Payments

Lump Sum Payments versus Monthly Installments

You may pay for your service buyback:

• In a lump sum by paying the full amount within 30 days of the date of signing the election form;
• By monthly installments; or
• By a combination of these two methods.

The installment method includes interest and mortality charges. In the event of your death, the election is considered paid in full, with the exception of any payments in default (missed payments) to that point in time. As the installment method is more costly than paying by a lump sum payment, you should compare the two costs before making a decision on how you wish to pay for the service buyback.

Cash Lump Sum Payments

Cash lump sum payments received within 30-days of the date you signed your election will directly reduce the cash cost. If your lump sum payment is not received within that 30-day period, it is assumed that you wish to pay by monthly installments from your salary. Any lump sum amount received after the 30-day period will not be applied to directly reduce the cash cost but will be applied to the balance owing at the time the payment is made.

If the total period of service you chose to buy back is for post-1989 service, the entire amount of the cash payment is fully tax deductible and must be claimed in the tax year it was paid. However, if any or all of the lump sum cash payment is in respect of pre-1990 service, the tax deductibility is limited. Before making a large lump sum cash payment, ensure that you understand the tax deductibility limits applicable to cash payments. Refer to the Tax Implications page for further information.

Cash (or money order) payments must be made payable to the Receiver General for Canada. If accompanying the election form, it must be sent directly to the address indicated on that form.

Payments not accompanying the election form must be forwarded directly to the Public Service Contact Us - Public Service Pension Centre.

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Direct Transfer from a Registered Retirement Savings Plan (RRSP)

You may pay for prior service by means of transferring RRSP contributions. In order to do so without having income tax deducted, you must complete a Direct Transfer under subsection 146.3(14.1) or paragraph 146(16)(a) or 146.3(2)(e) form (T2033) for RRSP transfers. This form is also available from your financial institution or the Canada Revenue Agency (CRA).

If you transfer funds from an RRSP to buy back service, you must complete Area 1 of the Direct Transfer under subsection 146.3(14.1) or paragraph 146(16)(a) or 146.3(2)(e) form and forward it along with the Election Form for Elective Pensionable Service to the address indicated on that form. When completing the form, please provide your current address, the RRSP account identifier and where the form indicates "in cash" or "in kind", select "in cash".

If your cheque, money order or Direct Transfer under subsection 146.3(14.1) or paragraph 146(16)(a) or 146.3(2)(e) form is not received within 30 days from the date you sign the election form, the Pension Centre will assume you have opted to pay by monthly installments.

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Direct Transfer From Your Former Pension Plan

You may also pay for prior service through a direct transfer from your former pension plan. In order to do so without having income tax deducted, you must complete a Record of Direct Transfer of a Single Amount form (T2151). This form is available from the administrator of your former pension plan or CRA.

The T2151 should be forwarded along with the Election Form for Elective Pensionable Service to the address indicated on that form. Upon receipt of your election form, the Pension Centre will contact you concerning this payment option.

Registered funds transferred into the Public Service pension plan cannot be certified as "locked-in" in accordance with the federal or provincial pension benefits standards legislation. Transferred funds are locked-in according to the provisions of the Public Service pension plan and not that of other pension benefits standards legislation. For this reason, some pension plan administrators and financial institutions may be reluctant or unwilling to transfer your funds. Contact your former employer or pension plan administrator in order to obtain more information on their transfer requirements and the amount of funds available. The Pension Centre can provide details of the Public Service pension plan lock-in provisions. Please note that the amount available for transfer to buy back service may not be the same as the amount available for transfer under the terms of a Pension Transfer Agreement (PTA).

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Monthly Installments

As indicated, the monthly installment method is more costly than paying by lump sum because of added interest and mortality charges.

If you pay by monthly installments, deductions must be made by the end of the month in which your election form is received. The first deduction may be larger than the regular monthly amount if deductions are not started on time. Also, proof of age is required when monthly installments have been chosen as the payment method. If satisfactory proof of age is not on file when you sign your election form, the Pension Centre will request that you submit one. A letter will be sent to you outlining the requirements, the time limit for submitting the proof of age documents and the consequences of not supplying the required documents within the prescribed time.

When on Leave Without Pay (LWOP), your payments should be sent directly to the Contact Us - Public Service Pension Centre. Interest will be charged on defaulted payments.

If you retire prior to paying the cost of your service buyback in full, the required installments will be deducted from your monthly pension benefit once your service buyback has been finalized. If your pension benefit is not payable immediately (within 30 days of termination of employment) you must remit your elective service payments directly to the Pension Centre; otherwise, interest will be charged on any defaulted payments. A default, which occurs over an extended period of time, will result in significantly higher minimum monthly payments.

After choosing monthly installments, you may decide later to amend your method of payment. You may make a lump sum payment at any time. It will be applied to shorten your repayment period or, at your request, reduce your monthly installment amount. You may also increase your monthly installment amount at any time which will shorten your repayment period. The payment methods are flexible and you may choose any one or a combination of these options. However, you normally cannot reduce your monthly payments below the minimum monthly installment amount nor can you extend the repayment period beyond the maximum permitted.