Your Pension Plan

This booklet provides a factual, concise explanation of the major terms of the Public Service Superannuation Act (PSSA, or "the Act"), your pension plan. As a new employee or one who has been in the Public Service for some time, you have a vital interest in the benefits this plan provides to you and your family and in the contributions you and your employer make to provide these benefits.

For some aspects of the Act you will have to make decisions, within given time limits, that will affect your eventual benefits and those of your family. We hope that, by carefully studying this booklet, you will be able to make the choices that are most beneficial to you. These decisions are your responsibility alone: you must learn about the choices available to you and the time within which you have to make them.

Although the information in this booklet applies to the great majority of employees, it isn't possible to cover every circumstance. If you feel that your situation hasn't been covered, or if you wish to confirm that a particular provision does or doesn't apply to you, you should talk to your compensation office.

This booklet has been revised to reflect amendments made to the Public Service Superannuation Act (PSSA) on June 17 and September 14, 1999. To find summaries of the 1999 amendments to the PSSA, you may refer to the Treasury Board Web sites listed in Annex A.

This booklet is provided for information purposes only and does not constitute a legal document on your rights and obligations. Should there be any conflict between the information in this document and that contained in the Public Service Superannuation Act and Regulations, or other applicable laws, the Act and Regulations apply.

Note: Please see Annex A of this booklet for a list of important addresses and telephone numbers that may be of use to you.

Introduction

Your pension plan is designed to provide you with a retirement income during your lifetime. In the event of your death, the plan provides an income for your survivor and eligible children.

This plan is generally referred to as a defined benefit pension plan. A defined benefit plan is one in which the benefits payable on death, disability, termination of service and retirement are specified in the plan document, in this case, the Public Service Superannuation Act and Regulations. The benefits are directly related to the employee's salary and period of participation (service with contributions) in the plan.

This Act, which provides pensions for public service employees, has been in effect since January 1, 1954. Part II of the Act, the Supplementary Death Benefit Plan, which provides decreasing term life insurance coverage to pension plan contributors, was added a year later. Since then, both the Act and its supporting regulations have been amended many times to respond to changes in the employees' and the employer's needs and to reflect changes in other federal and provincial laws. This booklet includes amendments up to September 14, 1999.

The President of the Treasury Board is the minister responsible for the PSSA, including financial management of the Superannuation Account and the Public Service Pension Fund. Public Works and Government Services Canada, under the direction of its minister, provides the day-to-day administration of the Act. The Office of the Superintendent of Financial Institutions makes periodic actuarial valuations of the Superannuation Account and the Public Service Pension Fund.

Other federal legislation complements the public service pension plan. Notably, a Retirement Compensation Arrangement (RCA) established under the Special Retirement Arrangements Act in 1994 provides those pension benefits that cannot be provided under the PSSA because of income tax rules for registered pension plans. Such benefits are paid from the RCA Account and are payable at the same time and in the same manner as those payable under the PSSA.

The public service pension plan is integrated with the Canada and Quebec pension plans (CPP/QPP). Integration affects both contributions and benefits. This means, firstly, that you contribute to your public service pension plan at a reduced rate on your salary up to the maximum covered by CPP/QPP. Secondly, it means that your pension under the public service pension plan will also be reduced by a standard formula when you become eligible to draw CPP/QPP benefits at age 65 or when you begin to draw CPP/QPP disability benefits at any age. (See "When will my public service pension be reduced?" p. 11.)

Part I - Benefits

A. Retirement Benefits

The retirement benefits payable to employees under the PSSA are designed to meet the needs of public service employees in their various situations at retirement. The benefits available to you will depend on your age, the years of service to your credit and, in some cases, the reason your employment ended.

To understand fully the benefits to which you may become entitled, read all of the following sections carefully and consult Table I.

As of June 17, 1999, the formula used to calculate basic retirement benefits for current plan members has been improved in your favour. Previously, the calculation was based on average best annual salary over six consecutive years. Now, the salary is averaged over five consecutive years. In most cases, this change will result in higher benefits at retirement.

