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April 21, 1999
Purchase of Service -- New Municipal Pension Plan Rules
When the Plan Member was Not Eligible to Contribute
Until March 31, 1999 purchase of service rules stated that an employer could, by resolution, purchase any service for a plan member who had in the past, been ineligible to contribute. The employer has been required to pay at least one-half the total cost. This service could include:
- service performed prior to January 1, 1988 where the plan member was not eligible to contribute as a result of age restrictions;
- probationary periods of employment prior to permanent appointment;
- any other service on which contributions were not taken, such as the first 12 months of full-time employment where the plan member was not permanent;
- any part time service, including casual hours worked, on which contributions were not taken.
Effective April 1, 1999 the new rules remove the requirement for the employer to pay at least one-half of the total cost. This means that the employee may contribute up to 100 per cent of the cost. How the cost is split between the employer and the employee will be determined by the resolution passed by the employer.
The new purchase of service provisions will be phased in:
- April 1, 1999 to March 31, 2000, the new rules will apply to plan members who are retiring or terminating
- April 1, 2000 the new rules will apply to all plan members
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Caution on tax implications
It is advisable to consult with a tax expert about any tax implications of your purchase options. For example, your ability to purchase service in the Municipal Pension Plan may be affected by eligible room in your Registered Retirement Savings Plan.
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