What happens to my pension if I terminate employment?

Your benefit received will be determined by:

1. When you terminate; and
2. What you are eligible for at your termination date.

If you are eligible for an immediate pension from SHEPP when you terminate your employment and Plan membership, you are entitled to a monthly pension benefit commencing the first of the month following your termination date.

If you terminate employment and Plan membership before you are eligible to retire, your termination benefit and your options will depend on your years of service.

If you work for more than one SHEPP employer, you can only receive a termination benefit if you stop working for all of your SHEPP employers.

How do I find out what I’m entitled to?

When you leave your job, SHEPP will receive a notice of your termination from your employer. If you are entitled to a termination benefit, SHEPP will mail you a statement within 90 days of your termination date that shows the amount of your benefit and what options are available to you.

What are the termination benefits under the Plan?

Termination with less than two years of service

If you have less than two years of credited service and have not completed two years of continuous service, you have up to six months to choose one of the following options:

• Take a refund of your own contributions, with interest. Income tax will be withheld, and the payment is taxable income for the year in which it is received; or
• Transfer your contributions, with interest, to a Registered Retirement Savings Plan (RRSP) or to another Canadian Registered Pension Plan (RPP), provided the plan accepts the transfer. No income tax will be withheld. If you fail to make an election before the benefit election deadline of six months, a taxable lump sum refund of contributions with interest will be issued.

Termination with more than two years of service

If you have at least two years of continuous or credited service but are not eligible to receive an immediate pension, you will have up to six months to choose one of the following options:

• Leave your benefits in SHEPP to pay you a pension at age 65, or as early as age 55 if you are willing to accept an actuarially reduced pension (this is called a deferred pension); or
• Transfer the commuted value of your deferred pension payable at age 65 out of SHEPP providing your employment ends before the month you turn 55 and before your age and years of credited service add up to 80 years.

The commuted value may be transferred to your personal Locked-In Retirement Account (LIRA) or to another Canadian RPP, provided the plan accepts the transfer. This termination benefit may be subject to a transfer deficiency holdback. If you choose this option, any portability or prior service contributions you have made will also be transferred out of the Plan with interest. If you fail to make an election before the benefit election deadline of six months, a deferred pension will remain in the Plan for you.

For more information, refer to the Deferred Pensions and Commuted Value Transfer Information Sheets.

Effective September 24, 2024, lump sum termination benefits are not subject to a transfer deficiency holdback.

What is a transfer deficiency holdback?

SHEPP has been permanently exempt from having to fund on a solvency basis. However, a solvency valuation must be completed every three years to determine the solvency ratio of the Plan. If on the date of measurement the Plan’s assets are less than the Plan’s liabilities, SHEPP is required to hold back a percentage of certain member termination payments based on the ratio of the Plan’s assets over its liabilities. The percentage that is held back is referred to as the transfer deficiency holdback (“holdback”).

SHEPP has remained above 100% solvent since the December 31, 2023 actuarial valuation. Therefore, SHEPP is not currently required to apply a holdback to termination benefits.

For more information, refer to the Transfer Deficiency Holdbacks Information Sheet.

What if my deferred pension is too small to warrant being paid as a monthly pension?

If you terminate employment and Plan membership and the basic lifetime pension you’ve earned or the lump sum commuted value of your deferred pension meets the definition of a small benefit, the Plan entitles you to receive the commuted value of your benefit as a taxable lump sum payment. Alternatively, you may tax shelter your benefit and transfer it to your RRSP or to another RPP provided the plan accepts the transfer.

In 2026, a basic lifetime pension less than $2,984 per year, or a lump sum commuted value of a deferred pension less than $14,920 would be considered a small benefit.

What are excess contributions?

Excess contributions are any required contributions you have made that exceed 50% of the commuted value of your vested pension. If your required contributions with interest have paid for more than 50%, then your excess contributions will be refunded to you with interest. Income tax will be withheld, and the payment is taxable income for the year in which it is received.

Alternatively, if you are transferring the commuted value of your pension out of SHEPP, you may be eligible to transfer all or a portion of your excess contributions, with interest, to an RRSP or to another RPP willing to accept the transfer.

What happens if I am rehired by my employer or employed by another participating SHEPP employer?

If you have terminated employment and are entitled to a termination benefit you may defer the election of your termination benefit for up to six months following your date of termination.

If you become employed by a SHEPP employer and meet the Plan’s eligibility requirements prior to making an election within the above time period, you will no longer be entitled to a termination benefit under the Plan. You will be re-enrolled in the Plan and required to transfer your contributions and service to your new employer. By transferring your contributions and service, you can continue to build your pension despite a change in employers.

In the event you reach the deadline date without having made a termination benefit election, you become ineligible to transfer between participating employers upon subsequent enrolment in the Plan. You will be required to elect a termination benefit.

Can I combine my active and deferred SHEPP membership periods?

If you have an active and deferred membership with SHEPP, all of your service and earnings will be combined to determine your SHEPP benefit and your eligibility to receive that benefit.

Combining of memberships will happen automatically when SHEPP receives your new active enrolment and will occur no matter what length of time has lapsed between the end of your deferred membership and your enrolment date of your new active membership. Refer to the Combining SHEPP Membership Periods Information Sheet.