Note: The new formula applies only to those who retire on or after June 17, 1999.

What happens if I have two or more years of pensionable service when I retire?

You will be entitled to either an immediate or a deferred pension, depending on your age at retirement. Or you may be able to choose a transfer value, depending on your age and how many years of pensionable service you have to your credit.

In most cases, the basic benefit (pension) formula below is used to calculate the benefit:

The benefit for any period of part-time pensionable service will be calculated as follows:

Notes: 1. Pensionable service means the years (complete or partial) to your credit at retirement. It includes any periods of elective service regardless of whether you have paid fully for that service. For purposes of determining whether a service threshold has been met (e.g., 2 years or 30 years), a year of part-time service counts as one year of pensionable service.

2. Average salary is your salary during five consecutive years of highest paid pensionable service. It includes any salary you earned after completing 35 years of service, if that salary is the highest. For periods of part-time pensionable service, the equivalent full-time salary rate is used but the pension benefit is adjusted to reflect the assigned hours of part-time work.

A person who retires with 35 years of service and an average salary of $40,000 over the best five years would receive two per cent X 35 X $40,000 = $28,000 per annum.

If that same person had 25 years of full-time service, along with 10 years of part-time service working 20 hours during a standard 37.5-hour work week, the calculation would be as follows:

2 per cent X 25 X $40,000 = $20,000
plus
2 per cent X 10 X $40,000 X 20/37.5 = $4,267
Total = $24,267 per annum

Retirement at or after 60 with two or more years of pensionable service, or at 55 with 30 or more years of pensionable service (immediate annuity)

If you retire at or after age 60 with two or more years of pensionable service, or at or after age 55 with 30 or more years of pensionable service, you are entitled to an immediate annuity calculated according to the formula set out above. It will not be reduced in any way, except for the appropriate adjustment for the CPP or QPP at age 65 or earlier if you are receiving disability benefits under either of these plans (see "When my public service pension be reduced," p. 11). For purposes of determining whether a service threshold has been met (e.g., 2 years or 30 years), a year of part-time service counts as one year of pensionable service.

Retirement before 60 with two or more years of pensionable service (no entitlement to an immediate annuity)

If you retire before you reach age 60 (unless you are between age 55 and 59 and have 30 or more years of service to your credit), then you have the following choice of benefits:

An annual allowance is calculated in one of two ways, depending on your age when you retire and the years of service you have to your credit.

The amount of the deferred annuity is reduced by five per cent for every year, to the nearest one tenth of a year, that you are under age 60 at the time the allowance is payable.

If you are exactly age 54 with 23 years of service, the calculation will be as follows:

Your annual allowance would equal your deferred annuity reduced by 30 per cent. If the deferred annuity were $20,000 per annum, the annual allowance would be $14,000.

If you have 25 or more years of service and are at least 50 when you leave the Public Service, an annual allowance is calculated by determining the amount of the deferred annuity and reducing it by the greater of the following two amounts:

If you are exactly age 54 with 27 years of service, the calculation will be as follows:

55 - 54 = 1 year X 5 per cent = 5 per cent
or
30 - 27 = 3 years X 5 per cent = 15 per cent

Since 15 per cent is the greater reduction, your annual allowance would equal your deferred annuity reduced by 15 per cent. If the deferred annuity were $20,000 per annum, the annual allowance would be $17,000.

In some cases, if you have 25 or more years of service and are 50 or more when you leave the Public Service, the Formula 1 reduction may produce a greater benefit than the Formula 2 calculation. If so, the larger annual allowance is paid. For example, under Formula 1, if you were 58 with 26 years of service, the annual allowance would equal the deferred annuity reduced by the following amount:

Under Formula 2, your deferred annuity would be reduced by the following amount:

55 - 58 = - 3 (therefore no reduction under the age component)
or
30 - 26 = 4 years X 5 per cent = 20 per cent

Since 20 per cent is the greater reduction under Formula 2, your annual allowance using the formula would equal your deferred annuity reduced by 20 per cent.

