Pensionable service is a key factor in figuring out how much pension you will receive. Because of this, you should consider buying service from times while you were away from work and not being paid, such as maternity and parental leave. This kind of buyback lets you avoid a gap in your pensionable service, and increases the amount of your future pension.
You may have the option to make the payments during your leave or wait until you return to work. You might even be able to use funds from a Registered Retirement Savings Plan (RRSP) or other retirement savings tool to pay for your buyback.
You can purchase up to five years of any kind of leave, and up to three years of maternity or parental leave. Additional years of parental leave can be taken against the five year amount.
For the first year of leave that you buy in LAPP, your employer pays the employer share of contributions with interest and you pay the employee share. Only the first year of leave in LAPP is cost-shared in this way. With any later leaves, you are responsible for paying both the member and employer share of contributions.
The due date shown on your Buyback Proposal will be set based on these timelines.
Payment(s) must be made according to the schedule shown on your Buyback Proposal, but you can also pay for the entire buyback in one payment. You can even transfer funds from an RRSP to pay for your buyback.
If you miss these timelines, you may still be able to purchase the leave but it could cost much more. If it costs more, it could be because you are paying for the full cost of that additional service, rather than just your own contributions.
Paying for a Buyback When You Leave Your Employer
If you are already making payments towards a leave of absence when you leave your LAPP employer, you will have 90 days to finish paying for the buyback. You are also able to take a break from making payments if you go on another period of leave.
If you do not complete the payment, the amount of service attached to that leave of absence will be credited based on what you have paid for to-date.
If you leave your LAPP employer and immediately start with a new LAPP employer with no break in service, you can continue making payments as you were before. You can arrange this with your new Human Resources or Payroll & Benefits department.
If you do not return to work at the end of your leave of absence, or if you change to a position with your employer where you are no longer a member in LAPP, you must apply to purchase the leave period within 30 days of the day you stop contributing to the Plan.
For example, if the cost of buying one year of service was $10,000 and you decided to stop making payments after paying $5,000, you would receive credit for about half a year's service (before any interest charges get factored in).