OSPC - FAQS - Overview of Manitoba Pension Laws
Termination and ending employment
The main objective of The Pension Benefits Act (the act) is to protect employees' rights to the benefits that are promised under private pension plans. The following are answers to frequently asked questions (FAQ) about Manitoba's pension laws. You should refer to the act for further information on Manitoba's pension laws. To find out the details of your particular pension plan (the terms of your plan may be more generous than required by the act), you should contact the plan administrator.
NOTE: Descriptions of the various pension plan options and terms discussed in these answers can be found at the bottom of the page.
What are my options when my employment ends?
Defined Benefit Plans
If you are a member of a defined benefit pension plan, you are entitled to the pension benefits under the terms of the plan. Any funds not locked in are available as a cash withdrawal.
If you have not reached the early retirement age stated in the plan, you must be allowed to choose what you want to do, either:
- leave the money in your employer's pension plan
- transfer your locked-in funds to a Locked-in Retirement Account or
- transfer your locked-in funds to a Pooled Registered Pension Plan.
A member of a defined benefit plan, who has reached the plan's early retirement age, may only transfer the locked-in funds to a Locked-in Retirement Account or Pooled Registered Pension Plan, if the plan allows it.
Defined Contribution Plans
If you are a member of a defined contribution pension plan, you are entitled to receive your own contributions (if any) and the contributions your employer made on your behalf, with interest. Any funds that are not locked in are available as a cash withdrawal.
You must be allowed to choose what you want to do, either:
- leave the money in your employer's pension plan
- transfer your locked-in funds to a Locked-in Retirement Account (LIRA) or
- transfer your locked-in funds to a Pooled Registered Pension Plan.
For example:
Alfonso became a member of a defined contribution pension plan when he joined his company. He left the company 18 months after he started work. Alfonso will be entitled to his contributions and the contributions made for him by his employer.
What are excess contributions?
If you are a member of a defined benefit pension plan, your monthly pension is set by a formula, usually based on salary and years of service. If you are required to make contributions to the plan, your employer must pay at least 50 percent of the value of the pension benefits you earned after January 1, 1985.
For example:
Pension Cost.....................$4,700
Employee Contribution (from Jan. 1/85 to end date) with interest.....................$4,000
Excess Contribution: $4,000 - ($4,700 x 50%) = $1,650
You are entitled to a locked-in pension of $4,700. This is made up of equal contributions from you and your employer ($2,350 each), plus the excess employee contribution.
Excess contributions can:
- be taken as a cash refund
- used to increase your pension or
- transferred to a Registered Retirement Savings Plan if the federal Income Tax Act allows it under your plan
What is a transfer deficiency?
A transfer deficiency occurs when you, as a member of your company's defined benefit pension plan, are entitled to transfer the value of your pension benefits out of the company plan, but the plan is not fully funded at the time.
What happens if there is a transfer deficiency?
When a transfer deficiency exists, an initial amount of your benefit will be transferred, based on the percentage of funding the plan has. Within five years, your employer must contribute the rest of the funds owning to the pension plan to cover the remainder (called the transfer deficiency) of your benefit. Then the plan administrator must transfer the remainder of the benefit, plus interest, to you.
For example:
The plan is 90 percent funded and your total benefit entitlement is $100,000.
Your initial benefit will be $100,000 x 90% = $90,000
The remaining benefit owing will be $100,000 - $90,000 = $10,000 plus interest
What are the rules for providing information on my benefits?
Under the provincial act, when your employment ends, the plan administrator has 60 days (or 60 days after the administrator becomes aware that your employment has ended) to provide a statement of your benefits.
How long do I have to decide how I want to receive my benefits?
You, as a plan member, have 90 days to choose how you want to receive your benefits.
How long does it take to transfer benefits?
If you are transferring your benefits out of the plan, the plan administrator must make the transfer within 90 days after the administrator has received all the necessary documents to do it.
For information on termination benefits and options under your pension plan, contact your plan administrator.
If you have more questions about the act or regulations, contact the Office of Superintendent - Pension Commission at (204) 945-2740 in Winnipeg; 1-800-282-8069, extension 2740 toll free; or go to www.gov.mb.ca/pension.
Definitions
Defined benefit pension plan is a plan in which you as a member earn a pension based on service and earnings. These plans can be contributory (employees must make contributions) or non-contributory (only the company makes contributions).
Defined contribution pension plan is a plan in which you receive, at retirement, the pension that can be bought, based on the value of the contributions you (if required by the plan) and your employer made, plus interest.
Locked-in Retirement Account (LIRA) is an investment that allows your money (pension benefits) to continue to grow and accumulate interest while being held (or locked in) in the fund until you retire. LIRAs replace locked-in, Registered Retirement Savings Plans (RRSPs), although they operate in the same way. A LIRA is a RRSP that is governed by the provincial act and holds locked-in pension funds until they are used for retirement.
Pooled Registered Pension Plan (PRPP) is a defined contribution-style plan that is set up and administered by a licensed provider and administered by the financial institution.
Registered Retirement Savings Plan (RRSP) is a personal retirement savings plan governed by the federal Income Tax Act (Canada).
