Return to work and suspension of payment of a retirement pension
Defined benefit plan
You do not receive a phased retirement benefit...
You can apply for suspension of payment of your retirement pension if you return to work for an employer party to the plan that pays the pension. In that case, the plan must provide for and you must continue accumulating new benefits before the normal retirement age unless you are receiving a maximum pension. After the normal retirement age, you can continue to accumulate new benefits, if the plan so provides.
At the end of the pension suspension, the suspended payments are not paid to you retroactively. Your retirement pension will be increased by an equivalent value that takes into account:
- the suspension period prior to the normal retirement age, unless you were 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 you 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 your salary for each year of service up to the normal retirement age of 65. The pension is not reduced if you at age 60 or later.
Your salary is 50 000 $ a year. You retire at age 60, after 25 years of service. You are therefore entitled to an unreduced pension of 25 000 $ (2% × 50 000 $ × 25 years). At age 63, you return to work full-time and have payment of your pension suspended. You continues to accumulate benefits until age 65, which will give you an additional pension of 2 000 $ (2% × 50 000 $ × 2 years). You resume your retirement at age 66.
Your 25 000 $ pension is increased to 27 000 $ for the period from ages 65 to 66. Your additional pension of 2 000 $ is also increased for the period from ages 65 to 66, to 2 160 $. As of age 66, you therefore receive a retirement pension of 29 160 $.
Thus your 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
You receive a phased retirement benefit...
If you return to work for an employer who is party to the plan that pays your retirement pension and you receive a phased retirement benefit, your retirement pension will be suspended. The suspension does not apply to the portion resulting from your excess member contributions, additional voluntary contributions and transferred sums. That portion can, however, also be suspended if the plan so provides and you make an application for suspension.
At the end of your pension suspension, the suspended payments will not be made to you retroactively. Your retirement pension will be increased for the suspension period prior to the normal retirement age, unless you were receiving an unreduced early pension. In addition, the newly accumulated benefits, if any, will provide you with an additional pension.
A helpful example...
Your plan provides for a pension equal to 2% of your salary for each year of service up to the normal retirement age of 65. The pension is reduced by 3% a year if you retire before age 65.
Your salary is 50 000 $ a year. You retire at age 60, after 25 years of service. You are therefore entitled to a pension of 25 000 $ (2 % x 50 000 $ x 25 years) reduced by 15%, which results in a pension of 21 250 $. You have no excess member contributions, no additional voluntary contributions and no transferred sums.
At age 63, you return to work full-time and make an agreement with your employer to receive the maximum phased retirement benefit. That benefit is 12 750 $ (60 % × 21 250 $). Your retirement pension must be suspended.
You continue to accumulate benefits up to age 65, which will give you with an additional pension of 2 000 $ (2 % x 50 000 $ x 2 years). You resume your retirement at age 65.
Your 21 250 $ pension is increased to 24 715 $ for the period from ages 63 to 65. Thus your 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 $).