However, with this combination of age and service, the annual allowance would be determined using the most beneficial formula. In this instance, you would receive an annual allowance equal to the deferred annuity reduced by 10 per cent (Formula 1).

If you choose a reduced annual allowance, this reduction is permanent except in the case of disability, as described below.

If you are entitled to either a deferred annuity or an annual allowance but become disabled before you reach age 60, you will receive an immediate annuity instead. In such cases, though, the annuity would be adjusted to take into account any amount you had already received as an annual allowance.

If you are between age 50 and 60 when you retire and are interested in an annuity, you should estimate the long-term value of a deferred annuity, which is payable at 60, and compare it to an annual allowance, which is reduced but payable immediately. Depending on your circumstances, you could gain substantially by choosing an annual allowance.

If you leave the Public Service before you reach age 50, you may choose to receive your earned pension benefits as a transfer value rather than as a future monthly pension. A pension transfer value is a calculated lump-sum value of your future pension benefit. Contributors have one year after leaving the Public Service to choose this option.

The benefit to be valued will be the deferred annuity payable at age 60, taking into account potential disability and survivor benefits, as well as indexing. The transfer value will be equivalent to the lump-sum value of the earned pension based on actuarial assumptions. If you are paying elective service instalments, only the service you have bought up to the date of the option will be included in the transfer value. Therefore, it is important in this situation to consider the possibility of paying the balance owing on the election to increase the amount of the transfer value.

The transfer value must be transferred to another registered pension plan, to a locked-in retirement savings vehicle that complies with the requirements of the federal Pension Benefits Standards Act, or to a financial institution to buy an annuity.

Where an individual's transfer value exceeds the limits established by the Income Tax Act, the excess will be paid in cash to the former employee and taxed at that time.

You should direct all inquiries and requests for more information on the transfer value option to your compensation office, which has a comprehensive information package about this option.

Disability is defined as a physical or mental impairment that prevents the individual from engaging in any employment for which the individual is reasonably suited by virtue of his or her education, training or experience and that can reasonably be expected to last for the rest of the individual's life.

For you to qualify for retirement on grounds of disability, Health Canada must certify that you meet this definition.

If you retire because of disability at age 60 or older, your benefits will be the same as if you had retired due to age.

If you have to retire because of disability before you reach age 60, you will receive an immediate annuity unless you have less than two years of pensionable service.

If you become disabled and choose an immediate annuity, but later regain your health and can return to work, your immediate annuity is terminated and converted to a deferred annuity payable at age 60. If you then wish to convert the deferred annuity to an annual allowance, you may do so at any time after reaching age 50.

If you are retiring because of disability, ask your compensation office about the procedures to follow.

Generally speaking, if you leave the Public Service with less than two years of pensionable service, you are entitled only to a return of contributions plus interest, regardless of your age or reason for retiring. The rate of interest payable on a return of contributions is calculated at the Superannuation Fund rate, compounded quarterly. Interest is calculated to the end of the quarter preceding the date of payment.

Even if you have more than two years of pensionable service when taking into account service under another pension plan, when you voluntarily retire from the Public Service before completing two years of substantially-continuous public service employment, your only entitlement will be a return of contributions plus interest. If, however, you came to the Public Service from the Canadian Forces or the Royal Canadian Mounted Police, or if you transferred your pension credits under the terms of a reciprocal pension transfer agreement, you can use this previous service to make up the two years, if necessary.

If you have to retire involuntarily, you are entitled to choose any of the benefits for which, considering your age and service, you would normally qualify.

As well, if you are laid off, the Treasury Board can waive all or part of the reduction in your annual allowance that would normally occur if you are 55 or older, have less than 30 years of pensionable service and have worked for the Public Service for at least 10 years.

