Skip to the content

Increasing your pension by making a purchase

You may be able to purchase periods of leave, or a period during which you were a member of a Canadian registered pension plan before working for an employer that participates in the CAAT Plan.

Your defined benefit pension from the CAAT Plan is the cornerstone of your retirement income. It will provide you with a lifetime of monthly pension payments after you retire.

When you make a purchase, you create a larger lifetime retirement income for yourself, from a secure and cost effective source. You may even be able to retire sooner than you had previously planned. And, you can rest assured that your purchased pension receives the same valuable additional benefits as the rest of your pension: conditional inflation protection in retirement and no-cost survivor benefits.

Your purchase in DBplus increases your pension, enabling you to retire with a larger pension, paid from one secure source. Not only that, any pension you purchase while contributing to DBplus will continue to grow throughout your membership as it receives AIW enhancement increases. When you retire, your whole pension, including the purchased portion, receives conditional inflation protection and survivor benefits, making it even more valuable.

Watch the video: Is a DBplus purchase right for you?

A DBplus pension purchase will increase your secure retirement income. Watch the video to learn if a DBplus pension purchase is right for you.

Is a purchase right for you?

Only you can decide if a purchase is a good idea for you, and if it’s a cost effective way to increase your pension.

We suggest you seek independent advice from a financial advisor, particularly around the tax implications of purchases.

What can you purchase?

Purchasing additional pension is an important way to maximize your retirement income, from one, secure source. It may be worth it for you to consider a purchase as soon as possible. Purchases fall into two general categories:

  • If, during your membership, you have any periods during which you didn’t contribute, for example, on a pregnancy leave, or a period before you enrolled in the Plan, you may be able to make a purchase to add these periods to your DBplus pension.
  • If you worked for an employer that does not participate in the CAAT Pension Plan, but that had a Canadian registered pension plan, you can make a purchase in respect of that membership, as long as the funds are in a registered retirement savings account, such as an RRSP or a LIRA.

Identify your situation from the possibilities below to see your options.

You can purchase the period of membership with any Canadian registered pension plan. If your previous membership was in a defined benefit plan, you must have transferred the value of that pension into a registered retirement savings account, such as an RRSP or a Locked-in Retirement Account (LIRA).

  • The cost of the purchase is paid entirely by you, with no employer matching contributions.
  • The maximum amount you can contribute for the purchase is based on 18% of your T4 earnings for the period you are purchasing.
  • The funds for the purchase must come from a registered retirement savings account, such as an RRSP or a LIRA. This means the amount you can contribute for the purchase is limited to the calculated maximum, or the amount of funds in your registered retirement savings accounts, whichever is lower.
  • The Plan calculates the amount of pension you would receive as a result of the purchase using the guaranteed base pension formula and the purchase adjustment factor.

Exceptions

Periods of membership in Group RRSPs and Deferred Profit Sharing Plans are not eligible for purchase in DBplus.

If your pension benefit is in a defined benefit pension plan, and still in your previous employer’s pension plan, you must transfer it to a registered retirement savings account before you can make the purchase in the CAAT Plan. You cannot purchase pension earned prior to 1992 with another employer’s pension plan if it was a defined benefit plan.

If you were away from work on an approved leave of absence, you can make a purchase for this period.

The maximum amount you can contribute for the purchase is equal to the total member and employer contributions for the period up to the allowable limits under the Income Tax Act. Your employer does not contribute. The contributions are calculated using your deemed earnings during the leave period, and the contribution rate in effect during the leave.

The funds for the purchase must come from a registered retirement savings account, such as an RRSP or a LIRA. This means the amount you can contribute for the purchase is limited to the calculated maximum, or the amount of funds in your registered retirement savings accounts, whichever is lower.

The Plan calculates the amount of pension you would receive as a result of the purchase using the guaranteed base pension formula and the purchase adjustment factor.

If you make the purchase within six months after you return to work

  • The amount of pension you receive is calculated with a purchase adjustment factor of 100%, no matter how close you are to the normal retirement date (this is the same as having no purchase adjustment factor).
  • You will pay 100% of the purchase amount, with no employer matching contributions.

