What Happens to your Pension if you are Fired?

If you have been fired, you probably have many questions, including: “what happens to my pension?”

The first thing to know it that your pension administrator has a legal obligation to provide you with clear information about your pension value and your options for your accrued pension.

That said, the pension provider may not understand what your rights are with respect to your pension going forward.  These rights may depend on your employment contract, the type of pension you have or the plan’s terms.

Your Pension and the Employment Standards Act

The Employment Standards Act (“ESA”) is the legislation governing provincially regulated employees in Ontario.  It contains many rules, some of which are discussed here and here.  In section 60(1)(c), the ESA tells employers that they must continue your benefits throughout the statutory notice period. This includes pension plan contributions. The statutory notice period depends on how long you have worked for the employer.  It can range from one to eight weeks.

Your Pension and the Common Law

After the statutory notice period ends, there is no obligation for the employer to continue making pension plan contributions.  That does not mean your rights end at that stage.  Rather, you may be entitled to damages for the lost pension contributions or value. This is because the Ontario Court of Appeal has held that an employee may claim damages for wrongful dismissal based on the employee’s total compensation – including pension benefits.  For more on the reasonable notice period, see here.

What damages you can receive for your lost pension under common law depend on the type of pension plan you have.

Briefly, for defined contribution plans, deferred profit sharing plans, or group RRSP plans your damages are typically the contributions that the employer would have made during the notice period. The damages may also include the investment return that you would have earned if the contributions had been made.

For defined benefit plans, damages are generally equal to the difference in the present value of the pension at the time of termination and the end of the reasonable notice period.  This value can be difficult to calculate and often requires advice from an actuary.

Understanding a termination letter or severance package may require understanding your pension rights. If you think that your employer is not compensating you fairly for your pension in your termination package, we would be happy to discuss your concerns. To speak with one of our employment lawyers who has expertise in this area, please contact us at [email protected] or 647-204-8107.