Options upon Termination
Options upon Termination
When we receive your signed Voluntary Election to Terminate Membership Form advising our office that you wish to terminate your membership in the Plan, we will send you an Application for Termination Benefit along with a Payment Election Form advising you of the amount you are entitled to receive under the options available to you. The amount of your benefit will depend on your age at the effective date of termination, and whether you worked in Ontario or Prince Edward Island.
Please note that the effective date of your termination will be the 1st of the month in which we receive your signed Voluntary Election To Terminate Membership Form.
The following is a list of the options available to Former Members that have elected to terminate their membership in the Plan:
You may leave your pension in the Labourers’ Pension Plan to be paid to you as a monthly pension upon retirement. Please note that if you are an Ontario or Prince Edward Island member who voluntarily elected to terminate, your Deferred Pension will be permanently reduced to reflect the Plan’s funded status on a solvency basis. You may apply as early as age 55 with the appropriate reduction factor of ½% for every month that you are younger than age 65.
Portability (Transfer) Option
If you are younger than age 55 when you file your Voluntary Election To Terminate Membership Form, you may transfer the commuted value of your pension to:
- a Locked-In Retirement Savings Plan, or
- a Life Income Fund, or
- a Locked-In Retirement Income Fund, or
- a Registered Retirement Income Fund, or
- the registered pension plan of your new employer, if that employer accepts the funds, or
- a Canadian life insurance company, for the purchase of a deferred locked-in life annuity.
These options may vary depending on the province in which you last worked.
If you choose to terminate from the Plan and elect the portability option, you will not be entitled to any further benefits from the Plan. If you later return to work with a Contributing Employer, you will be treated as a new employee, and must again satisfy the requirements for joining the Plan.
Lump Sum Cash Payment
If you last worked in Ontario or PEI and your monthly pension amount payable at age 65 is less than 1/12th of 4% of the YMPE or the commuted value is less than 20% of the YMPE, in the year you have elected to terminate, you may be entitled to receive a one-time cash payment (less applicable taxes) that is equal to the Commuted Value of the reduced by transfer ratio monthly pension amount. This would be a final payment, and there would be no further benefits paid to your estate or beneficiary upon your death.
The method of determining if you're eligible for a lump sum cash payment varies according to the Province you last worked. The commuted value method is prescribed by the Canadian Institute of Actuaries.
What does "locked-in" mean?
Once you are Vested in a Pension Plan, your benefits become locked-in. Does that mean that the funds are tied up for a few years, like a five-year Guaranteed Investment Certificate, which you can access when it matures? The answer is no.
Locked-in means, that the pension benefits cannot be paid to you in cash and must be used to provide you with an income at retirement. Provincial pension legislation requires that all pension benefits be immediately locked-in. In other words, your pension is immediately locked-in unless your monthly pension at age 65 is considered "a small amount" as defined by CRA. The locking-in provision is designed for your protection. It ensures that the funds are still there for you when you retire. As a result, these savings plans have certain conditions attached to them. For example, you cannot make withdrawals from them, or use them as collateral for a loan or to participate in the Home Buyers' Plan. They cannot be seized by your creditors if you run into debt.
Please advise the LPF Office if you are receiving or have received:
- Workers’ Compensation Benefits (WSIB)
What is a Commuted Value?
The Commuted Value is based on standards set by the Canadian Institute of Actuaries, the Pension Benefits Act and the Rules and Regulations of the LPF Pension Plan. The Commuted Value reflects the financial market conditions as of the termination date and the value that the market places on your future pension payments. The Commuted Value is based on several factors, including the following:
- your age at the termination date
- the interest rate in effect at the termination date
- the number of years of Pension Credit you have accrued
- your Benefit Rate
- your monthly pension amount at age 65
The Commuted Value is not directly related to the amount of contributions made on your behalf. The older you are when you terminate from the LPF, the higher your Commuted Value will be. On the other hand, the younger you are, the lower your Commuted Value will be. The reason is that when you are younger, you have a longer period of tme to invest the funds until you reach your retirement age.
The amount of your Commuted Value will also depend on the interest rates at the time of your termination. A lower interest rate will give you a higher Commuted Value, and vice versa. The Commuted Value is the amount that would have to be invested now to fund your future benefit. If interest rates go down, you will earn less interest over time, so you would need a larger investment (Commuted Value amount). If interest rates go up, you would earn more interest over time, so you would not have to invest as much (since your Commuted Value amount would be lower).
Pension Funds Released due to Financial Hardship
Effective January 1, 2014, all applications for financial hardship unlocking must be made to the financial institution that holds the locked-in account. For further information, visit the Financial Services Commission of Ontario (FSCO) website, or call FSCO at 416-250-7250 or 1-800-668-0128.
A pension from the Labourers’ Pension Fund is an important asset in your financial retirement and estate planning. It is important that you review your options carefully. For specific financial advice, we recommend consulting an independent financial advisor.