Important Terminology and Definitions
Annual Allowance
If you became a member of the Public Service Pension Plan on or before December 31, 2012:
- An annual allowance is a benefit available to plan members who have more than two years of pensionable service, who retire before age 60 and are not entitled to an immediate annuity. This benefit is a reduced pension that takes into account the early payment of a retirement pension. It becomes payable at age 50 at the earliest.
If you became a member of the Public Service Pension Plan on or after January 1, 2013:
- An annual allowance is a benefit available to plan members who have accumulated more than two years of pensionable service, who retire before age 65 and are not entitled to an immediate annuity. This benefit is a reduced pension that takes into account the early payment of a retirement pension. It becomes payable at age 55 at the earliest.
Annuity
A contract purchased from an insurance company to provide periodic (usually monthly) payments to a person for his or her lifetime.
Average Salary (For Pension Purposes)
Salary of the five consecutive years of highest paid pensionable service in the public service. The average salary of those five years is used to calculate pension benefits under the public service pension plan. Salary includes performance pay and bonuses paid.
Bridge Benefit
When you retire, you will receive both a lifetime pension and a bridge benefit. A bridge benefit is a temporary benefit, payable until age 65 (the bridge benefit stops if you become entitled to CPP/QPP disability benefits). Regardless of when you start receiving your CPP/QPP pension, your bridge benefit payments will stop at age 65.
Common-Law Partner
For the purpose of federal pension legislation, a person who has been cohabiting with a member in a conjugal relationship for at least one year.
Compensation Web Applications
Compensation Web Applications (CWA) is a suite of self-service pay, pension and insurance applications enabling employees to monitor and manage their personal compensation information, as well as calculate pay, pension and insurance “what if” scenarios to assist with financial planning. CWA allows employees to view their Pension and Insurance Benefits Statement, their Statement of Earnings (Pay Stub), and request changes to their Voluntary Deductions. Employees can also use the Pension Benefits Calculator, the Service Buyback Estimator, the Retirement Package, the Pension Portability Package, the Service Buyback Package and the Public Service Health Care Plan (PSHCP) Web Application to help make important pension and insurance related decisions.
Continuous Employment
The period during which an employee is continuously employed by the same employer. Continuous employment may be defined in the pension plan (or by law) to include certain periods of absence and/or of employment with an associated or former employer.
Deferred Annuity
If you became a member of the Public Service Pension Plan on or before December 31, 2012:
- A benefit that is available to most plan members who leave the public service and have accumulated at least two years of pensionable service. This benefit is calculated using the same formula as an immediate annuity, but payment is deferred.
If you became a member to the Public Service Pension Plan on or after January 1, 2013:
- deferred annuity is available to most plan members who leave the public service before age 65 and have accumulated at least two years of pensionable service. This benefit is calculated using the same formula as an immediate annuity, but payment is deferred.
Defined Benefit Plan
A type of registered pension plan that promises a certain level of pension, usually based on the plan member’s salary and years of service. The Public Service Pension Plan is a defined benefit pension plan. This is contrasted with defined contribution pension plans where the benefit at retirement is determined by the amount of annuity that the accumulated contributions plus interest can purchase at retirement.
Immediate Annuity
If you became a member of the Public Service Pension Plan on or before December 31, 2012:
- You can receive an immediate annuity if you leave the public service at age 60 or over with at least 2 years of pensionable service or have attained age 55 or over with at least 30 years of pensionable service.
If you became a member to the Public Service Pension Plan on or after January 1, 2013:
- You can receive an immediate annuity if you leave the public service at age 65 or over with at least 2 years of pensionable service or at age 60 or over with at least 30 years of pensionable service.
Indexation
It is the automatic adjustment of pensions in pay, or accrued pension benefits (deferred annuities), in accordance with changes in the Consumer Price Index. Public service pensions are indexed in January of each year.
Operational Service – Correctional Services Canada
Service with Correctional Services Canada (CSC) is broken down into two types:
- Actual operational service
You accumulate actual operational service when your CSC principal place of work is not one of the following:
- The national headquarters or a regional headquarters of CSC;
- The office of the CSC Commissioner; or
- A regional Correctional Staff College or any other institution that provides similar training to CSC employees.
- Deemed operational service
If you have accumulated at least 10 years of CSC operational service and have ceased to be employed in actual operational service but continue to be employed by CSC, you may accumulate operational service while employed by CSC, subject to certain conditions. You are encouraged to contact the Pension Centre to fully understand the conditions.
- For Contribution Rates, visit Operational Service Provisions Contribution Rates.
Pension Adjustment (PA)
The estimated value of a member’s pension benefits accruing in a particular year as determined under the Income Tax Act. For defined benefit plans, the PA is determined by a formula. A person’s RRSP contribution room is reduced by the value of the previous year’s PA.
