You may be able to increase yourin the OMERS Plan (and increase your retirement pension and survivor benefits) by purchasing previous service.
Credited and Eligible Service
Your years of service are a key component of your OMERS Plan pension. While you work for an OMERS employer, you earn service in the OMERS Plan. You may also have other types of service that could help to increase your OMERS Plan pension or help you to retire sooner.
What is credited service?
Credited service is the number of years and months of paid service you have in the OMERS Plan. The maximum amount of credited service a member may have is capped at 35 years.
Note: Effective January 1, 2021, OMERS will no longer cap your credited service. If you have not reached 35 years of credited service prior to this date, you will continue to contribute and accrue credited service in the Plan. If a member meets the 35-year cap before January 1, 2021, the limit will continue to apply.
We use your years of credited service and your earnings to calculate your pension.
Credited service includes periods of time for which:
you contributed to the OMERS Plan (and have not had a refund of contributions);
you earned pension during a contribution holiday (an OMERS Plan surplus period when contributions are not required);
you purchased leaves or previous service;
you transferred funds from another pension plan; and
you earned pension while on an OMERS-approved disability leave from your OMERS employer.
Credited service does not include service for which your contributions were refunded.
If you work full-time, you earn one year of credited service for every full year you work.
Full-time credited service example
Melinda works a standard 40-hour full-time schedule. She earns $70,000.
We calculate Melinda's credited service for one year as follows:
2,080 hours = 1 year
Melinda has earned one year of credited service. We record her earnings for that year as $70,000.
If you don't work full-time, we calculate your credited service as a proportion of what a full-time member would earn. Also, when we calculate your pension, we annualize your earnings – giving you the equivalent of full-time earnings.
Non-full-time credited service example
Mike works 20 hours a week, compared to Melinda's standard 40-hour full-time schedule. Mike earns $35,000, which is half of Melinda's annual salary rate of $70,000 for her position.
We calculate Mike's credited service for one year as follows:
1,040 hours ÷ 2,080 hours = 0.5 years
Mike has earned half a year of credited service. We record his annualized earnings for that year as $70,000.
When we calculate Mike's pension, we use his credited service and the average of his annualized earnings – to ensure that his pension is accurate and fair.
What is eligible service?
Eligible service is service with any OMERS participating employer that isn't credited service. Although this doesn't increase your normal retirement pension, it can help bring you closer to an unreducedpension. We add your eligible service to your credited service when we calculate your early retirement pension factor.
summer-student work with an OMERS employer
service that was refunded when you left an OMERS employer
unpurchased pregnancy/parental leave since December 1990
unpurchased waiting periods.
You may be able to purchase some eligible service, converting it into credited service.
Tell us if you have eligible service
Your credited and any eligible service is listed on your annual Pension Report. 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:
You may have some OMERS Plan service or refunded service with another pension plan that doesn't currently count as. If you are an active OMERS member, you may be able to buy this service back and convert it into credited service, which increases your pension and may help you retire earlier without a reduction.
Types of service you can buy back
Refunded service after 1991 (including a waiting period) with another registered pension plan (see example 1 below)
Previously refunded service in the OMERS Plan (see example 2 below)
A waiting period to join the OMERS Plan
Transferred-in service shortfall (when the amount transferred in from another pension plan doesn't buy the same amount of service in the OMERS Plan)
Examples of eligible service
Alex worked for XYZ Corporation from 1985 to 1995, and was a member of the company's registered pension plan. When Alex left XYZ, he transferred the benefit he'd accrued during his 10 years with the company out of their plan into a locked-in retirement account (LIRA). He has the option to buy the portion of his service that occurred after 1991 (up to four years from 1992 to 1995) and convert it into OMERS credited service. To help pay for the service, he can use the funds from his LIRA.
Susan transferred the commuted value in respect of 3 years of service out of the OMERS Plan into a LIRA when she left her former OMERS employer. She recently started to work for another OMERS employer and the three years of service she transferred out of the OMERS Plan count as. Susan has the option to buy all or some of the 3 years of service back and convert it into credited service. To help pay for the service, she can use the funds from her LIRA.
Who can buy service?
You must be anto be eligible to buy service. OMERS retirees and survivors and members who leave their OMERS employer and keep their pension in the OMERS Plan (deferred members) do not have the option to buy service.
Things to consider about buying service
Is the increase in your pension worth the cost of the?
You can choose to buy back any or all of the service: it's entirely up to you. You may wish to consult a retirement planner or financial adviser.
As an active OMERS member, you can purchase service at any time. If you terminate your employment or retire, you must complete the purchase within 30 days of leaving your employer.
Previous service with an OMERS employer may count as eligible service in the OMERS Plan, even if you don't buy it back.
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 another registered pension plan, you may be able to transfer it into 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.
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 Income Estimator on the secure member site or call 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 for you.
The cost of the service you want to buy will remain in effect for 6 months. After that, we must recalculate the cost, which will likely be higher. The cost increases as you get older, which reflects the increasing value of the benefit.
If you leave your OMERS employer or retire, you must complete the purchase within 30 days of leaving your employer.
Service purchases and income tax
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.
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 can be carried forward to apply in subsequent years.
Transfer from a registered retirement savings vehicle
Funds transferred into OMERS from an RRSP,retirement account (LIRA) or registered pension plan are already tax-sheltered. You cannot claim them again as a tax deduction for a service purchase.
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 rate for the OMERS monthly payment plan are 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 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.
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 2008, 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 2009, 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 2010, 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.
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.
Chris purchased 3 years of post-1989 service in 2009 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.
If you pay by RRSP 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.
In 2008, David bought 4 years of service (January 1, 1990 to December 31, 1993) 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 thefrom your OMERS record (though it may still count as).
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; or
You can arrange to pay over 12, 24 or 36 months through a monthly payment plan; or
You can pay using a combination of a lump sum for a portion of theand the monthly payment plan for the balance.
The options and instructions and forms are included in the buy-back package you receive when you request a cost to buy service.
Types of lump-sum payments
OMERS can accept the following types of payments:
Personal cheque payable to OMERS – OMERS will issue a tax receipt for the payment received
Transfer from a registered retirement savings plan (RRSP) orretirement account (LIRA)
Transfer from another registered pension plan (RPP)
Withdrawal from your OMERS Additional Voluntary Contributions (AVC) account.
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 credited 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.
Canada Revenue Agency (CRA) service purchase payment restrictions
CRA has some restrictions on how you can pay for buying service. 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 cost to buy service outlines any payment restrictions that apply to your past service.