Can anyone explain pension vesting?

**cmoy** · 10-06-2010, 08:12 PM

Hi All.....

I live in Canada, and work as a labourer for my municipality. My
co-workers and I have been discussing what vesting in a pension
actually means.

From all that I have read, after 3 or 5 years, you are fully vested,
and if you leave this position, you will collect employee and employer
contributions in full.

My co-workers seem to think that you are not fully vested until
retirement.

Does anyone have any idea who may be right ?

Many thanks.......carol

**lisaflex** · 10-06-2010, 08:16 PM

well, someone please chime in if i am at all incorrect, which i very well may be....i was a public employee for five years. i left just after five years was up. i was vested at five years. at that time, i took out my PERS and Deferred Comp - at that time i recvd a total of about $25000.00. had i left it, i could have collected at retirement age i believe. so, i guess it depends on how canada works and what you are looking to get out of being a public employee. imho

**monkeywrangler71** · 10-06-2010, 08:27 PM

The maximum vesting period in Canada is two years. After vesting you are entitled to the full amount in the account at termination, however, you can not access any of the funds until you reach the retirement age specified in the initial plan. If you leave before vesting you are entitled only to your own contributions plus interest, but you have immediate access to the funds.

Specific rules vary by province.

**cmoy** · 10-06-2010, 08:52 PM

Many thanks MW...

I think our misunderstanding came on the retirement part of
the plan.

I have contributed 15,000 (match would equal 30,000), so I
wondered if I left employment tomorrow, what I would receive.

So, my 30,000 would be flipped into an RSP and couldn't be
touched until retirement? I am 50 years old. And, obviouslllly
quite lazy since I could have contacted HR, but this seemed
easier, and you never know, someone else might learn something.

carol

**monkeywrangler71** · 10-06-2010, 09:17 PM

It would go into a locked-in rsp. At retirement it would roll into a locked-in RIF, which has all the restrictions of a regular RIF except with an additional restriction on the maximum withdrawal amount per year.

**Saule** · 10-06-2010, 09:22 PM

You might be able to roll it into another retirement fund - that depends on provincial and possibly federal rules. But generally yes, you cannot touch it until you reach retirement age. The vesting gives you the right to the matching portion - before vesting, you'd lose that. That's a short time period for vesting. I think here at the employers' option, it can take up to ten years, unless you are 45.

Here if the money is in a 401(k), if the plan allows, you can generally borrow against it. You have to repay it or suffer a severe tax penalty.

**cmoy** · 10-06-2010, 09:36 PM

Thanks Saule...

"the vesting gives you the right to the matching portion"

That was my original question to my co-workers.

My misunderstanding was about not touching it until retirement.
I guess that they were right, and I was confused. (Although, they were wrong also, and confused about my question...go figure...)

Thanks so much for your help!

carol

**slittle119** · 10-07-2010, 08:44 AM

Originally Posted by cmoy

Hi All.....

I live in Canada, and work as a labourer for my municipality. My
co-workers and I have been discussing what vesting in a pension
actually means.

From all that I have read, after 3 or 5 years, you are fully vested,
and if you leave this position, you will collect employee and employer
contributions in full.

My co-workers seem to think that you are not fully vested until
retirement.

Does anyone have any idea who may be right ?

Many thanks.......carol

Hi Carol,

I'm not sure about laws in Canada but in Massachusetts vesting is 10years. After 10 years of service you can lock your pension and come back to the State, City or Town at age 55 and collect the pension. Keep in mind that three things impact your retirement calculation Age, Service and Salary. If you left and came back at 55 (age factor 1.5 for Group 1 - the non hazardous group) with ten years of service the calc. would be for 15% of your three highest consecutive years of salary. The calc. keeps going up until you reach 65. Age sixty five has an age factor of 2.5 x 10 years = 25%.

One other benefit of being vested is that if you died (un-related to your job) before you retire; your spouse would be entitled to a reduced retirement.

With this type of pension in Massachusetts there is an offset with Social Security. Social security reduces what you would get from them based on what you get from the pension if don't have thirty years of significant earnings under social security.

I know this is complicated but hope it helps.

**KeithBC** · 10-10-2010, 11:39 PM

Prior to being vested, if you quit the job, they give you back your pension contributions. No matching amount, no pension, just a cheque, been nice to know ya.

Once you are vested, if you leave, you are entitled to a pension (the amount of which depends on their age and service requirements). So you can leave it in the pension fund until you are 65 and then take it as a pension.