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Buying Service

A buy-back allows you to purchase certain past service from your previous or current employer, which increases your amount of service in the OMERS Plan. This added service can help you increase your total pension amount and may be able to help you retire sooner without a reduction to your pension.

Ready to get started? You can request a costing using the Buy-back Costing tool in myOMERS or by phone.

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Who can buy service?

You must be an active member to be eligible for a buy-back. If you are retired, a survivor or a deferred member (someone who left their OMERS employer but kept their pension in the OMERS Plan), then you do not have the option to purchase past service.

What service can be purchased through a buy-back?

You can purchase service from both OMERS and non-OMERS employers.

If you are purchasing service from an OMERS employer, this may convert eligible service into credited service. Doing this will increase your total pension amount. To learn more about and , check out the OMERS Member Handbook.

If you are purchasing service from a non-OMERS employer, this adds credited service to your record. Doing this will increase your total pension amount and may help you retire sooner with an unreduced pension.

If you are unsure if you have service you can buy back, ask yourself the following questions:

  • Did you work for another OMERS employer?

  • Did you cash out a pension from a previous employer post-1991?

  • Did you have an unpurchased waiting period?

  • Did you take a leave period (e.g., parental leave) with your current OMERS employer but didn’t purchase the period before the deadline?

  • Did you transfer service from another pension plan into the OMERS Plan that resulted in a shortfall? (i.e., where the amount transferred in didn’t buy the same amount of service in the OMERS Plan)

If you answered “yes” to any of those questions, you may be able to buy back that service.


Buy-back Basics

There are four main steps involved in a buy-back.

  1. Request a costing. A buy-back costing tells you how much it will cost to purchase your service. It’s calculated based on several variables including your age, salary and when your service occurred. If you request a costing, it will be valid for 6 months. You can only have one costing available to you at a time (so if you cancel your costing and request a new one, you can’t go back to your previous one even if your new costing is more expensive).

  2. Confirm your past service. If the service you are looking to purchase isn’t already confirmed through OMERS, we may ask you to submit additional proof regarding when the service took place.

  3. Elect to purchase your service. Once the cost has been established and the service has been confirmed, you’ll be able to proceed with the buy-back. In this step, you’ll confirm what service you’d like to purchase and how you’d like to pay for it (i.e., lump sum, payment plan or a combination of the two).

  4. Make your payment. Once you have selected your payment option(s), OMERS must receive the amount before your assigned due date. Otherwise, the buy-back will not be processed and a new costing will need to be requested.

Payment options for buying service

OMERS offers several payment options for buying service:

  • You can pay the full cost of the service in one lump sum.

  • You can pay over 12, 24 or 36 months through a monthly payment plan.

  • You can pay using a combination of a lump sum for a portion of the buy-back and the monthly payment plan for the balance.

Types of lump sum payments

OMERS can accept the following types of lump sum payments:

  • Personal cheque payable to OMERS (you’ll be issued a tax receipt for the payment received).

  • Transfer funds from a Registered Retirement Savings Plan (RRSP), Locked-In Retirement Account (LIRA), Additional Voluntary Contributions (AVC) account or another Registered Pension Plan (RPP).

OMERS monthly payment plan

Monthly payments can make it easier to manage the cost of buying back service. Payments are made over 12, 24 or 36 months through pre-authorized debit withdrawals from your bank account. The service is added to your record as your monthly payments are received.

If you have to stop payments during the payment period, or if there is still service remaining at the end of the period, OMERS can recalculate the cost and set up a new monthly payment schedule for you.

Please note: Your payment plan will be charged an annual interest rate.

Canada Revenue Agency (CRA) service purchase payment restrictions

The CRA has some restrictions on how you can pay for a buy-back. Some periods must be paid for through a transfer of funds from a RRSP, LIRA or RPP. The buy-back package OMERS prepares when you request a costing outlines any payment restrictions that apply to your past service.


Things to consider before you buy back service

Before you proceed with a buy-back, make sure you are aware of the following considerations.

Is there service missing from your record?

If you think you have eligible service that is not on your OMERS Plan record, let us know as soon as possible.

There are several ways to notify us:

Past service with an OMERS employer may count as eligible service in the OMERS Plan, even if you don't buy it back. Be sure to double check your most recent Pension Report to see if the service is accounted for or not.

