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Pensions, reciprocal transfer arrangements

For employees who joined or were eligible to join the McGill University Pension Plan prior to January 1, 2009, the University has concluded Reciprocal Transfer Agreements with a number of Canadian employers that allow the transfer of pension credits from one pension plan to another. Staff members who have accrued pension credits with such an employer before coming to McGill may wish to consider transferring their accumulated pension credits to the McGill Pension Plan, subject to the specific provisions of the agreement that has been concluded with their former employer.

Benefit levels and pension formulas vary widely among pension plans. Consequently, the actuarial value of a year of credited service will differ from plan to plan. The method employed to transfer credit requires each plan to calculate the actuarial value of the benefits according to the terms of each plan and the employee's actual salary history applied under each plan.

Future benefit projections are based on the exit salary in the case of the former employer and the entry salary in the case of McGill. McGill then makes a "demand" to the former employer in the amount of McGill's actuarial value calculation. If the former employer is able to meet the McGill demand (i.e. if the actuarial value as calculated by the former plan is at least as high as that demanded by McGill), the full period of credited service is transferred to the McGill Plan. If the amount transferred is less than that demanded, a pro rata reduction is made in the amount of credited service transferred. If the amount available for transfer exceeds the amount demanded by McGill, it may also be transferred to the McGill Pension Fund to provide additional supplementary pension benefits (but not additional credited service) provided that such a settlement is permitted by both Revenue Canada and the pension regulations of the former employer.

It should also be noted that a transfer of pension benefits may be permitted by some employers without the necessity of a formal reciprocal transfer agreement. This practice is often permitted by employers who sponsor the defined contribution type of pension plan, in which credited service is not relevant to the calculation of benefit entitlement. In such cases, the transfer of benefits is usually effected by the execution of a single case "lock-in" agreement that provides that the amount transferred will be applied solely to provide additional benefits. In such cases, no transfer of credited service takes place but the amount transferred is invested in the McGill Pension Fund to provide additional benefits at retirement.

Transfer of pension credits between plans is generally only one of a range of options available to a terminating employee. It is not necessarily the best or most appropriate manner in which to preserve pension credits and employees contemplating such a transfer should be encouraged to make a thorough examination of all of the options offered by the former employer.

A current listing of organizations with which the University has concluded reciprocal transfer arrangements is on file with Human Resources - Pensions, Benefits and Payroll.

University administrators who may be engaged in negotiations to attract new staff members to the University are advised to contact Human Resources - Pensions, Benefits and Payroll at (514) 398-6250, for information and assistance if the transfer of pension credits becomes an issue in any individual case.

For more information, please visit Human Resources - Pensions, Benefits and Payroll