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Death of a Retiree

When an employee receiving a pension dies, the benefit payable is different depending on whether the retiree was in partial retirement or full retirement.

Situation 1 – The retiree is partially retired

In partial retirement, the retiree receives a pension from the General Account, but not from the Complementary Account.

If the retiree has a spouse and if the survivor option is in effect for the pension from the General Account

  • If the retiree dies before the end of the guarantee period, the spouse receives 100% of the pension the retiree was receiving from the General Account for the remaining 120 or 180 guaranteed payments, depending on the option the retiree chose at retirement.
    When the guaranteed period ends, the spouse receives 60% of the retiree’s pension from the General Account. If the value of the pension payable to the spouse from the General Account is lower than the limit set by the Supplemental Pension Plans Act, an amount equal to that value will be paid to the spouse in a lump sum instead of as a monthly pension.
  • In addition, an amount equal to the value of the employee’s Complementary Account will be paid to the spouse in a lump sum.

The pension paid to the spouse is taxable.

A lump-sum payment is taxable; taxes will be deducted at source. However, the spouse may request that the payment be transferred to a registered retirement savings plan (RRSP); no income taxes will be deducted from the amount transferred.

Example:

Peter had been partially retired for 24 months when he died at the age of 62. Peter had chosen a pension that was increased to $1,000 per month then reduced to $300 per month at age 65, with a 10-year guarantee period (120 payments) and a 60% survivor option.

Peter received 24 payments of $1,000 a month from the General Account before he died. His spouse Louise will receive:

  • a lump-sum payment equal to the value of Peter’s Complementary Account;
  • 36 payments of $1,000 per month (which is 100% of the increased pension Peter would have received from age 62 to 65);
  • 60 payments of $300 per month (which is 100% of the reduced pension Peter would have received after age 65 for the balance of the 120 guaranteed payments).
  • payments of $180 per month until her death (which is 60% of the reduced pension of $300 a month) because all the payments in the guarantee period were completed (that is, 24 + 36 + 60 = 120).

If the retiree has a spouse and if the pension without a survivor benefit option is in effect for the General Account

  • If there is still a pension amount payable from the General Account, a lump-sum benefit is paid to the designated beneficiary(ies) or, if there is no beneficiary, to the retiree’s estate.
  • An amount equal to the value of the employee’s Complementary Account is payable in a lump-sum to the spouse.

A lump-sum payment is taxable; taxes will be deducted at source. However, the spouse may request that the payment be transferred to a registered retirement savings plan (RRSP); no income taxes will be deducted from the amount transferred.

If the retiree does not have a spouse

  • If there is still a pension amount payable from the General Account, a lump-sum benefit is paid to the designated beneficiary(ies) or, if there is no beneficiary, to the retiree’s estate.
  • In addition, an amount equal to the value of the employee’s Complementary Account is payable in a lump-sum to the designated beneficiary(ies) or, if there is no beneficiary, to the retiree’s estate.

A lump-sum payment is taxable; taxes will be deducted at source.

Situation 2 – The retiree is fully retired

When fully retired, the retiree receives all pension entitlements.

If the retiree has a spouse and the survivor option is in effect

The spouse is entitled to a pension. This pension is taxable.

  • If the retiree dies before the end of the guarantee period, the spouse receives 100% of the pension the retiree was receiving for the remaining 120 or 180 guaranteed payments, depending on the option the employee chose at retirement.
  • When the guaranteed period ends, the spouse receives 60% of the retiree’s pension.

Note: If the employee retired before December 1, 2013, the pension options offered were different. The employee could choose either a 50% or 60% survivor pension and the guarantee period was 5 years (60 payments) or 10 years (120 payments).

If the value of the pension payable to the spouse is lower than the limit set by the Supplemental Pension Plans Act, an amount equal to that value will be paid to the spouse in a lump sum instead of as a monthly pension. A lump-sum payment is taxable; taxes will be deducted at source. However, the spouse may request that the payment be transferred to a registered retirement savings plan (RRSP); no income taxes will be deducted from the amount transferred.