Is a buy-back right for you?

We encourage you to carefully consider how buying past service fits with your plans for retirement and to seek the counsel of a qualified financial advisor you trust. In some instances, the increase to your pension may not justify the cost of buying all of the purchasable service available to you.

The cost of buying service

Your buy-back cost is based on factors such as your age, salary and when the service occurred. The cost of the service is its “actuarial value,” or simply put, what your future pension is worth in today's dollars with the added service.

You can use the Retirement Planner tool on myOMERS or contact Member Services to see how buying service will increase your pension. When you know the cost and the increase to your pension, you can decide whether buying service is right for you.

Purchase deadlines

Your costing will remain in effect for 6 months. If you decide to proceed with the purchase after 6 months has passed, we must recalculate the cost of your buy-back, which will likely be higher. The cost typically increases as you get older, which reflects the increasing value of the benefit. 

If you leave your OMERS employer or retire while you are in the process of completing a buy-back, you must complete the purchase within 30 days.

Other considerations

  • Money used to pay for the service you are buying could become locked in.

  • You cannot reverse your purchase. If you leave your employer, your options would be to keep your benefit in OMERS or transfer it to another pension plan or locked-in retirement account (LIRA). You would not have the option of a cash refund.

  • If you still have a benefit in the other pension plan, the service cannot be purchased. However, you may be able to transfer it to OMERS.  

  • Effective January 1, 2020, if you rejoin the OMERS Plan after transferring your commuted value (CV) out of the Plan, you will have to wait five years from the transfer-out date of your CV before you can buy back the associated service.


Income Tax Considerations

The Income Tax Act (ITA) governs the service you can buy, the methods of payment, whether a maximum purchase limit applies and whether your purchase lowers your taxable income.

CRA benefit limits

Canada Revenue Agency (CRA) has some limits on the amount of the benefit you receive for the service you buy back.

When did the service occur?

CRA benefit limit

Service in 1992 and after

$3,245.56 of pension per year of service (limit for 2021)

Service in 1990 and 1991

No limit

Service before 1990

  • You were a member of a pension plan (other than CPP)

No limit

Service before 1990

  • You were not a member of a pension plan (other than CPP)

$2,163.71 of pension per year of service (limit for 2021)

Transfer from a registered retirement savings vehicle

Funds transferred into OMERS from an RRSP, LIRA or RPP are already tax-sheltered. You cannot claim them again as a tax deduction for a service purchase.

Cash payment

  • If you pay for the service purchase in cash (i.e., by personal cheque or through OMERS monthly payment plan), all or some of the amount may be tax-deductible, depending when the service occurred and if you were a member of a registered pension plan.

  • The annual interest for the OMERS monthly payment plan may be tax-deductible.

  • If you borrow money from a financial institution to purchase service, the interest is not tax-deductible.

OMERS will issue a tax receipt for the amount received in each tax year.

Service purchases and tax-deductibility

The cost of buying service may be tax-deductible and may affect your RRSP room, depending on the type of service, when it occurred and how you pay for it. The tax deduction applies in the year the payment is made or may be carried forward—depending on when the service occurred—to apply in subsequent years.

When the service occurred

Portion of the cost that is tax-deductible

Deduction limit per year

Carry-over

Service period after 1989

Total cost

No limit for the year of purchase

No carry-over

Service period before 1990

  • While you did contribute to a registered pension plan

Total cost

The lesser of:

  • The amount paid or carried forward; or

  • $3,500 minus all other OMERS contributions

Carry-over the deduction until the balance = $0

Service period before 1990

  • While you did not contribute to a registered pension plan

lesser of:

  • total cost; or

  • $3,500 × years or part-years purchased

lesser of:

  • The amount paid or carried forward; or

  • $3,500

Carry-over the deduction until the balance = $0

Service before 1990: If you were a member of a registered pension plan (other than CPP)

The cost of the service purchase is fully tax-deductible, with an annual deduction limit. In any one calendar year, you may deduct the lesser of:

  • the amount you paid (or carried forward) or $3,500 minus OMERS current service contributions; and

  • any past service contributions you made during the year.

Example

Brad bought back 3 years of pre-1990 service at a cost of $13,420. Brad was an OMERS member during that time, so his entire purchase cost is tax-deductible. 

