Laid off with a pension?

Laid off with a pension?

“Grow-in” benefits can provide huge payouts if you live in Ontario

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Imagine you’re 47 and you’re laid off after 10 years of loyal employment. A disaster right? Maybe not: if you work in Ontario and you have a defined benefit pension plan, you could be entitled to a big payout.

In July 2012, the province introduced new “grow-in” rules that provide a pension bridge to workers who have a defined benefit (DB) pension plan and are fired without cause. To qualify, you must have been enrolled for 10 years or more, your plan must offer an early retirement option, and your age plus years of service must add up to at least 55.

If you do qualify, you’re in for a treat. That’s because under the new rules, your employer must now calculate your pension payout as if you had continued to work there until you qualified for early retirement.

For instance, consider Sam, a 45-year-old earning $120,000 with 15 years in a plan that offers early retirement at 55. Under the old rules, Sam would get a $196,000 lump sum payout, says actuary Fred Vettese of Morneau Shepell. Under the new rules he gets $306,000, the same he’d get if he had worked until age 55.

Ontario’s grow-in rules don’t apply to some institutional pensions, but most plans with an early retirement option should be eligible. So make sure to ask about the bridge if you end up getting laid off.

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