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, your employer pays the employer share of contributions with interest and you pay the employee share. Only the first year of leave is cost-shared in this way. With any later leaves, you are responsible for paying both the member and employer share of contributions.
I Received a Buyback Proposal But I Don't Think I Was on a Leave of Absence
It is important to know that a leave of absence is any period of time away from your regular work hours where you are not receiving pay, no matter how short. Examples of a leave could be time away from work for such things as an unscheduled appointment, a time difference in shifts that were traded, or an unpaid day off.
All of these periods of time, some of which could be as small as a few minutes, will be added together onto one total Buyback Proposal for the year. This Buyback Proposal will be sent to you at the start of the year once your employer submits the previous year-end payroll information to LAPP.
If you still believe you have received a Buyback Proposal in error, please contact your employer.
What is the Process to Buy a Leave?
If you want to look at buying a leave, the best place to start is with your employer's Human Resources or Payroll & Benefits area. If your employer tells us that you have a leave of absence that can be purchased, you will be sent a package called a Buyback Proposal early in the year. This Buyback Proposal will tell you what you need to know to purchase the gap in your service.
You must let us know you want to purchase your leave of absence by the earlier of:
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.
Buyback Considerations Before You Leave Your LAPP Employer
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.
Can I Pay for Less Than the Whole Amount?
You may have a set amount of money you want to pay towards your buyback, or perhaps your finances change before you are finished paying, and you decide you no longer wish to make payments. You can pay for a portion of the service you wish to buy instead of the full amount. This is sometimes called prorating your service.
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).