Pension Benefit
The periodic amount that a member or former member is or may become entitled to under the terms of the pension plan.
Pension Benefit Credit
The aggregate value, at any given time, of a person’s pension benefit and other benefits provided to them under a pension plan.
Pensionable Age
The age specified in the plan text as the age at which members are entitled to a pension that is not reduced because of early retirement. It can be a specific age or be the age at which a certain number of years of service are attained, or require the attainment of both a certain age as well as a minimum number of years of service.
Pensionable service
Pensionable service means the complete or partial years of service credited to you at retirement. Your total pensionable service is the sum of your periods of current service, service that has been bought back and service transferred through a Pension Transfer Agreement. Your pensionable service is used to determine your eligibility for pension benefits and to calculate your pension benefits.
Plan Administrator
The person or group that is responsible for managing your pension plan and the pension fund. The plan administrator may hire a third party service provider to manage the day-to-day work, but the plan administrator is ultimately responsible.
Portability / Transfer Options
The options available on cessation of membership, death, marriage breakdown, or plan termination. Members, or survivors in the case of a member’s death, can transfer the commuted value of accrued pension benefits to a Locked-in RRSP, a LIF, an RLIF, another pension plan (if there is a reciprocal transfer agreement in effect and the transfer is accepted by the new plan), or the commuted value can be used to purchase an immediate or deferred annuity. A member can forego these options and elect to receive a deferred pension from the plan at retirement.
Retirement Compensation Arrangement (RCA)
A plan which provides benefits that exceed the allowable limits for a registered pension plan under the Income Tax Act. For 2019, employees whose annual salary rate was in excess of $169,300 were required to contribute to the RCA in respect of the portion above this amount (https://www.tpsgc-pwgsc.gc.ca/remuneration-compensation/bapr-samb/2019/bapr-samb-2019-001-eng.html). For executives, this includes base salary and any performance award or bonus received.
Return of Contributions
A benefit that is available to plan members who leave the public service with less than two years of pensionable service under the public service pension plan. It includes employee contributions only plus interest, if applicable.
Service Buyback
Purchase of prior eligible service that an active plan member may count as pensionable, at his/her option, subject to certain conditions. You are encouraged to contact the Pension Centre to fully understand the conditions.
Spouse
For the purposes of pension legislation, a person married to the member or former member (includes a void or null marriage).
Supplementary Death Benefit
Decreasing term life insurance benefit equal to twice the annual salary of the plan member; coverage decreases by 10 percent per year starting at age 66. A minimum amount of coverage ($10,000) is provided at no cost to the plan member at age 65 for plan members entitled to an immediate annuity or an annual allowance payable within 30 days after termination of employment in the Public Service. This minimum coverage is maintained for the plan member’s life.
Survivor
The survivor of a plan member is the person who, at the time of the plan member’s death:
- was married to the plan member before retirement; or
- was cohabitating in a relationship of a conjugal nature with the plan member prior to retirement and for at least one year prior to the date of death.
Survivor Benefit
A pension benefit that is paid to the eligible survivor of a plan member who dies. The common-law survivor of a plan member may be entitled to a survivor benefit if this person has lived with the plan member in a relationship of a conjugal nature prior to retirement and for at least one year prior to the date of death.
Transfer Agreement
An agreement negotiated between the Government of Canada and an eligible employer to provide portability of accrued pension credits from one pension plan to the other.
Transfer Value
A benefit option available to plan members who leave the public service before age 50 with at least two years of pensionable service. This benefit is the actuarial value of the plan member’s future pension benefits. It must be transferred to another registered pension plan, to a retirement savings vehicle or to a financial institution for the purpose of purchasing an annuity.
Vested Benefits
Pension benefits to which an employee is entitled upon cessation of membership under a pension plan, provided that they have accumulated at least two years of pensionable service. Under federal legislation, an employee’s pension benefits are vested immediately when they join a pension plan.
Waiver
The removal of the normal reduction to an annual allowance that is applied because the individual, at termination, did not meet the age and service thresholds to receive an immediate annuity. This reduction would normally be 5% for every year that the individual’s pensionable service credit is less than 30 years or the age is less than 60 years for plan members employed on or before December 31, 2012 and less than 65 years of age for plan members employed on or after January 1, 2013.
Year’s Maximum Pensionable Earnings (YMPE)
The maximum earnings for which contributions can be made to the Canada Pension Plan/Quebec Pension Plan (earnings ceiling) during the year. The YMPE changes each year according to a formula using average wage levels. The YMPE is set annually by the Canada Revenue Agency (CRA) and is available on their website.
Source: Public Services and Procurement Canada (PSPC)
