To provide more flexibility to employers to offer phased retirement programs, and to increase the reward to older workers from full-time work, Ottawa is proposing to amend the Income Tax Act regulations to allow an employee to receive pension benefits from a defined-benefit registered pension plan, and simultaneously accrue further benefits.

The new regulations will allow employers to offer qualifying employees up to 60% of their accrued defined benefit pension, while accruing additional pension benefits on a current service basis in respect of their post-pension commencement employment.

To ensure that this measure has a positive impact on labour supply, it will be limited to employees who are at least 55 years of age and who are otherwise eligible to receive a pension without the plan imposing an early retirement reduction.

The 60% limit will be based on the amount of pension benefits that would be paid from the plan if the employee were fully retired.

There will be no requirement that the partial pension be based on a reduction in work time or that there be a corresponding reduction in salary.