choose to continue with the transfer, you must complete the relevant portions of the Appendix B/B2 and return it to the Pension Centre prior to the deadline indicated at the bottom of the form. Doing so constitutes your formal request for transfer. Once a formal request for transfer is made, the provisions of the PTA stipulate that the pension value must be recalculated as of the date of receipt of the formal request for transfer, that is, the Appendix B/B2. In most cases, if not all, it is expected that the final amounts will change as time passes because the calculation of the pension valuation takes into account, among other factors, the actual age of the employee and interest.

Pension transfer amounts will be determined on an actuarial basis. The amount to be transferred will be the lesser of:

1. the amount available for transfer as calculated by the former employer (federal transfer amount—defined benefit: Glossary or defined contribution: Glossary)

   or

2. the amount required under the outside employer's plan to fund the period of service being transferred (employer transfer amount: Glossary)

Your new employer will credit you with service purchased by the federal transfer amount and will calculate this credit according to their plan rules. For more detailed information on the contents of the estimate, refer to How the transfer amounts are determined.

What happens to my retirement compensation arrangement benefits if I transfer my service to my new employer

The Income Tax Act (ITA) sets specific limits on the average salary that may be used to calculate pension benefits under a registered pension plan. The Canada Revenue Agency (CRA) establishes these limits yearly, e.g. 2005 limit is $114,400. An retirement compensation arrangement (RCA) was created as a vehicle for providing those pension benefits that could not be provided under a registered pension plan due to ITA limits. For additional information regarding the limits imposed you may contact your local Canada Revenue Agency office. You may also consult their Tax information phone service (T.I.P.S.) at 1-800-267-6999.

If you choose to transfer out of the PSSA then those benefits payable under the RCA must also be transferred. If your current employer has a similar funded arrangement under the ITA and is prepared to provide benefits in excess of the ITA limits from this supplementary plan, then the RCA amounts available will be transferred to them. Otherwise, a lump sum amount taxed at source will become payable to you directly. You may want to inquire on this issue with your current employer prior to making your final decision.

Transfer process

After you have reviewed your Appendix B/B2—Request for transfer of service credits form - and carefully considered all the relevant issues surrounding your pension portability options, you must return the form to your current employer clearly indicating your option by checking off the appropriate section. If you proceed with the transfer, you will cease to be entitled to any benefits under the Public Service Supperannuation Act (PSSA).

It is important to note there is a time limit to make your decision and return the Appendix-B/B2 to your current employer. If you do not return this appendix within the deadlines indicated on the form, you risk losing the opportunity to transfer. Delays may result in significant changes to the federal and/or employer transfer amounts. These changes are a direct result of variations in actuarial assumptions and the accumulation of interest.

If you proceed with the transfer, your current employer will advise the Government of Canada Pension Centre of your decision, provide an updated employer transfer amount and make a request for payment. The Government of Canada Pension Centre will then forward the lesser of the federal transfer amount or the employer transfer amount to your current employer.

Upon receipt of the payment, your current employer will advise you of the amount that was transferred on your behalf and the credited service purchased by the transferred amount. They will also advise you if there is an opportunity to purchase any remaining service that was not credited by the transfer.

What happens if the amount available for transfer is more than the amount required

If the federal transfer amount is greater than the employer transfer amount, but less than the amount of transfer value benefit payable under the PSSA, the difference between the transfer value and the employer transfer amount is payable to you. This amount is payable whether or not you would be entitled to a transfer value benefit under the PSSA and is called a "transfer value guarantee".

The Income Tax Act (ITA) places certain limits on the amount of pension benefit that can be transferred on a tax-sheltered basis to a registered pension vehicle. If any of the excess funds available are within the tax limits prescribed by the ITA, these funds must be transferred to a locked-in registered retirement savings plan (RRSP). No T4A (or Relevé 2) will be issued for this portion of the payment and your financial institution should not issue a tax receipt.

Any funds in excess of the ITA limits are payable to you in cash with taxes taken at source. A T4A (and Relevé 2, if applicable) is issued for this portion of the payment. However, if you have available Registered retirement savings plan (RRSP) room, you may wish to transfer these funds to an RRSP. The transfer of these funds is not subject to the lock-in provision. A T4A (and Relevé 2, if applicable) is issued indicating the amount paid but no tax is deducted. It is your responsibility to contact the Canada Revenue Agency (CRA) to find out if you have sufficient RRSP room to accommodate the transfer. For information regarding your situation you may contact your local Canada Revenue Agency office. You may also consult their Tax information phone service (T.I.P.S.) at 1-800-267-6999.

Roles and responsibilities

The process of transferring your pension from the Public Service Pension Plan to your current employer's pension plan is a team effort. The team consists of you, the Government of Canada Pension Centre, your public service compensation advisor, your current pension plan administrator and the Canada Revenue Agency (CRA).

The length of time required to process your request will vary according to your circumstances and the time associated with the receipt of information required to process your request. This document provides you with an overview of the steps involved during this process as well as the estimated time required.

Process overview timelines

Table summary

A table describing the overview for the pension transfer out process. There are three columns which describe the responsibilities for the employee, the current pension plan administrator and Pension Centre's with an associated estimate of time for each responsibility as well as the time line for the length of time for the actual transfer process.

Estimate

You	1 year	Initiate the process
Government of Canada Pension Centre	3 months	Provides the data
Current Pension Plan Administrator	3 months	Provides the pension transfer estimate

Table summary

A table describing the overview for the pension transfer out process. There are three columns which describe the responsibilities for the employee, the current pension plan administrator and Pension Centre's with an associated estimate of time for each responsibility as well as the time line for the length of time for the actual transfer process.

Transfer

You	3 months	Complete the transfer form
Government of Canada Pension Centre	3 months	Provides the pension funds upon receipt of a request from the current employer

All team members play a critical role in ensuring the transfer process moves along as required under the terms of the applicable pension transfer agreement (PTA). The transfer process tends to be sequential in nature and can be somewhat complicated and lengthy. Therefore, any delays experienced throughout this process may slow down the entire transfer and could impact your final costs.

Possible reasons your request may be delayed

• Delays in getting information from your former plan administrator
• Delays in getting information or documentation you must provide
• Delays in getting information from the Canada Revenue Agency (CRA)

You may inquire as to the progress of your transfer at any time by contacting pension centre for federal employees or your current employer's pension plan administrator.

Related link

How pension transfer amounts are determined