What Happens to my Pension if I Have Been Terminated?

Pursuant to the common law, upon termination of employment without cause, an employer is obligated to provide reasonable advance notice of termination or payment in lieu, often referred to as a “severance package”.

For those individuals who were hoping to remain with their employer until retirement, know that when you receive a severance package, your ex-employer is not necessarily required to bridge you to your intended or ideal date of retirement. This is the case whether you are close to the traditional retirement age of 65 or not.

In Ontario, if you participated in a group pension plan, the employer is obligated to continue your participation in the employer pension plan for the minimum period prescribed by the Employment Standards Act of 2000. This minimum statutory notice period is generally between 0 and 8 weeks, depending on your length of service.

Pursuant to the common law, however, the employer is generally obligated to continue your participation in the pension plan for an extended period of time (beyond the statutory notice period). However, many employers, do not continue pension beyond the statutory notice period (which is a maximum of 8 weeks), which can result in significant pension loss to the employee. If participation in the pension plan is terminated early, the employer is required under the common law to financially compensate the individual for the pension loss.

If your employment has been terminated, you should carefully examine whether your pension is being continued by your employer, and if so, for how long. Within 30 days of the termination of your participation in the pension plan, your pension plan administrator is obligated to provide you with:

  • A written statement outlining details of your plan including years of credited employment
  • The transfer value of the benefits
  • The benefits payable
  • Any related transfer options
  • The deadlines to exercise any transfer

Your severance package should also generally be structured in such a manner where either a) your pension benefits are being continued for the applicable common law notice period, or b) to otherwise compensate you for the pension loss.

If you were part of a defined contribution (DC) pension plan, your pension loss would be fairly simple to calculate; often, it would be the amount of employer contributions during the applicable common law notice period. However, if you were part of a defined benefit (DB) pension plan at dismissal, measuring pension loss may require an expert assessment by a pension actuary.

Upon termination of employment, you may be presented with an option of accepting a lump sum severance package instead of salary continuance. If presented with such an option, you should consider the impact of each option as it relates to your pension entitlement. Many pension plans do not allow for continued pension accrual past the statutory notice period, again the maximum of 8 weeks, if you take a lump sum payment.

If you are being asked by your employer to sign a release in exchange for the severance package, it is advisable to speak with us at Pak Smith Employment Lawyers to review your severance entitlement, including your pension entitlement.

By |2020-09-03T03:56:19-04:00December 11th, 2019|Article-All|0 Comments

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