Example 1:

Death of a retiree who chose a pension with a survivor benefit and who was fully retired

Paul had been retired for 24 months when he died at the age of 62. Paul had chosen a pension that was increased to $2,000 per month, then reduced to $1,300 per month at age 65, with a 10-year guarantee period (120 payments) and a 60% survivor option.

Paul received 24 payments of $2,000 a month before he died. His spouse Lucy will receive:
  • 36 payments of $2,000 a month (which is 100% of the increased pension Paul would have received from age 62 to 65);
  • 60 payments of $1,300 a month (which is 100% of the reduced pension Paul would have received after age 65 for the balance of the 120 guaranteed payments).
  • payments of $780 per month until her death (which is 60% of the reduced pension of $1,300) because all the payments in the guarantee period were completed (that is, 24 + 36 + 60 = 120).

Example 2:

Death of a retiree who chose a pension with a survivor benefit and who took partial retirement but was fully retired at the time of death

Philip took partial retirement on September 1, 2014; his pension from the General Account was a level pension of $1,000 per month, with a 10-year guarantee (120 payments) and a 60% survivor option.

Philip took full retirement on October 1, 2019; his pension from the Complementary Account was a level pension of $1,800 per month, with the required 10-year guarantee (120 payments) and a 60% survivor option.

Philip died on August 15, 2022.

Before he died, Philip received:
  • 61 payments, from September 1, 2014 to September 1, 2019, from his pension from the General Account of $1,000 a month;
  • 35 payments, from October 1, 2019 to August 1, 2022, of $2,800 a month, which was his $1,000 pension from the General Account plus his $1,800 pension from the Complementary Account.
His spouse Lorraine will receive:
  • 24 payments, from September 1, 2022 to August 1, 2024, of $2,800 a month (which is 100% of Philip’s $1,000 pension from the General Account plus 100% of his $1,800 pension from the Complementary Account);
    The number of guaranteed payments from the General Account will then be complete (61 + 35 + 24 = 120);
  • 61 payments, from September 1, 2024 to September 1, 2029, of $2,400 a month (which is 60% of Philip’s $1,000 pension from the General Account (i.e.- $600) plus 100% of his $1,800 pension from the Complementary Account);
    The number of guaranteed payments from the Complementary Account will then be complete (35 + 24 + 61 = 120);
  • From October 1, 2029 until her death, payments of $1,680 a month (which is 60% of the $1,000 pension from the General Account and the $1,800 pension from the Complementary Account).

If the retiree has a spouse and if the pension without a survivor benefit option is in effect

If there is still a pension amount payable from the pension plan, it will be paid to the designated beneficiary(ies) or, if there is no beneficiary, to the retiree’s estate. The benefit amount is taxable; taxes will be deducted at source.

The spouse, if there is one, will not receive a pension.

Example:

Retiree who chose a pension without a survivor benefit
 

Michael had been retired for 24 months when he died at the age of 62. Michael had chosen a pension increased to $2,000 per month, reduce to $1,300 per month at age 65, with a 10-year guarantee (120 payments) and without a survivor option. Michael designated his two children, Martine and Mark, as the beneficiaries of the death benefit.

Michael received 24 payments of $2,000 per month before he died. The guarantee covers:

  • 36 payments of $2,000 (which is 100% of the increased pension Michael would have received between the ages of 62 and 65);
  • 60 payments of $1,300 (which is 100% of the pension Michael would have received after age 65 for the balance of the 120 guaranteed payments).
Martine and Mark, the beneficiaries designated by Michael, will receive an amount equal to the value of these 96 payments.

If the retiree does not have a spouse

If there is still an amount payable from the pension plan, it will be paid to the designated beneficiary(ies) or, if there is no beneficiary, to the retiree’s estate. The benefit amount is taxable; taxes will be deducted at source.

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