Pension Eligibility at Age 65 - Workforce Adjustment and Pension Waivers

Plan members who resign or are laid-off before age 65 under the terms of a workforce adjustment (WFA) or an employment transition may qualify for a waiver of the reduction to their pension because of their early retirement.

Table of contents

Background

The Public Service Superannuation Act (referred to as ‘Act’) allows the Treasury Board (TB) of Canada to waive the reduction in a plan member’s pension amount because of early retirement under certain conditions. Pension waivers have been used over the years to help WFA and other structural transformations. The TB delegated the authority to waive pension reductions to the Secretary of the Treasury Board in April 2023.

Waiver Eligibility

To be considered for a waiver of the pension reduction under the public service pension plan (referred to as ‘plan’), the member must:

  • have retired involuntarily;
  • be at least 60 years of age; and
  • have been employed in the public service for a period or periods totaling at least 10 years, with at least two years of pensionable service. 

An involuntary retirement occurs when:

  1. An indeterminate employee resigns or is laid-off due to a WFA or an employment transition because of:
    • a lack of work,
    • the discontinuance of a function,
    • a relocation of a work unit in which the employee does not wish to relocate, or
    • an alternative delivery initiative.

An indeterminate employee who is not affected by the WFA but is willing to leave employment in the place of an affected employee can be considered for a pension waiver. The alternate needs to meet the same other criteria than the affected employee.

  1. An executive negotiates a career transition agreement due to a lack of work, the discontinuance of a function, or the transfer of work or a function, as set out in the career transition instrument applicable to the executive.
  2. A Governor in Council (GiC) or ministerial appointee’s position is eliminated.

In addition to the above mentioned, the following conditions also apply for the retirement to be considered involuntary:

  • The member must not have received a guarantee of a reasonable job offer, as defined in the applicable WFA or employment transition instrument.
  • The member must not have received an education allowance under a WFA or employment transition instrument.
  • The executive must not have negotiated a bridging agreement to accommodate additional service or to facilitate permanent employment outside the organization, as defined in the applicable career transition instrument.

A waiver will not be approved under the following circumstances:

  • To encourage a voluntary early retirement instead of a demotion or termination;
  • To avoid a pension reduction in the case of an involuntary termination for unsatisfactory performance or discipline;
  • To avoid a pension reduction in the case of a voluntary early retirement;
  • In cases of a retirement due to health reasons that don’t meet the definition of “disabled” under the Public Service Superannuation Act;
  • When the member received compensation to offset the pension reduction; or
  • When the member received involuntary departure benefits that are greater than those available to employees for whom TB is the employer.

Requesting a Pension Reduction Waiver

A pension waiver must be requested by the person who acts as deputy head by completing the Request for a pension reduction waiver form, PWGSC-TPSGC 2429. This would typically be the deputy minister or the chief executive officer (CEO). Deputy Heads do not have the authority to approve or deny waivers but must be the ones that certify the criteria required to qualify. Deputy Heads may delegate their signing authority, but they ultimately remain accountable for the certification.  

The form must be sent to the plan administrator, the Government of Canada Pension Centre, who will process the waiver if all conditions are met.

Pension Entitlement

An annual allowance is a reduced pension payable to a member as early as age 55 years of age with at least two years of pensionable service. The benefit is a reduced pension that considers the early payment of a pension benefit.

This reduction is normally five percent for every year that the member’s pensionable service credit is less than 30 years, or their age is less than 65.

Figure 1: Pension Eligibility at Age 65 – Annual Allowance Reduction
Years of service Age Reduction to your annual allowance
25 or more 60+ The lesser of:
  • 5% for each year you are under age 65, or
  • 5% for each year that your pensionable service is less than 30 years
Less than 25 60+ 5% for each year you are under age 65

Situation
Robert is 61 years old and has 12 years of pensionable service. He has been declared surplus because of a lack of work in his department. He did not receive a guarantee of a reasonable job offer and will be laid-off.

Pension Entitlement
Robert is entitled to an annual allowance under the public service pension plan. Without the waiver, Robert would have a 20 percent reduction to his annual allowance. Since he is four years younger than age 65, his reduction is four years multiplied by five percent which equals a 20 percent reduction. If his unreduced pension benefit at age 65 would be $15,600 per year, it would be reduced by 20% to $12,480 per year if he were to retire at age 61. 

Since he qualifies for a waiver of his pension reduction, Robert will get $15,600 per year when he retires at age 61.

Re-employment

Accepting a new position in the federal public service after being laid-off could impact your pension reduction waiver entitlement.

If the position does not require you to contribute to the public service pension plan, you can receive both your pension and the salary from your new position.

If you are required to contribute to the pension plan, your monthly pension will stop, and your waiver entitlement will cease. The pension reduction will not apply to a second retirement unless it is also because of a WFA. To receive a full, unreduced pension, you must retire after age 65 with at least two years of pensionable service or after age 60 with at least 30 years of pensionable service. Your pension will be recalculated based on the latest date you leave the public service based on your age and total years of service (past and current).

Income Splitting

The Income Tax Act (ITA) imposes limits on amounts payable under a registered pension plan, including benefits payable for early retirements. The amount that exceeds this limitation is paid out of the Retirement Compensation Arrangement (RCA). The RCA is an unregistered pension plan that provides benefits that exceed the allowable limits for a registered pension plan under the ITA.

Income from an RCA is eligible for pension splitting. At the end of each year, retired members receive a Statement of Pension, Retirement, Annuity, and Other Income (T4A) indicating the amount of pension income they received for the previous year. In addition, retired members who receive a portion of their pension from an RCA also receive a separate Statement of Distributions from a Retirement Compensation Arrangement (T4A-RCA) indicating the amount they received from an RCA. The T4A-RCA will also include the amount eligible for pension income splitting.

Page details

Date modified: