Leaving the Plan

Pension plans are only required to do an actuarial valuation once every three years, but LAPP does one annually to be sure we are always on top of any gap between what we hold in the Fund and what we estimate we will need to meet our pension obligation.

Leaves of Absence

• 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. If you do not complete the payment, the amount of service attached to that leave of absence will be prorated to what you have paid for to date. If you have had a leave of absence in the year that you leave your LAPP employer, you will have 30 days from your LAPP termination date to apply to purchase the attached service.

Prior Service Purchases

• If you are considering buying prior service, such as probationary service, you must let LAPP know before you leave your job with your LAPP employer. If you are already making payments towards buying prior service, you will have 90 days to finish paying for that buyback.

If you leave the Plan:

• Before age 65;
• Prior to January 1, 2022; and
• You have fewer than two years of membership or pensionable service (including purchased prior service),

you will become what is called a deferred member. If the above applies to you, you will not be vested and therefore not eligible to collect a pension at retirement.

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.

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You can leave your Pension Contributions and 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 or become a member of another plan that has a transfer agreement with LAPP, you may want to leave your money in the Plan.

As soon as you become an active member again, you will be automatically vested and eligible to receive a pension for the rest of your life when you turn 55.

• What is the value of being vested?
• What are the benefits of a lifetime LAPP pension?
• How is my lifetime LAPP pension calculated
• If I leave my pension contributions with LAPP and later rejoin the Plan and become automatically vested, what will my future lifetime pension be?

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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.

• Who does LAPP have transfer agreements with? How do I complete a transfer?

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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.

• Would you like the form to transfer funds from LAPP to an RRSP or LIRA?
  • Use the form Request for Transfer from a Registered Pension Plan

• What are the benefits of a lifetime LAPP pension?

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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 mailed to you the following February 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. Read more about Income Taxes.

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.

As a LAPP member, you are entitled to a lifetime LAPP pension at retirement.

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 us know. If you do not, your funds will be left with LAPP until you decide what you want to do with them.

You can request a new Termination Statement later as long as you have not rejoined LAPP.

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You Can Leave Your Pension Benefit With LAPP

When you turn 55, you will be eligible to receive a pension for the rest of your life.

There are good reasons for leaving your money in the Plan, especially because it is pretty rare these days to belong to a pension plan that will pay benefits for life, no matter how long you live.

Also, if you take another job with a LAPP employer, by leaving your money in the Plan you will add new pensionable service to what you have earned and increase the lifetime pension you will receive. When you leave your money in LAPP until retirement, you become what is called a deferred member.

• What are the benefits of a lifetime LAPP pension?
   
• How is my lifetime LAPP pension calculated?
   
• If I leave my pension benefit with LAPP what will my future lifetime pension be?

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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.

• Who does LAPP have transfer agreements with? How do I complete a transfer?

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You Can Transfer Your Pension as a Lump Sum to a Locked-In Retirement Account (LIRA)

Commuted value, also known as CV, is the present value of a future pension that would be paid for a person’s lifetime after retirement. It is a lump sum payment equal to the amount of money that would have to be set aside by LAPP today, based on LAPP's current economic and demographic assumptions, to pay for that person's future pension.

If you transfer your commuted value out of LAPP, you are no longer entitled to a lifetime LAPP pension.

At LAPP, CVs are calculated using the same economic and demographic assumptions that are used to set funding targets, provide information used in setting contribution rates and form the basis of all other administrative calculations where it is necessary to estimate the cost of the benefits to be provided to members.

A determination of a member’s CV must be done at the time of termination from active membership, or in the case of a deferred member, at the time of retirement or withdrawal from the Plan. If you are already vested and are planning to retire or terminate from your employer, you can read about your options for your pension entitlement on the page, When Can I Retire?

Your Commuted Value Transfer Options Are:

• Transfer your commuted value to your LIRA and have any non-locked funds transferred to your Registered Retirement Savings Plan (RRSP).
• Transfer your commuted value to your LIRA and have any non-locked funds paid as a taxable cash lump sum payment.

Because there are limits to the amount of funds from a pension payout that you are allowed to tax shelter, your payout may also contain some funds known as tax rule excess that you have to take as taxable cash.

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.

LIRAs have strict rules about how and when the funds within them can be accessed. Normally, money cannot be taken from a LIRA until the owner reaches age 50, but you can get more details about converting LIRA funds from the Government of Alberta Private Sector Pensions Information for Individuals website.

Once the transfer to the LIRA is made, you will not be able to change your mind.

How to Transfer to a LIRA

• Before the commuted value can be transferred, you will need a LIRA with a bank or financial institution. Your bank or financial institution can assist you with this.
• LAPP can only transfer locked-in funds to a financial institution that appears on the Alberta Superintendent of Pensions' list.
• LAPP will only send the locked-in funds directly to the approved financial institution, and not to a third party company (such as an investment broker or related company of the financial institution).
• There is no tax withheld from a transfer to a LIRA. All funds transferred to a LIRA and the investment earnings on those funds are typically used to purchase an annuity, such as a Life Income Fund (LIF) or Locked-In Retirement Income Fund (LRIF) that will provide monthly payments from pension commencement to the end of the life of the LIRA holder.
• Normally, the earliest a LIRA can be converted to an annuity, LIF or LRIF is the 50th birthday of the LIRA holder. The LIRA must be converted to an annuity before the end of the year in which the LIRA holder reaches age 71.
• Would you like the form to transfer funds from LAPP to a LIRA?
  • Use the form: Request for Transfer from a Registered Pension Plan

As a LAPP member, you are entitled to a lifetime LAPP pension at retirement; and if you are age 55 or older when you leave the plan, you are eligible to start your LAPP pension right away. You can also choose to start your pension at a later date.

You Can Start an Immediate LAPP Pension

• What will my lifetime pension be, based on my current LAPP membership or service, age, and salary details?
• I'm thinking of retiring and want more information.
• I'm ready to retire and want more information.

You Can Start Your Pension at a Later Date

You can wait and start your pension after you turn 55, but you have to start it before the end of the year in which you turn 71.

Also, if you take another eligible position with a LAPP employer, leaving your money in the Plan means that you will add new pensionable service to what you have earned and increase the lifetime pension you will receive. Please note that you will normally not be eligible to start to receive a LAPP benefit while you are active with any LAPP employer. When you leave your money in LAPP until retirement, you become what is called a deferred member.

• I want more information on when I can retire.

You Can Transfer Your Pension Benefit to Another Pension Plan

LAPP has transfer agreements with several provincial and federal public sector pension plans in Canada. If you start working for a new employer who participates in one of those pension plans, you may be able to transfer your LAPP service into a new plan.

• Who does LAPP have transfer agreements with? How do I complete a transfer?

If you stop contributing to LAPP on or after your 65th birthday, you are entitled to an unreduced pension.

However, if you think you may seek employment again before or when you are 71 years old, consider:

If you leave your money in the Plan, you become what is called a deferred member. If, after deferring, you take another eligible position with a LAPP employer, you will add new pensionable service to what you have already earned and will increase the lifetime pension you will receive. Please note that while you are active in LAPP, you are not eligible to start to receive a LAPP benefit.

Just remember: you must start your pension by the end of the year in which you turn 71 years old.

• Are you thinking of retiring?
• Are you ready to retire?