Reciprocal Transfer Agreements

When you move from one employer to another, you will likely ask, “Can I take my pension with me?” The answer is yes – if the two employers have a reciprocal transfer agreement.

A reciprocal transfer agreement is a negotiated arrangement regarding pension plans between two employers. It defines the terms and conditions under which a member may transfer pension entitlements (contributions, pension values and/or pensionable service) from one registered pension plan to another, and the process for making that transfer.

If there is a reciprocal transfer agreement in place, you should carefully evaluate the pros and cons of transferring your pension entitlement from your current pension plan to a new employer’s plan. Reciprocal transfer agreements can be as complicated as pension plans themselves. Each agreement is unique to the two pension plans involved, and your transfer may also be unique within that agreement. Read the transfer documentation carefully to make sure you understand all the terms and conditions.

PSSP and the Saskatchewan Transportation Company Superannuation Plan have reciprocal agreements with:

• City of Moose Jaw;
• Province of British Columbia;
• Province of Newfoundland;
• Province of Ontario;
• Saskatchewan Crown Investments Corporation;
• Saskatchewan Indian Agricultural Program;
• Saskatchewan Teachers’ Federation;
• Saskatchewan Teachers’ Superannuation Commission;
• Saskatchewan Telecommunications Pension Plan Board*; and,
• University of Regina.

*Also has a reciprocal agreement with the Liquor Board Superannuation Plan.

Considerations

There are some questions you will want to ask before you decide whether or not to use a reciprocal transfer agreement.

How are your pension benefits calculated by my current pension plan?

There are two common types of pension plans:

• defined benefit; and
• defined contribution.

Under a defined benefit plan, your pension is based on a formula, usually including years of service and a salary component. The pension plans listed above are defined benefit plans.

Under a defined contribution plan, contributions are accumulated with investment earnings. When you retire, you purchase a retirement income option using the account balance.

If you are transferring to another plan, there are at least three other factors you should consider:

Your retirement age

Some defined benefit plans offer substantial subsidies or early retirement. Some have severe penalties for early retirement.

Your survivor benefits

The formula for some defined benefit plans assumes that your pension will continue to your spouse for his or her lifetime in the event of your death. Other formulas assume that the pension will cease at your death. Including survivor benefits in your pension will decrease the monthly amount of pension paid to you.

Indexing

Some defined benefit plans include automatic indexing or have a history of ad hoc indexing for their pensioners. Because you might expect to live 20 or 30 years after you retire, indexing could be an important feature.