Options
If a member has earned five or more years of pensionable service in MEPP, they are considered vested in the Plan and entitled to a lifetime pension at retirement.
Should a member leave their employer, MEPP will send the member a Termination Statement outlining their options. Members have 90 days to make a decision. If the member does not respond within that time frame, their funds will remain with MEPP.
Time Sensitive Considerations
Leaves of Absence
Members have 30 days from the date they leave the Plan to apply to purchase a leave of absence. If they are already paying for a leave of absence, they have 90 days from the date they leave the Plan to complete that purchase.
Prior Service Purchases
If a member intends to buy prior service, they must submit their application before they leave the Plan. If a member is already making prior service payments, they will have 90 days to complete their buyback purchase.
In either scenario, if members do not complete the purchase, it will be prorated — only the amount of service they have paid for will be credited.
Leave Pension Contributions with Interest with MEPP
Should a member re-join the Plan in the future, any new pensionable service they earn will be added to their existing service, increasing their benefit.
With this option, when a member is vested in the Plan, they can begin collecting a MEPP pension once they reach 55 years of age and retire, or they can continue to keep their funds secure in the Plan until they choose to withdraw them; either way, the contributions will continue to earn interest in the meantime. Members must start their pension by December 31 of the year in which they turn 71 years of age.
Choosing this option does not prevent members from removing their funds later on, even if they turn 55 years of age in the meantime, so long as they do not re-join the Plan.
Further Reading
Transfer Pension Contributions with Interest to Another Pension Plan
MEPP has transfer agreements with several other provincial and federal public sector pension plans.
If members join an employer who participates in one of those plans, they might be able to transfer their MEPP service to the new plan.
Transfer Pension Contributions with Interest as a Lump Sum to a Locked-In Retirement Account (LIRA)
Once members are vested, the lump sum of their pension is known as a commuted value (CV). In most scenarios, to remove these funds from the Plan (and not transfer them to another plan), the CV must be transferred to a Locked In Retirement Account (LIRA). A LIRA is a special type of registered retirement savings account designed to hold locked-in pension funds as retirement income.
Members have the following commuted value transfer options:
- transfer their commuted value to your LIRA and have any non-locked funds paid as a taxable cash lump sum payment; or
- transfer their commuted value to your LIRA and have any non-locked funds transferred to a Registered Retirement Savings Plan (RRSP).
There are strict rules about how and when the funds within a LIRA can be accessed. Normally, money cannot be taken from a LIRA until the owner reaches age 50. Banking institutions will have more information, or members can read more about converting LIRA funds on the Government of Alberta website.
If a member transfers their commuted value out of MEPP, they are no longer entitled to a lifetime MEPP pension. Once the transfer to the LIRA is made, members will not be able to change their decision.
If members have a CPS relationship between MEPP and the Public Service Pension Plan (PSPP), they can withdraw funds from one plan while leaving them in the other, so long as they are no longer active in either plan. However, this will affect their future pension benefit. Please contact us for more information.
Note: Legislative limits establish the percentage of funds that must go to a LIRA and the percentage that must go to other retirement savings or be paid to a member as taxable income.
How Much Income Tax is Withheld from the Payout?
| Lump Sum Amount | Federal Income Tax Rate |
|---|---|
| $5,000 or less | 10% |
| Over $5,000 up to $15,000 | 20% |
| More than $15,000 | 30% |
A T4A will be issued with the payment to indicate the amount of income the member has received and the amount of tax they have paid. The tax withheld will be based only on the value of this payment. Depending on any other income the member has for the year, the member might be required to pay additional tax when they file their income tax return. If the address we have on file for a member is outside of Canada when they receive funds from the Plan, the tax amount withheld will depend on the country. Read more about income taxes and receiving tax slips.