Buying Prior Service

Your employer’s Human Resources area will be able to tell you which types of past employment are eligible for purchase. You can also contact us if you have any questions about buybacks.

You can only purchase your service from a previous Registered Pension Plan (RPP) under PSPP if you are able to take a payout of your benefits from that plan as a lump-sum. You cannot begin purchasing this service until after your funds have been removed from the other plan, so check with us to make sure the service is eligible.

Restrictions apply to the purchase of service from a previous RPP earned before 1992. Please call us for details.

The cost of prior service is based on the amount of money required today to fund what your pension will be in the future for that period of service. This is called an actuarial reserve costing, and includes assumptions about potential interest changes over time, as well as your salary, age, and life expectancy.

If you are using funds from another Registered Pension Plan (RPP) to purchase service, the value of the lump-sum benefit you receive from that plan may be less than the cost of buying the equivalent amount of prior service under PSPP. This means that you will not get credit for all of your prior service unless you pay for any resulting shortfall.

Visit our online Buyback Estimator to get an estimate of the cost to buy your prior service. You can apply to buy a period of prior service through your employer’s pay and benefits coordinator.

If the prior service is from a different employer, we will need information from them. Contact us or your employer’s pay and benefits coordinator for help in determining when this is the case.

You can estimate how buying prior service might affect your pension by using the online Pension Estimator:

1. Visit the PSPP Pension Estimator
2. Click on the button next to "Check here to provide your own service estimate"
3. Run two pension estimate calculations:

• One with only your current PSPP service
• One that includes your current PSPP service PLUS the prior service

Compare these two estimates to see how buying prior service will impact your PSPP pension. You should also consider the cost of the prior service, the length of time it will take you to pay for the prior service, and how long it will take for the increase in your pension to offset the cost of buying the service. You should also consider the impact that a Past Service Pension Adjustment (PSPA) might have on your RRSP contribution room.

If you are buying service you earned in another Registered Pension Plan (RPP), your application should not be made until your lump-sum benefit has been removed from your previous RPP. You can speak to your employer for more information on how to apply to buy prior service.

Once you have applied you will be sent a Buyback Proposal which outlines:

• how buying prior service will affect your PSPP pension;
• how much it will cost you to buy your prior service;
• how much prior service you are eligible to buy;
• how to pay for your prior service; and
• the deadlines for making your election and payment(s).

If a portion of the period you have requested to buy is not eligible for purchase, it will not be included in your Buyback Proposal.

For service after 1989, federal tax rules require that you have adequate RRSP room to allow for the certification of the Past Service Pension Adjustment (PSPA) associated with the prior service you are buying. This PSPA represents the value of the increase in your PSPP benefit entitlement, using the Canada Revenue Agency's (CRA) formula, and will reduce your RRSP contribution room.

Please make sure you understand how this PSPA may affect your ability to buy the service and how you can use a transfer from an RRSP or LIRA to reduce or eliminate the PSPA before it is reported to CRA.

This information only applies if you are purchasing service you earned in another Registered Pension Plan (RPP): before deciding to remove your benefits, it is important to check with your financial institution to see if the locking-in rules applicable to those benefits will allow your funds to be transferred into PSPP.

In certain situations, benefits paid out from an RPP must remain “locked-in” (within locked-in retirement accounts (LIRAs), RPPs, etc.) until they are used to fund your retirement.

Most RPPs are subject to the locking-in rules of the jurisdiction (i.e. province) in which the benefits are accrued. If those funds are used to buy your prior service with PSPP, they will be administered in accordance with Alberta locking-in rules.