If you make the purchase more than six months after you return to work

  • The amount of pension you receive is calculated using the purchase adjustment factor based on how close you are to your normal retirement date.
  • You will pay 100% of the purchase amount, with no employer matching contributions.

The process depends on the timing of your purchase.

You may be able to make this purchase through regular deductions by your employer from Supplementary Unemployment Benefit (SUB) Plan payments you may receive during the leave period.

Making the purchase during your leave through your employer (if applicable)

If your employer provides supplemental maternity leave payments, your contributions may be deducted directly from these payments. Your employer will match these contributions and your pension will continue to grow during your leave.

Your employer will provide you with the form that you will have to complete and sign. Generally it is to your advantage to purchase these leaves, however if you decide against it, you must complete the waiver section of the form and return it to your employer.

If you are not entitled to such payments, or do not wish to have contributions deducted from your payments, you can make the purchase when you return to work.

Making the purchase when you return to work

You have the option to make the purchase when you return to work. The amount you can purchase is based on your deemed earnings during the period of leave, and the contribution rate in effect during the leave.

The Plan calculates the amount of pension you would receive as a result of the purchase using the guaranteed base pension formula and the purchase adjustment factor.

If you make the purchase within six months after you return to work

  • The amount of pension you receive is calculated with a purchase adjustment factor of 100%, no matter how close you are to the normal retirement date (this is the same as having no purchase adjustment factor).
  • Your employer will match your contributions for the purchase.
  • You can use cash for the purchase.

If you make the purchase more than six months after you return to work

  • The amount of pension you receive is calculated using the purchase adjustment factor based on how close you are to the normal retirement date.
  • You will pay 100% of the purchase amount, with no employer matching contributions.
  • The funds for the purchase must come from a registered retirement savings account, such as an RRSP or a LIRA. This means the amount you can contribute for the purchase is limited to the calculated maximum, or the amount of funds in your registered retirement savings accounts, whichever is lower.

The process depends on the timing of your purchase.  

If you work outside of Ontario, the Employment Standards Act (Ontario) does not apply to you. Contact your employer’s HR to determine if your leave is eligible under the applicable legislation based on your province of employment.

You may be able to purchase other periods of leave, for example, if you had a statutory leave as defined under the applicable provincial legislation, you can make a purchase for this period. 

Other types of purchasable periods could include any time that you:

  • worked for an employer that participates in the CAAT Plan before joining the Plan
  • were a member of the Plan, but terminated before vesting and took a refund of contributions
  • were a member of the CAAT Plan, terminated, and transferred the commuted value out of the Plan
  • had a period of grievance, if you have returned to work
  • had a period of layoff, if you have been recalled.

Under the Employment Standards Act (Ontario) a statutory leave includes:

  • Family medical leave
  • Organ donor leave
  • Family caregiver leave
  • Critical illness leave
  • Child death leave
  • Crime-related child disappearance leave
  • Domestic or sexual violence leave
  • Sick leave
  • Family responsibility leave
  • Bereavement leave
  • Emergency leave, declared emergencies
  • Pregnancy leave *
  • Parental leave *

* Note that Pregnancy, adoption or parental leaves are statutory leaves covered under the Employment Standards Act, but they have different purchase processes. Refer below to “I took pregnancy, parental or adoption leave resulting from the birth or adoption of a child” for more information and to find the correct form to get started.

If you work outside of Ontario, the Employment Standards Act (Ontario) does not apply to you. Contact your employer’s HR to determine if your leave is eligible under the applicable legislation based on your province of employment.

Details about the purchase cost

In DBplus, purchases are treated like contributions. You make contributions for the period you are purchasing, and the Plan calculates the amount of pension you would receive as a result of the purchase, using the pension formula and the purchase adjustment factor.

What does a purchase cost? 

In DBplus, purchases are treated like contributions. You make contributions for the period you are purchasing, and the Plan calculates the amount of pension you would receive as a result of the purchase, using the pension formula and the purchase adjustment factor.

