Commuted value (pension)

An employee leaving a pension plan after a sale, or a buyer reviewing the seller’s plan, meets commuted value when the question is what a pension is worth as a lump sum. This entry covers Ontario’s Pension Benefits Act and the federal Pension Benefits Standards Regulations, 1985 only; check the rules where you are.

How the two sets of rules use it

Under s.42(1) of Ontario’s Act, a former member of a pension plan is entitled to require the administrator to pay an amount equal to the commuted value of the deferred pension to another plan’s pension fund if the conditions in s.42(1.1) are met, into a prescribed retirement savings arrangement, or, if the plan permits, to buy a life annuity; s.42(2) to (6.1) set limits and conditions. The federal Regulations use the term pension benefit credit: under s.18, subject to subsection (2), a pension benefit credit is determined in accordance with the Canadian Institute of Actuaries’ Recommendations for the Computation of Transfer Values from Registered Pension Plans. Section 19.1 lists a life income fund, a restricted life income fund and a locked-in RRSP as retirement savings plans into which a pension benefit credit may be transferred for the purposes of ss.16.4 and 26 of the federal Act.

What to ask

• Who the plan administrator is and which statute governs the plan.
• Whether the plan is ending, and what the sale changes for members.
• How the value was calculated and as of which date.

See what happens to the pension or benefits plan and the locked-in retirement account.