Entitlement to bridge benefits payable at pensionable age

Many federally regulated private pension plans provide a bridging benefit that is payable to former members for a temporary period from the date of retirement to when the former member is eligible to receive benefits under the Old Age Security Act or the Canada Pension Plan/Quebec Pension Plan.

When the plan’s pensionable age is or can be earlier than the date that these bridging benefits cease to be paid (typically age 65), the bridging benefits must be considered when determining a terminating member’s pension benefit. Pensionable age is defined in subsection 2(1) of the PBSA as the earliest age at which a pension benefit is payable to the member under the terms of the plan without the consent of the administrator and without reduction by reason of early retirement. Depending on the plan, pensionable age may be expressed as a specific age, a number of years of service, a combination of both, or a minimum combined age and service point total. All members who terminate employment prior to pensionable age are assumed to grow into any minimum age requirement or the age portion of a minimum point total for pensionable age.

As described below, bridging benefits payable at pensionable age are considered to be part of the pension benefit payable to a member at pensionable age (see Vested Benefits Payable to Terminating Employees). 

Section 17 of the Pension Benefits Standards Act, 1985 (PBSA) provides that, on cessation of membership in the plan, a member is entitled to a deferred pension benefit that is calculated in a similar manner and payable on the same terms and conditions as the immediate pension benefit they would have received had they attained pensionable age. This provision of the PBSA prohibits a pension plan from restricting eligibility for pension benefits payable at pensionable age (including bridging benefits) to members who retire from active service.

Therefore, if a terminating member would have met any eligibility requirements for bridging benefits by their pensionable age (assuming age grow-in), bridging benefits payable as of their pensionable age must be included in their pension benefit.

An example of where special attention is needed to ensure that pension benefits are calculated correctly for terminating members is where a plan has a pensionable age of at least age 55 with 85 points and the plan terms provide that the bridging benefit is payable on retirement to all retiring members until age 65. As noted above, a pension plan cannot restrict pension benefits payable at pensionable age (including bridging benefits) to those retiring from active service. Therefore, a member who ceases membership from this plan before reaching pensionable age must, at a minimum, be provided with the bridging benefit from their pensionable age to age 65. If the member ceases membership at age 50 with 25 years of service, their pensionable age is age 60 (60 + 25 = 85 points) and the deferred pension benefit provided to the terminating member must include bridging benefits payable from age 60 to age 65. The value of these bridging benefits must also be reflected in their pension benefit credit.

Special care must also be taken with respect to the pension benefits of members who retire (rather than terminate) prior to pensionable age from a plan whose plan terms restrict eligibility for bridging benefits to members who retire after reaching a particular age or with a particular number of points. Pursuant to section 16 of the PBSA, where a member who retires prior to pensionable age would have met the plan’s eligibility requirements for bridging benefits by the time they reached their pensionable age (assuming age grow-in), their pension benefit must also account for bridging benefits payable from their pensionable age.