If you are younger than age 65 and you leave LAPP before you have two years of LAPP membership or two years of LAPP service (including purchased prior service), you will not be eligible to collect a pension at retirement. This is what it means to say you are "not vested".
If you leave the Plan, LAPP will send you a Termination Statement with your options. You will have 90 days to make a decision and let LAPP know. If you do not, your contributions with interest will be paid to you with income taxes withheld.
You Can Leave Your Pension Contributions with Interest with LAPP
Leaving your pension contributions with interest with LAPP will allow you to add pensionable service to your existing service if you later rejoin LAPP.
If there is a chance you will be returning to a position with any LAPP employer, you may want to leave your money in the Plan.
Once you reach two years of LAPP membership or service, you will be vested and eligible to receive a pension for the rest of your life when you turn 55.
You Can Transfer Your Pension Benefit to Another Pension Plan
LAPP has transfer agreements with several other provincial and federal public sector pension plans.
If you start working for a new employer who participates in one of those plans, you may be able to transfer your LAPP service to that new plan.
You Can Transfer Your Contributions with Interest to a Registered Retirement Savings Plan (RRSP), with No Taxes Withheld
Your contributions, with interest, can be transferred to an RRSP. No income tax will be withheld from this transfer, and no T4A will be issued.
You Can Receive a Refund of Your Contributions with Interest
Your contributions, with interest, will be paid to you by cheque or direct deposit, and income tax will be withheld. After this payment, you will no longer have a benefit with LAPP. A cheque will be sent automatically if you do not respond to your Termination Statement within 90 days.
How much income tax is withheld from my payout?
If you live in Canada, the amount withheld is based on this table:
|Lump Sum Amount||
Federal Income Tax Rate
|Up to $5,000||10%|
|More than $5,000 up to $15,000||20%|
|More than $15,000||30%|
A T4A will be issued with your payment to show how much additional income you have received and how much tax you have paid. The amount of tax withheld will be based only on the value of this payment. When added to your employment income for the year, you may be required to pay additional tax when you file your income tax return the following year.
If you are living outside of Canada when you receive funds from the Plan, the amount withheld will depend on that country's income tax rates.