You should consult your compensation office if these are your circumstances and you would like the Treasury Board to waive the reduction in your annual allowance.

Table I on the next page shows the PSSA retirement benefits available under various circumstances.

We have covered several situations in which an individual leaving the Public Service must choose between two or more pension benefit options.

You choose your benefit (make your option) by completing a special optional benefit form available from your compensation office. Normally you must complete this form and forward it to the Superannuation, Pension Transition and Client Services (or the Superannuation Sector) within one year from the day you leave the Public Service (Please see Annex A for the address and phone number.). If you do not make your option within this period, you are considered to have chosen a deferred annuity and cannot subsequently choose any other benefit except an annual allowance.

Once you make an option, you may change it only under specific and rare circumstances. For this reason, when you retire, you should examine closely the benefits available to you before you complete the optional benefit form. You should also ensure that you make your option within the one- year time limit; otherwise, you will be deemed to have chosen a deferred annuity.

If you are re-employed in a position that does not require you to contribute to the Public Service Pension Fund, you can receive both your pension and also the salary for your new position.

If, however, you do become a contributor (this will depend on the nature and/or the length of your employment), your annuity or allowance will be stopped and, ordinarily, a new one based on the combined periods of service will be payable when you retire again. If you must accept a return of your contributions when you retire again, the return is limited to your new period of service and your previous basic annuity will be reinstated.

Generally speaking, re-employment outside the Public Service has no effect on any of your entitlements under the PSSA, unless you retired on grounds of disability.

Your basic pension benefits increase each January after you retire to take into account increases in the Consumer Price Index (CPI). The first increase payable the year after you retire will be prorated to reflect the number of full months since your retirement date. If there is no change in the CPI, or if it drops, your pension will not be adjusted that year.

If you retire with entitlement to a deferred annuity, your basic pension, when it is payable, will be increased by the total accumulated percentage increases from your date of retirement.

If you become re-employed in the Public Service and begin to make contributions under the PSSA, payment of your benefit, including indexing, will cease. When you cease to be employed again, your indexing benefit will be based on the amount of your basic pension at that time. Your retirement date for determining the annual per centage increase will be the most recent retirement date.

The new combination of benefits - that is, your new annuity plus the increase based on the later year of retirement - could be lower than the previous total entitlement. If you are thinking of taking a job in a contributory position, carefully consider if it would affect your total pension benefits.

When the CPP and QPP came into effect on January 1, 1966, the contribution rates under the federal employee pension plan were integrated with those under the CPP/QPP, rather than added to them. Integration of contributions required an equivalent integration of benefits. PSSA pension benefits are reduced automatically by a standard formula once the pensioner reaches age 65, which is the normal age of eligibility for CPP/QPP benefits, or when he or she begins to draw CPP/QPP disability benefits at any age.

How have the PSSA amendments of 1999 affected the integration of my pension benefits?

As of June 17, 1999, the formula by which PSSA pensions are integrated with CPP/QPP has been improved in your favour. Previously, the formula was based on average maximum pensionable earnings for the year of public service retirement and the two preceding years. Now, the average covers the year of retirement and the four preceding years. In most cases, this change will result in a slightly smaller reduction in PSSA benefits through CPP/QPP coordination.

Note: This new formula applies only to those PSSA pensioners whose pensions are reduced as a result of CPP/QPP co-ordination on or after June 17, 1999.

Normally, the reduction due to this co-ordination will occur on the first of the month following your 65th birthday, regardless of whether or not you are receiving benefits under the CPP or QPP. Please note that you must apply for CPP or QPP benefits; you don't receive them automatically. If you begin to receive your public service pension before you reach age 65 and you are not receiving CPP or QPP disability benefits, you will receive your unreduced benefit from the date of your retirement until the first day of the month following your 65th birthday.

