Purchase of Service: Maternity and Parental Leave of Absence

Cost

For maternity and parental leaves of absence after December 31, 2000, the cost of purchasing the leave will be calculated as follows: current full time equivalent monthly salary times employee pension contribution rate times the number of months of leave of absence being purchased. As the employer will be billed for its pension contribution, this type of purchase is always cost effective.

If you are purchasing maternity or parental leaves completed after December 31, 1991, the maximum that you can purchase is three years of leave. The amount of maternity and parental leave of absence purchased at the employee pension contribution rate is subject to limits established by the Employment Standards Act.

The most tax effective time to purchase a maternity or parental leave of absence is during or immediately after the expiration of the leave and before April 30 of the calendar year following the expiration of the leave of absence.

Example 1
If as an active pension plan member with a current full time equivalent monthly salary of $8,000 ($80,000 annual salary) you were to purchase a one-year maternity and parental leave of absence taken in 2001 or after, the calculation of the cost would be $8,000 times 11.2% times 10 months. In this case, the employee contribution rate is 11.2% and the employer contribution rate is 13.33% (for salary in a calendar year that is under the YMPE). Your cost would be $8,960. The employer would then be billed for $10,644. The cost may be slightly higher if the combined leave of absence was for a calendar year rather than a school year. Purchasing maternity or parental leave of absence is always worth while when the employer is required to make the employer contribution.

Maximum purchase for each child

Cost Estimator

The Teachers’ Pension Plan on-line Purchase Cost Estimator is available to help you determine the cost of purchasing a maternity and/or a parental leave of absence. The cost estimate can be printed and attached to your application form. The form must be signed by the employer from whom the leave was taken.

Calculating the Cost Benefit

Using the Teachers’ Pension Plan “My Account” Personalized Pension Estimator, enter the information from your most recent Members Benefit Statement and calculate your pension estimate for a specific retirement date. You can access the Personalized Pension Estimator by clicking on "My Account" at Teachers' Pension Plan. Then go back and increase the pensionable and contributory service by the additional amount that is being purchased and recalculate your pension for the same retirement date. This will give you the increase in your monthly pension due to the purchase of maternity and/or parental leave of absence. Compare the increase in the monthly pension to the cost of the purchase. Divide the cost of the purchase by the increase in the monthly pension to determine the number of months of increased pension it will take to recover your purchase cost.

You may also contact BCTF Income Security for assistance:

BCTF, Income Security
100-550 West 6th Avenue
Vancouver, BC V5Z 4P2
604-871-1921, toll free 1-800-663-9163, Local 1921, fax 604-871-2287
E-mail: mkimmis@bctf.ca, rtaylor@bctf.ca  

For leaves of absence terminating after April 1, 2002, the time limit for purchasing a leave of absence will be five years from the completion of the leave of absence or termination of employment with that employer, whichever is earlier. 

Applications for Purchase of Maternity and/or Parental Leave of Absence

More detailed information is available on the Teachers’ Pension Plan web site in a publication called Pensionfacts: Purchasing a Leave of Absence . An application form called Purchase of Service Application  is available or you may use the Purchase Cost Estimator. The latter is a combined cost estimator and application form that you can print and attach to your application form. All applications must be signed by the employer who granted the leave of absence and forwarded to the Teachers’ Pension Plan.

Timelines and Conditions for Purchasing Leaves of Absence in the Teachers’ Pension Plan

Steps to figure out if a purchase of service is worthwhile

• Calculate your purchase of service cost using the online Purchase Cost Estimator at the Teachers’ Pension Plan website: tpp.pensionsbc.ca Print off the results. If you have received a Statement of Cost from the plan, you will not need to use the Purchase Cost Estimator.
  
   
• Do a pension estimate using your Personalized Pension Estimator at My Account on the Teachers’ Pension website: tpp.pensionsbc.ca Enter the date on which you would like to retire. Click Perform Estimate and print the results.
  
  Note: If you have not previously logged on to My Account, you will need your 2006 Member’s Benefit Statement at hand. Your username and temporary password to access My Account can be found in Section 1 Personal Information on the statement.
  
   
• Do a second pension estimate using same date entered in Step 2. Beside the label Additional Pensionable Service, fill in the amount of time you are purchasing as shown on the printed results page from the Purchase Cost Estimator¹ and or the printed Statement of Cost from the Teachers’ Pension Plan. Click Perform Estimate and print the results.
  
   
• Compare the two pension estimates.² The highlighted amount is the amount you will get up to age 65; the top number above the bridge amount is the amount you will get after age 65. Make notes of the increase in the pension amount as a result of the purchase of service.
  
   
• Calculate the cost return. Divide the cost of the purchase (as determined by the online Purchase Cost Estimator or the printed Statement of Cost from the Teachers’ Pension Plan) by the amount of the pension increase derived if you purchase the service. The answer you get is the cost pay back time in months. If that number is less than 120 months, the purchase may well be to your financial advantage.

¹Note: If you are purchasing a 100% unpaid leave (general, maternity, parental) then you are purchasing both pensionable service and contributory service and can thus enter the amount of time on the “Additional Pensionable Service” line. If, however, you are purchasing a partial leave, i.e., you worked half-time and were on leave for half-time in a school year, you are only purchasing pensionable time because you will have already accrued the contributory time. If that is the case, there is currently no way to only add pensionable service only to the “Additional Service” line. This will thus impact on exactly when you would achieve an unreduced pension. This aspect of the Estimator should be rectified by the end of the 2007–08 school year.

Updated October 2010