Phased retirement and defined contribution plans

Two measures may be available to you if you reach an agreement with your employer to:

• receive a phased retirement benefit from your plan while working full-time or part-time
• reduce your work hours, which would give you entitlement to a cash payment (refund) from your plan

In both cases, you will receive an advance on your retirement savings. Thus, the balance of your account will be reduced by the amount that you receive. Moreover, if you are still an active member, contributions made for work during this period will continue to be credited to your account.

To take advantage of one of those options, you must make an application with your plan administrator.

Note that...

Your employer is not required to allow you to receive a phased retirement benefit or to reduce you work hours. Also, the employer can add conditions. If the employer refuses, you will not be able to use the measures.

You cannot take advantage of both measures simultaneously.

You do not have to retire at the end of the period covered by your agreement with your employer, unless the agreement requires you to.

Phased retirement benefit

If your plan allows, you can reach an agreement with your employer to withdraw an amount from your account as a phased retirement benefit while continuing to work full-time or part-time. You must be at least 55 years of age but under age 65.

The calculation and payment terms of a phased retirement benefit must be included in the agreement. However, the annual payment cannot exceed 60% of the maximum life income that your could withdraw if the sums credited to your account were in a life income fund (LIF).

An agreement cannot provide for age conditions or other conditions that would be more advantageous.

Reduction in work hours and cash payment from a plan

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

You can choose the amount that you wish to receive from 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 (21 000 $ for 2014)
• the balance credited to your account

The amount must be paid to you in a lump-sum for the year, at the time you choose. If your work hours are reduced for more than one year, you can receive more than one payment, so long as the maximum payment for a particular year is not exceeded.

To be entitled to phased retirement, there is no minimum percentage of reduction in your work hours.