If you become entitled to disability benefits under the CPP or QPP before you reach age 65 and are receiving a pension under the PSSA, your public service pension will be reduced immediately. You must inform the Superannuation Sector (Please see Annex A for the address and phone number.) of such an entitlement to avoid receiving a pension overpayment that you will have to repay later. When you retire, you will also be asked to complete forms declaring whether you are entitled to a CPP or QPP pension, and authorizing the Superannuation Sector (Please see Annex A for the address and phone number.) to verify this information with the CPP or QPP authorities.

The reduction in your public service pension is based on the number of years of pensionable service to your credit under the public service pension plan and on the average maximum pensionable earnings (AMPE) under the CPP or the QPP for the year of your retirement and the four preceding years. If the average of your pensionable earnings for the same years was below that amount, this lower average will be used to calculate the reduction.

If you retire on December 31, 2000, with service extending at least as far back as January 1, 1966, the reduction at age 65 will be:

If your average salary was lower than the AMPE, your actual average salary would be used in the calculation.

Under the old formula, the AMPE for year 2000 would have been $37,300. Your corresponding PSSA reduction would have been somewhat greater, at $9138.50 per year or $761.54 per month.

Note: The CPP or QPP reduction that relates to periods of part-time pensionable service is prorated.

If your marriage or relationship of a conjugal nature breaks down, the pension benefits you have acquired during the course of that marriage or during the period of cohabitation in a relationship of a conjugal nature may, on application, be divided according to the terms of the PBDA.

Married persons who have separated or divorced, and persons who have lived in a relationship of a conjugal nature for a minimum of one year and have separated, are eligible.

Either party may apply for a division. To do so, the person must make a formal application, which must be accompanied by a court order or agreement between the parties providing for the division of benefits. If the application is based on an agreement, the couple must have been separated for at least one year.

If the division is approved, a lump sum representing the share of the value of the benefits being divided will be transferred either to a specified kind of retirement savings vehicle chosen by the party in question, or to a life insurance company to purchase a life annuity. This lump sum can never exceed 50 per cent of the value of the benefits being divided. Your pension benefits will be reduced to reflect that division.

Yes. You will be notified of any application made to divide your benefits, after which you can file an objection with the Minister of Public Works and Government Services Canada, provided you do so within 90 days after the notice of application was sent out. Please note that the grounds for objection are very specific. They are as follows:

Additionally, the responsible Minister may refuse to approve a division if he or she is satisfied based on evidence submitted that it would not be just to do so.

If you need more information about the PBDA, please contact your the Superannuation Sector (Please see Annex A for the address and phone number.).

B. Benefit for Your Survivor

As a rule, once you have a pensionable service credit of two or more years, your survivor and children become entitled to an immediate allowance in the event of your death. This is true whether you are employed or retired at the time of your death. If you were retired, it doesn't matter whether you were receiving an annuity or entitled to a deferred annuity.

By the PSSA amendments of 1999, the survivor benefit has been extended to include a survivor of the same sex. The same-sex survivor of a plan member who dies on or after September 14, 1999, may now be entitled to a survivor benefit. The section on "Relationship of a Conjugal Nature" explains this in greater detail.

Where the contributor has less than two years of pensionable service at the time of death, the survivor is entitled only to a return of contributions with interest. Please see the section on Supplementary Death Benefit.

The survivor benefit is usually equal to half of your basic pension entitlement - that is, half of your pension calculated before it is reduced to reflect an annual allowance or to integrate it with the CPP or QPP. Your survivor can receive benefits under the CPP or QPP and also receive a full survivor benefit under the public service pension plan.

If you marry after retirement, your survivor would not normally be entitled to a pension. However, you may elect, within one year of marrying or within one year of becoming entitled to payment of a deferred annuity or annual allowance, to provide your survivor with a benefit by taking a reduction in your own pension.

In June 2000, Parliament adopted the Act to Modernize the Statutes of Canada in Relation to Benefits and Obligations. This Act amended the PSSA so that a plan member living with a person in a relationship of a conjugal nature may now elect to provide his/her survivor with a benefit. The plan member can do so by taking a reduction in his/her retirement pension. The details of this new optional benefit will be specified by regulations which are expected to come into force in 2001.

