Re-employment of pensioners

What's on this page:

    Overview

    This subsection describes how the PSPP pension is affected by the income earned by PSPP pensioners who choose to seek re-employment after they retire.

    What constitutes re-employment of a pensioner?

    This page introduces the re-employment of pensioners and describes what happens if a PSPP pensioner is re-employed or engaged in any capacity by an employer who contributes to the PSPP. 

    It includes these topics: 

    What is meant by "re-employed or engaged in any capacity"?

    A pensioner can be re-employed or engaged in any capacity by means of or through employment arrangements or billing arrangements such as, but not limited to,

    • contracts
    • fee-for-service
    • per diem
    • invoices
    • consulting
    • Orders-In-Council
    • third party agencies

    What is meant by an arm's-length relationship?

    This describes the relationship between the re-employed or engaged pensioner and the employer.

    Arm's-length relationship

    A pensioner will have an arm's-length relationship with an employer if the pensioner and/or the pensioner's immediate family do not have a major financial interest or business interest in the employer.

    No arm's-length relationship

    A pensioner who does not have an arm's-length relationship with the employer (e.g., the pensioner has established himself as a corporation under the Income Tax Act (Canada)) may be considered to be "re-employed or engaged in any capacity" if the pensioner's corporation is hired or engaged by an employer who contributes to the PSPP.

    Important: OPB solely responsible for assessment. For purposes of re-employment, only OPB, as opposed to the pensioner and/or the employer, can properly assess whether or not there is an arm's-length relationship.

    Which employers contribute to the PSPP?

    An employer who contributes to the PSPP may be;

    • a Ministry of the Government of Ontario,
    • an Agency, Board or Commission of the Government of Ontario, or
    • an employer designated by an Order-In-Council, which requires that employer to contribute to the PSPP.

    PSPP Participating Employers (PDF)

    Employer's responsibility to re-employed pensioner

    This section describes what employers must do when

    Hiring a PSPP pensioner

    This table describes what the employer must do when re-employing a PSPP pensioner.

    When the employer... Then the employer should...
    • is a Ministry, Agency, Board, or Commission,
    • hires a pensioner currently in receipt of a PSPP pension who does not rejoin the PSPP, and
    • pays the re-employed pensioner directly.
    • submit Quarterly Re-employment Earnings transaction through the portal, and
    • advise the re-employed pensioner to notify OPB of re-employment.
    • is a Ministry, Agency, Board, or Commission,
    • hires a pensioner currently in receipt of a PSPP pension who re-joins the PSPP, and
    • pays the re-employed pensioner directly.
    • notify OPB to stop pension payments, and
    • submit an enrolment transaction through the portal
    • is a Ministry, Agency, Board, or Commission,
    • hires a pensioner currently in receipt of a PSPP pension, and
    • does NOT pay the re-employed pensioner directly.
      • Example: Paid through invoices

    advise the re-employed pensioner to

    • notify OPB directly, and
    • remind the pensioner that they are responsible for submitting proof of quarterly payment to OPB.

    Important: OPB is solely responsible for assessment.Only OPB, as opposed to the pensioner and/or the employer, can properly assess whether or not the type of re-employment or engagement of a pensioner impacts the PSPP pension.

    Reporting quarterly earnings

    The Ministry, Agency, Board or Commission that has re-employed or engaged the pensioner must ensure that quarterly earnings are submitted to OPB after quarter end. This applies if the re-employed or engaged pensioner is

    • paid directly by the Ministry, Agency, Board or Commission, or
    • through a contract with an employer who is not at arm's length with the pensioner.

    Note: Where the pensioner is paid on a fee-for-service basis, the pensioner, not the employer, is responsible for submitting proof of payment (e.g., invoices) to OPB.

    The reporting process is explained below.

    Stage Who Does It What Happens
    1 Employer Submits a Quarterly Re-employment Earnings transaction through the employer portal

    Note: Please see Timing of earnings reporting for information about when to report pensioners’ re-employment earnings.
    2 OPB
    • Calculates the Quarterly Earnings above the limit, if any.
    • Advises the pensioners if they must repay any amount.

    Timing of earnings reporting

    Please report a pensioner's quarterly re-employment earnings in the calendar quarter they are paid, not when they were authorized and earned.

    Exception

    Where re-employment earnings are paid in a later calendar quarter due to administrative delays beyond the pensioner's control (e.g., a payroll backlog), please re-assign the applicable earnings to the calendar quarter that it should have been paid to avoid putting the pensioner in an overpayment situation.

    Example

    A PSPP employer hires Janet, a pensioner, at the beginning of the first calendar quarter. However, due to a payroll backlog, Janet was not actually paid until well into the second quarter when she was finally set up in the payroll system.

    Because of the delay, Janet's combined first and second quarter re-employment earnings exceed her quarterly earnings limit for the second quarter, causing a pension overpayment.

    Since the employer, not Janet, was responsible for the delay; an employer representative must determine what portion of the combined earnings should have been paid in the first quarter had there not been a delay. Once the income related to the first quarter has been determined, it must be reported as having been paid in the first quarter so that Janet avoids having to repay pension to OPB.

    Retiring a pensioner who rejoins the PSPP

    When the re-employed pensioner terminates employment again, the employer must submit a retirement transaction through the employer portal. Once OPB has been notified of the member’s retirement, we will re-calculate the pension and notify the pensioner directly.

    Effect of re-employment income on pension payment

    This section describes some of the factors that could affect a member's pension when that member becomes re-employed after retirement and includes these topics:

    Employer relationship with pensioner

    When a pensioner returns to work as an employee of a company that has a contract with or performs a service for a particular Ministry, Agency, Board, or Commission, OPB needs to

    • examine the relationship between the employer and the pensioner, and
    • determine if an arm's-length relationship exists between them.

    Pensioner's relationship with PSPP

    When the pensioner who is re-employed or engaged in any capacity with an employer who contributes to the PSPP, then there are certain restrictions on the amount these pensioners may earn. These restrictions are described below.

    When the pensioner... Then...
    Rejoins the PSPP OPB
    • stops pension payments effective the month the pensioner rejoins the PSPP, and
    • recalculates the pension benefit when the pensioner ends their period of re-employment.
    Does not rejoin the PSPP the re-employed pensioner
    • repays any excess of the pensioner's Quarterly Re-Employment Earnings over the Quarterly Earnings Limit, to a maximum amount equal to the quarterly pension.
    • may earn an amount limited to the following formula:
    3 × Final monthly salary before retirement − Quarterly pensions (without escalation) = Quarterly earnings limit

    Important: OPB is solely responsible for assessment. Only OPB, as opposed to the pensioner and/or the employer, can properly assess whether or not the type of re-employment or engagement of a pensioner impacts the PSPP pension.