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Refund of Contribution Overpayment Following the Regularization of Employment for 2016

We proceeded to a regularization of public sector pension plan employment for 2016. People entitled to a refund of contribution for that period have been notified in writing.

What is the regularization of employment?

Regularization of employment concerns people who hold more than one job during a given year. It is an adjustment of service, credited so that it does not exceed service usually recognized for one full-time job during the same year. Therefore, for an adjustment to be made, the total of the credited service for all jobs must be higher than one year.

The contributory salary is also adjusted on the basis of the credited service.

This table shows an example of the calculation of a contribution overpayment:

 

Credited service

Contributory salary

Service used

Annual basic salary

Salary used

Contributions actually paid

Contributions that should have been paid

Overpaid Contributions

Job A

0.5000

$25 000

0.5000

$50 000

$25 000

$1 500

$1 500

$0

Job B

0.6000

$24 000

0.5000

$40 000

$20 000

$1 200

$1 000

$200

Total for the year

1.1000

$49 000

1.0000 [1]

N.A.

$45 000

$2 700

$2 500

$200

 

[1]

Since the annual basic salary for job A is higher, 0.1000 year of service is subtracted from job B.

What are the consequences of a regularization of employment?

The regularization of employment has the following consequences:

  • Adjustment of service credited to one year (1.0000 year);
  • Adjustment of contributory salary;
  • If applicable, refund of an overpayment, that is, any difference between the contributions actually paid and the contributions that should have been paid.

What should I do if I believe that I am entitled to a refund of contributions?

You are not required to do anything because excess contributions are now refunded after we have finished processing the annual statements submitted by employers. Individuals entitled to a refund of contributions for a given year will either receive a cheque by mail or a direct deposit payment.

Can I apply for a refund of my contributions if I do not wish to wait for the mass refund operations?

No. We refund overpayments of contributions without any action on your part. Only people entitled to a refund will be informed.

Will interest be calculated on the refund of my overpaid contributions?

Yes. The interest on the plan is applied to the contributions to be reimbursed as at the date of the refund. The interest rate is determined according to pension funds performance.

Will income tax be deducted from my refund?

Yes. Federal and Québec income taxes will be deducted from your refund.

When will the income tax slips related to that refund be issued?

The income tax slips required for your income tax returns will be issued at the beginning of each year. The amount of the contribution refund is taxable in 2018. 

I make payments on a buy-back. Can I use the refund of my contribution overpayment to pay part or all of the balance on my buy-back?

No. We cannot directly apply the amount of your refund to the payment of your buy-back since income taxes are deducted from the amount.

Can I refuse my refund to get it at a later date?

No. A person cannot decide to decline a refund in order to receive it at a later date. Any declined refund will be transferred to the Ministère des Finances du Québec and income tax slips will be sent for the year when we issued the refund cheque. In addition, a person cannot transfer the amount due to him or her to an RRSP.