More information about this option is available from the Superannuation Sector. (Please see Annex A for the address and phone number.)

If you should die within one year of marriage, no survivor benefit is payable unless the President of the Treasury Board is satisfied that your health at the time of marriage was such that you expected to survive for at least one year.

If you are divorced, your former spouse will not be entitled to a survivor benefit. (See "Benefits in the Event of a Separation or a Divorce - The Pension Benefits Division Act," p. 13.) If you are separated from your legal spouse, but not divorced, your spouse is entitled to a survivor benefit.

If you have lived in a relationship of a conjugal nature, the person with whom you have so lived may be entitled to a survivor benefit.

The claimant must prove that he or she lived with you in a relationship of a conjugal nature for at least one year before your death. The relationship must have started before you left the Public Service and have continued up to the time of your death.

For your survivor to receive benefits under the pension plan, the claimant must be prepared to provide documented proof that a relationship of a conjugal nature actually existed. This proof normally takes the form of statutory declarations from disinterested persons who know the circumstances of the relationship, along with bills or receipts, mortgage papers, leases, joint bank accounts, credit accounts or any other relevant documents.

Where a contributor has both a legal spouse and an eligible survivor with whom he/she has lived in a relationship of a conjugal nature, the survivor's benefit will be apportioned between them. Each survivor's share of the benefit will be based on length of cohabitation with the contributor.

Your survivor can waive entitlement to a survivor benefit if doing so results in payment of a minimum benefit or a double-rate child's allowance (see "Allowances to Children" below). The deadline for waiver of entitlement is three months from the date of notice of entitlement.

Note: When a survivor waives entitlement to a survivor benefit, no benefit is payable upon the death of the plan member.

You, your survivors or your estate or succession cannot receive, in total, less than the amount of your PSSA contributions over the years.

Circumstances where a minimum benefit is paid and how it is calculated are as follows:

A child can be your natural child, your stepchild or a child you have adopted either legally or in fact. To be eligible for an allowance, your child must normally be under age 18. Children between 18 and 25 may receive allowances if they are enrolled in a school or other educational institution full-time and have attended continuously since their 18th birthday or the date of your death, whichever is later.

Eligible children are entitled to allowances equal to one tenth of your basic pension. If you have no survivor, the children will receive allowances equal to one fifth of your basic pension.

The maximum combined amount of children's allowances payable with respect to one contributor is four fifths of the survivor benefit or, if there is no survivor, four fifths of the contributor's basic pension. If there are more than four children, the maximum combined amount payable may be divided among the children.

Benefits are payable to your survivor and children immediately, regardless of whether you die during employment or after your retirement.

Normally, the survivor benefit and children's allowances are paid directly to the survivor. If the children are not living with the survivor, the children's allowances are paid to the person responsible for their custody and control. Allowances for children over 18 are normally paid directly to them.

The determination of benefits may be delayed if the Superannuation Directorate does not have the necessary documents on age and survivor status. Claimants should, therefore, make every effort to ensure that the Directorate has proof of age for themselves and their children and any certificates or other information they think would help clarify their entitlement to a survivor benefit. Claimants may submit this information to the Superannuation Sector (Please see Annex A for the address and phone number.) confidentially if they wish.

Table II below outlines the PSSA survivor benefit available under various circumstances.

* In cases where the contributor has less than two years of pensionable service at the time of death, the survivor is entitled only to a return of contributions with interest. Please see the following section on Supplementary Death Benefits.

C. Supplementary Death Benefit

The Supplementary Death Benefit Plan, which is Part II of the PSSA, provides a form of decreasing term life insurance protection designed to cover you and your beneficiary during the years you are building up your pension. This plan applies to almost all public service employees who contribute to the Public Service Pension Fund.

