Patricia

The Situation

Patricia came in for a general retirement planning conversation. She was 52, fourteen months into a new role as principal at a secondary school in the GTA, recently single after a divorce she described as long-overdue, and the full-time caregiver for her son Marcus, who is 23 and has a developmental disability requiring ongoing support.

She had a specific question: “Can I afford to retire at 62, or do I need to work until 65?”

She did not come in asking about her pension. She barely mentioned it in the first meeting — it was a number in a folder she had never really studied, because OMERS had told her what it would pay, and she had assumed her options were limited to “take it” or “defer it.”

The planning process revealed something she did not know she needed to know.

What She Was Trying to Figure Out

Patricia’s surface question was about retirement date and spending. Underneath it was a set of quieter anxieties that she had been carrying for years without a clean place to put them:

1. What happens to Marcus if I die? Her ex-husband was not in the picture. Her sister had agreed informally to take on Marcus’s care, but nothing had been documented and no financial structure supported that arrangement.
2. Will my pension actually support both of us if Marcus continues to live with me after I retire? Her OMERS pension was meaningful, but she had never modelled what her retirement income looked like once Marcus’s support costs were factored in explicitly.
3. Am I leaving him with anything? Patricia assumed that if she took her pension, she would receive monthly income for life, and when she died, the survivor benefit would flow to Marcus. She had never read the actual plan documents.

The third assumption is where the planning work began to surface something none of us had expected.

What We Did

We started, as always, with the life. Patricia’s retirement vision was specific: she wanted to retire at 62, continue living in her current home for the foreseeable future, travel modestly once or twice a year, and — above everything else — know that Marcus would be financially secure if she were gone tomorrow.

Then we went to her OMERS documentation.

OMERS is a strong plan. Patricia’s accrued pension at 52, with 26 years of credit, was substantial. The default election, if she took the pension at age 62, would provide lifetime income with a 66.67% survivor benefit.

But there was a problem with that default path for Patricia specifically.

A 66.67% survivor benefit means that if Patricia dies, Marcus — assuming he qualifies as an eligible survivor under the plan’s specific rules — would receive a reduced monthly payment for the rest of his life. That is useful. It is also, in Patricia’s case, significantly less useful than a structured capital pool held in a Henson Trust, for two reasons. First, a guaranteed pension income stream would likely disqualify Marcus from continuing to receive ODSP beyond a very low threshold, because ODSP counts pension income against eligibility. Second, pension income stops when Marcus dies — it cannot pass on to support any remaining care structure or cover his final expenses and dignity-of-care commitments.

The commuted value, by contrast, could be rolled into a LIRA, eventually converted to a LIF in retirement, and on Patricia’s death, the remaining balance could flow to a Henson Trust structured for Marcus’s benefit. The trust would hold the capital without triggering ODSP disqualification (because the trustee has discretion over distributions, a Henson Trust does not count as Marcus’s asset). The trustee — Patricia’s sister, with a corporate co-trustee for continuity — could use trust assets to supplement whatever support Marcus needed beyond ODSP, without reducing his provincial benefits.

And then came the piece that gave the meeting its gravity.

Patricia could only elect the commuted value if she did so before age 55 and before reaching eligibility for an early retirement pension. Once she hit 55, the commuted-value option disappeared. She had, based on her current age and OMERS-specific rules we confirmed with the plan administrator, a window of approximately two years and four months.

Nobody had ever told her this.

“I came in asking when I could retire. I left knowing I had about two years to make a decision that would determine what happened to my son after I was gone — and I almost never knew I could choose it.”

The planning work then became a coordinated sequence, executed over roughly four months:

• Estate lawyer. We referred Patricia to an Ontario estate lawyer experienced with Henson Trusts. Her will was updated. The Henson Trust was drafted. Marcus’s RDSP was reviewed. Powers of attorney were put in place for both Patricia and — where appropriate — Marcus.
• Private health coverage. Because taking the commuted value would forfeit OMERS retiree health benefits, Patricia needed private coverage in place before the election was finalized. We coordinated a private health plan covering prescription, paramedical, and vision — with specific attention to ensuring Marcus’s ongoing medical needs were covered without pre-existing condition exclusions. Underwriting was completed before any OMERS paperwork was filed.
• The commuted-value election. We modelled the Maximum Transfer Value split, timed the transfer to straddle two tax years in a way that minimized the overall tax hit on the taxable excess, and confirmed every number with OMERS directly before signing.
• The LIRA investment strategy. The LIRA was positioned in a balanced income-oriented portfolio with a clear mandate: preserve capital across Patricia’s expected retirement horizon, generate enough growth to support LIF withdrawals from age 62 to 90, and leave the largest possible residual balance for the Henson Trust at Patricia’s death.

The Outcome

Patricia elected the commuted value at age 53, inside the pre-55 window. The taxable MTV excess was absorbed using a combination of RRSP contribution room and careful year-end tax planning. The LIRA was funded and invested. The Henson Trust was established. Private health coverage for Patricia and Marcus is in place with no pre-existing condition exclusions.

Modelled across Patricia’s expected lifespan to age 90, the commuted-value path — compared to the default OMERS pension election with 66.67% survivor benefit — is projected to leave an additional $340,000 of capital available to Marcus through the Henson Trust after Patricia’s death, without reducing his ODSP eligibility.

The planned retirement date is unchanged: age 62. The income during retirement is slightly lower than the pension would have provided Patricia during her own lifetime, but it is sufficient for the life she has planned, and the trade-off protects Marcus’s long-term support structure in a way the pension could not.

Patricia describes the outcome more simply than any of the numbers do. “Marcus is safe. That’s the whole plan.”

Why This Story Probably Applies to You — or Someone You Know

If you are an OMERS member, or an HOOPP, OPG, or Ontario Teachers member, and any of the following describes you, the planning window Patricia found is real and closing:

• You are under 55 and have a pension plan that offers a commuted-value option only before that age.
• You have a dependent with a disability, a complex family situation, or estate planning needs that a standard pension survivor benefit does not address well.
• You have never read your actual plan documents — only the summary statements.
• You have assumed that taking the pension is the default and therefore must be the right choice.

The commuted-value decision is not for everyone. For most members, keeping the pension is the right answer, because the pension provides a guaranteed income floor that is hard to replicate and protects against longevity and investment risk. But the fact that most people should keep the pension is not a reason to skip the analysis. It is a reason to confirm which group you are in while you still have the choice.

If you are under 55 and have not had a planning conversation about your pension options, the single most valuable thing you can do in the next ninety days is get one on the calendar. Not because every member should change their election — most will not. But because the members who should change their election often do not know they are in that group until someone models it for them.