In 2018, Brad contributed $2,250 to OMERS for his current service. He deducted $1,250 of his $13,420 purchase ($3,500 – $2,250 = $1,250). He carried forward the balance of his purchase cost ($13,420 – $1,250 = $12,170). 

In 2019, Brad contributed $4,000 to OMERS for his current service. He could not deduct any of his purchase cost because contributions for his current service exceeded the $3,500 limit. He continued to carry forward the balance of $12,170. 

In 2020, Brad retired. He contributed only $1,000 to OMERS for his current service. He deducted $2,500 ($3,500 – $1,000 = $2,500) of the balance of $12,170 of his purchase. He carried forward a balance of $9,670 ($12,170 – $2,500 = $9,670). 

Now that Brad is retired, he is not making current service contributions to OMERS. From 2011 on, he can deduct $3,500 per year until the balance of $9,670 is fully deducted.

Service before 1990: If you were not a member of a registered pension plan (other than CPP)

The total amount you can deduct is the lesser of:

  • the total cost of the service purchase or $3,500 times the number of years* to which the purchased service relates.

In any one calendar year, you can deduct the lesser of:

  • the amount you paid (or carried forward) or $3,500.

If you exceed the maximum deductible amount in a calendar year, you may carry forward the balance to subsequent years until you use up your total allowable deduction.

*“Number of years” includes any portion of a calendar year, e.g., for service from June 2008 to February 2009, you would multiply 2 years x $3,500.

Example

Debra bought back 5.5 years of pre-1990 service at a cost of $30,600. Debra did not contribute to a pension plan during the 6 calendar years (1984 to 1989). 

Debra's total tax-deductible limit is $3,500 x 6 years* = $21,000. The lump-sum amount she paid ($30,600) is over the limit by $9,600; this portion is not tax-deductible. 

In any one calendar year from the date of her purchase, Debra may deduct $3,500 and carry forward the balance until the $21,000 is fully deducted. 

Another option Debra may consider is buying less of the service, and not exceed her $21,000 tax-deductible limit, so instead of buying 5.5 years, she could buy 3.75 years.

*Although 5.5 years were purchased, 6 years is used because partial years count as full years when determining the tax-deductible limit.

Service after 1989

The amount paid in cash is fully tax-deductible in the calendar year it is paid, but you must have approval from CRA for a past service pension adjustment (PSPA), if applicable. Whether you can use the full deduction depends on your taxable income in that year.

Example

Chris purchased 3 years of post-1989 service in 2020 at a cost of $6,000. Chris paid for the service by personal cheque payable to OMERS. Chris may claim and deduct the entire $6,000 of the service cost in the year it was paid.

Service after 1989 and PSPAs

If you are buying post-1989 service, OMERS will calculate a past service pension adjustment (PSPA) and report it to CRA. CRA uses the PSPA to determine if you have enough RRSP room for the purchase.

Please note:

  • If you pay by RRSP/LIRA/RPP transfer, the PSPA is reduced by the amount of your payment.

  • PSPAs under $50 do not need CRA approval.

If the PSPA gets CRA approval, CRA will reduce your available RRSP room by the amount of the PSPA.

If the PSPA does NOT get CRA approval, CRA will contact you. Your options may include:

  • Withdraw or transfer funds from your RRSP to create more RRSP room for the PSPA.

  • Buy less of the service.

  • CRA may let you exceed your available RRSP room by up to $8,000, leaving you with a negative RRSP deduction limit. You could not make further RRSP contributions until this limit becomes positive again as you earn new RRSP room in the future.

Example

In 2019, David bought 4 years of service (January 1, 2000 to December 31, 2003) for $45,000. David paid for the service using funds from his RRSP. Since these funds were already tax-sheltered, they were applied toward reducing the PSPA amount. PSPA approval was not required from CRA.

Important! Please notify us immediately if CRA does not approve your PSPA. If you do not wish to make room in your RRSP for the purchase, we will refund any payment received and remove the your OMERS record (though it may still count as ).


Ready to get started?

Sign in to myOMERS today and click My Buy-back to request a costing.

Don’t have a myOMERS account yet? Creating one is easy. All you need to get started is your OMERS 7-digit reference number, the last three digits of your social insurance number and your date of birth.