As of September 14, 1999, the PSSA Supplementary Death Benefit Plan was amended as follows:

The plan provides a benefit equal to twice your annual salary. If that amount is not a multiple of $1,000, your benefit coverage is adjusted to the next highest multiple of $1,000. The amount of your benefit automatically goes up as your salary goes up.

The benefit declines by 10 per cent for each year beyond the age of 65. For example, if you are covered for $60,000 at 65 and your salary does not change, your coverage declines to $54,000 at age 66, $48,000 at 67, and so on.

The yearly reduction will take effect on April 1 or October 1, whichever date comes first after your birthday.

With the reduction rate described above, benefits would ordinarily disappear when you are 75, but for the following two special provisions.

Participants still employed, or those who cease to be employed and are entitled to an immediate annuity or an annual allowance payable within 30 days after they cease to be employed, are entitled to a paid-up coverage of $10,000 when they reach age 65. This means that the participant, whatever his or her actual coverage at 65, has $10,000 of that coverage without contribution. This paid-up benefit is retained for life at no cost.

If a participant dies after reaching age 65 while still employed in the Public Service, the minimum coverage is the greater of $10,000 or one third of the person's annual salary. If one third of the salary is not a multiple of $1,000, it will be adjusted to the next higher multiple of $1,000 in order to determine this benefit.

As of October 1, 1999, contributions are at the rate of 15 cents a month for every $1,000 of coverage. This means that if you earn $31,760 a year, you would contribute $9.60 a month or $115.20 a year and would be covered for $64,000. After you reach age 66, your contributions will go down as your coverage declines.

There is no maximum contribution period under this plan, nor is there provision for a return of contributions. Your contributions are deducted from your cheque each month. If you are on leave of absence you will still contribute and be covered. Your compensation office will tell you how to remit your contributions.

The government contributes an amount equal to one twelfth of the benefit payments in respect of participants who, at the time of death, were employed in the Public Service or were in receipt of an immediate pension under the Act.

If you leave the Public Service, you may retain this benefit if you wish. You must have at least two years of service without substantial interruption or have participated under the Supplementary Death Benefit Plan without interruption for two years or more. You must also elect to retain the benefit in the year before leaving the Public Service, or within 30 days after leaving. You can use a period of time in the Canadian Forces or as a regular Forces participant under Part II of the Canadian Forces Superannuation Act to make up the two- year period. If you decide to retain your benefit, you will be covered for the exact amount for which you are covered at the time you leave the Public Service, subject to the reductions after you reach 65.

Please note that, if you leave the Public Service with an entitlement to an immediate annuity, or with an annual allowance payable within 30 days of ceasing to be employed, you are deemed to have elected to continue your participation in the Supplementary Death Benefit Plan. In other words, you don't have to take any action; the required contributions will be deducted automatically from your monthly pension. If you wish, you may cancel your coverage or reduce it to $10,000. You will receive information on how to do this when you retire. (Please see the section "Cancelling coverage," below.)

This automatic coverage does not apply to those entitled to an annual allowance payable more than 30 days after ceasing to be employed. Please see the section on the next page about making an election to continue coverage.

The cost will depend on the type of pension benefit you receive. If you leave with an immediate annuity, an immediate annual allowance payable within 30 days after you leave, or with a disability annuity at any age, the rate is the same as if you had stayed in the Public Service. If you are 65 or over when you leave, you can keep only the reduced coverage you have at that date and your coverage and contributions will continue to decline yearly until only the paid-up portion of $10,000 remains, if applicable.

If you leave the Public Service with a pension benefit other than an immediate annuity or a disability annuity, or an annual allowance payable within 30 days after you leave, you will have to make an election to continue coverage, as described below. In this case, you will also have to contribute at an increased rate if you wish to retain your protection. Your compensation office can tell you about these commercial rates, which vary according to your age at the time you leave the Public Service.