  • Unlike your regular contributions, which your employer matches, you are responsible for the entire cost of your purchase (with some exceptions).
  • There are Income Tax Act maximums that apply to the amount you can purchase.  
  • Once the purchase amount has been determined, the funds must come from a registered retirement savings account, for example an RRSP or LIRA. If your registered accounts have an amount equal to or more than the calculated purchase amount, you can contribute the entire purchase amount. Your purchase amount can come from multiple accounts, but if your registered accounts have an amount that is less than the calculated amount, you can only contribute up to the amount available in your registered accounts. 

The amount of pension you receive as a result of the purchase depends on a variety of factors

The purchase adjustment factor is applied to all DBplus pension purchases. It depends on the number of years you are away from normal retirement at the date of the purchase.

  • If you make a purchase when you are more than 25 years from your normal retirement date, the adjustment factor is 100%.
  • If you are less than 25 years from your normal retirement date, the 100% adjustment is decreased by 1.4% per year, calculated on a day-by-day basis, reducing the purchased benefit.

This means the closer you are to your normal retirement age, the less pension your purchase will result in. For example, if you were to make a purchase and you were 20 years from your normal retirement date, the purchase adjustment factor would be 93% (100% - (1.4% x 5 years)).

How to pay for your purchase

  • The funds for a DBplus purchase must come from a registered retirement savings account such as an RRSP or a LIRA. You are responsible for arranging the transfer, as well as any fees that your financial institution may charge.
  • In most cases, you are responsible for the full cost of any purchase.
  • However, if you are making a purchase of a leave protected under the Employment Standards Act (Ontario) within six months of the end of the leave, your employer is required to contribute to the purchase as well.
  • Once you sign the purchase form, you will have 90 days to make full payment. If the payment is made after 90 days, the amount of pension you will receive will be recalculated with a revised purchase adjustment factor.

Tax Implications

Nearly all DBplus purchases are made using funds in tax-sheltered registered retirement saving accounts. If your funds came from these accounts, there are no tax implications for your DBplus purchase, however you will not be able to reclaim the RRSP room from the purchase – in effect, you are moving your tax-sheltered funds from one registered savings account into another.

How to start a pension purchase in DBplus

Visit the DBplus Purchase Tool to get an estimate of the value of a purchase to you and start the purchase process.

The DBplus Purchase Tool makes it easy to start the process! Once you’ve done an estimate, simply download the Purchase Application Form for your employer. (Click “Detailed Explanation” on the Tool to find the form.)

You will complete part of the form, and your employer will complete part of the form. The information provided on the form is used by the CAAT Plan to determine the maximum amount you can purchase, and the pension you would receive as a result of the purchase.

We’ll mail you an information package showing the maximum you can contribute for the purchase, and the amount of pension your purchase will result in, as well as deadlines to complete the process.

You can make your final purchase decision when you have received the package. If you don’t make the purchase within 90 days, you can choose to make it any time while you are a contributing member, but the amount of pension you can purchase may change.  

Once your payment is received, the CAAT Plan will mail you a confirmation letter.

Exceptions and restrictions

Purchases under DBplus are only permitted for employment periods that occur after 1990.

If you have already retired or terminated employment, you are not eligible to make a pension purchase, unless you are rehired and resume membership in the Plan.

You cannot purchase pension earned before 1992 from another employer’s pension plan if it was in a defined benefit pension plan.

Periods of membership in Group RRSPs and Deferred Profit Sharing Plans are not eligible for purchase in DBplus.

You can use funds from an RRSP, LIRA, Group RRSP, Deferred Profit Sharing Plan, or Defined Contribution plan to make a purchase for a period of employment with an employer that participates in the CAAT Plan, such as a leave.

We suggest you seek independent advice from a financial advisor, particularly around the tax implications of purchases.

Do you work outside of Ontario?

Some Plan provisions may be impacted by the pension legislation that is applicable based on your province of employment.

Forms

Find the forms you need here.

DBplus Purchase Tool

Visit the DBplus Purchase Tool.

Contact Us Image

Questions? Contact Us

The CAAT Plan's member services team are available to answer any questions you may have.