In effect, with commercial rate coverage, you have to pay the full cost of your coverage without any contribution from the government. For example, a person leaving the Public Service at age 50 with coverage of $80,000 (final salary of $40,000) would have to pay approximately $964.00 a year to retain this protection. In addition, no paid-up coverage is provided, and coverage is reduced to zero at age 75.

If you have to make a formal election to continue your coverage under the Supplementary Death Benefit Plan, you must do so in writing on the prescribed form, which you can obtain from your compensation office. You must sign the form and have it delivered or send it by mail to the Superannuation Directorate within the time prescribed (from one year before, to 30 days after, the date you leave the Public Service). If you are entitled to a deferred annual allowance, a deferred annuity, or a transfer value, your first payment must accompany the form. The Superannuation Directorate will check your election and issue a document to confirm that you are an elective participant.

You will be asked for proof of age if you have not already submitted it. Those who re-enter the Public Service will cease to be elective participants if they again become contributors to the PSSA, and their contributions will be adjusted accordingly.

If you receive an immediate annuity upon retiring, or an annual allowance within 30 days of ceasing to be employed, you may elect at any time to reduce your SDB coverage to $10,000. In such a case, you will make contributions on that amount only until you reach age 65, after which the $10,000 coverage is free. You must make an election to reduce coverage in this way on a form available from the Superannuation Directorate. Please note that such an election is irrevocable.

Action taken by a plan member to cancel participation in the Supplementary Death Benefit plan will be considered an irrevocable election. You should note that once you have chosen to cancel your coverage, this coverage can never be reinstated. Participants eligible for $10,000 paid-up coverage at age 65 should consider reducing coverage to $10,000 as an alternative to full cancellation of coverage.

If you leave with an immediate annuity or an immediate annual allowance and become an elective participant, your contributions will be deducted automatically from your pension cheque each month.

In all other cases, you should send the full contribution for the first year of coverage when you send in the necessary documents to make an election. Make the cheque, money order or bank draft payable to the Receiver General for Canada. In subsequent years, you must, as an elective participant, contribute within the time prescribed. If the Superannuation Directorate does not receive your contributions within 30 days from the due date, your coverage ceases. The Superannuation Sector (Please see Annex A for the address and phone number.) will provide instructions on how to remit the required contributions.

Once you begin receiving your deferred annuity or deferred annual allowance, your contributions will be deducted from your monthly pension cheque and you no longer have to send contributions to the Superannuation Directorate.

As a participant in the Supplementary Death Benefit Plan, you may designate one of the following as your beneficiary:

Your compensation office will supply you with the form to name a beneficiary. The form must be signed, dated, witnessed and submitted to your compensation office, which will then send it to the Superannuation Directorate for your file.

You may, at any time, change your beneficiary by completing a new designation form and submitting it to your compensation office or the Superannuation Directorate.

Note: Please remember that any minimum benefit payable under Part I of the PSSA will be paid to the beneficiary you have designated under the Supplementary Death Benefit Plan, if you remain an SDB participant and your beneficiary survives you.

Normally, the supplementary death benefit will be paid directly to the beneficiary you have named if your beneficiary survives you. If you have not named a beneficiary, it will be paid to your estate or succession.

However, there are some exceptions. For example, a male employee who was married and was a Supplementary Death Benefit Plan participant on December 19, 1975, who did not cease participation and who did not name a beneficiary before his death, will have the death benefit paid to his widow, provided that the marriage took place on or before December 19, 1975. If no widow survives, the death benefit is payable to his estate.

Under certain circumstances, all or a portion of the death benefit can be applied directly against the expenses for the maintenance, medical care or funeral of a participant. For example, part of the death benefit could be used to pay a funeral bill, or to reimburse a person or group who has already paid the funeral expenses. The expenses must be "reasonable." Please note that this provision is intended primarily to cover difficult situations, such as those where there is no estate or one with insufficient assets, or where a long delay in settling the estate is expected.


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Preface

Introduction

Part I - Benefits

A. Retirement Benefits

B. Benefit for Your Survivor

C. Supplementary Death Benefit