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Section : CONTRIBUTIONS WHILE ON LEAVE WITHOUT PAY (LWOP)

Subsection : OPTION NOT TO COUNT LWOP AS PENSIONABLE - GENERAL

RULE

In the past, public service pension plan contributions were required for all periods of authorized LWOP. Effective September 9, 1993, the Public Service Superannuation Act (PSSA) was amended to allow employees to elect NOT TO COUNT LWOP as pensionable service beyond the first three months and deficiencies will not be required for the leave other than for the first three months.

When a valid election has not been made, pension contributions must be paid in respect of the full periods of LWOP occurring after the employee becomes a contributor. These periods are, therefore, countable as pensionable service.

NOTE 1

The Public Service Pension Centre (Pension Centre) is responsible to receive elections not to count periods of LWOP as pensionable service.

NOTE 2

The option not to count LWOP as pensionable service must be made for the FULL period of the LWOP, except for the first three months.

The Pension Centre will send a notice to the compensation advisor if a plan member opts not to count the period of LWOP as pensionable service beyond the first three months. The compensation advisor must take appropriate action to change the LWOP type code. The LWOP type code on the Regional Pay System (RPS) must be changed to a non-pensionable leave code, either "1" for single rate leave not counted and/or "2" for double rate leave not counted.

The Pay Office (PO) must also stop, refund pension deficiencies and adjust the Pension Adjustment (PA), when required.

PENSION ADJUSTMENT

PA is the sum of pension credits which reflect the pension benefits accruing to an employee during the year under all plans sponsored by an employer. Since it is subtracted from contribution limits to determine the next year's maximum Registered Retirement Savings Plan (RRSP) room, this amount will be used to reduce RRSP contribution room available to an individual.

For 2007 and earlier, the rate was 1.3%. Since January 1, 2008, when calculating the annual benefit entitlement accrual, the benefit rate used for the annualized pensionable earnings up to the yearly maximum pensionable earnings (YMPE) takes the year of birth into consideration.

As illustrated in the following table, as a result of the PSSA amendments, there is a total of six different benefit rates. However, only one rate will be used per plan member, which will be determined by the plan member's year of birth.

Year of Birth 1942 or earlier 1943 1944 1945 1946 1947 or later
Benefit rate on
pensionable earnings
up to the YMPE
1.3% 1.315% 1.33% 1.345% 1.36% 1.375%

The PA calculation for the current service forms part of the year-end process. Effective 2008, changes will be required to recognize six benefit rates and to take into account the employee's year of birth.

FORMULA TO CALCULATE THE PA:

If the individual reaches the age of 65 prior to 2008 (the year of birth prior to 1943), the rate of 1.3% will apply, and the calculation for the 2008 PA will be as follows:

  • Step 1: Determine the annual benefit entitlement (pensionable earnings): 1.3% of the YMPE + 2% of the maximum salary used for PA calculation minus the YMPE;
  • Step 2: If the annual benefit entitlement is greater than the maximum benefit entitlement specified for that year, then impose the maximum benefit entitlement;
  • Step 3: Prorate the benefit entitlement by the number of pensionable pay periods;
  • Step 4: Multiply the result of step 3 by a factor of 9;
  • Step 5: Prorate the PA offset ($600) by the number of pensionable pay periods;
  • Step 6: Subtract the result of step 5 from the result of step 4; this result, rounded to the nearest dollar, is the PA for the taxation year;
  • Step 7: If the PA is greater than the maximum pension adjustment (MPA) specified for that year, then impose the MPA.

If the individual reaches the age of 65 in 2008, or thereafter, the rate used for the calculation will be based on the year of birth (for rates, refer to the previous table).

Years Maximum Benefit Entitlement YMPE for the Canadian Pension Plan (CPP) /Quebec Pension Plan (QPP) Maximum Salary used
for PA Calculation
Maximum Pension Adjustment
2006 $2,111.11 $42,100 $120,300 $18,400
2007 $2,222.22 $43,700 $126,500 $19,400
2008 $2,333.33 $44,900 $130,700 $20,400
2009 $2,444.44 $46,300 $136,700 $21,400
2010 $2,494.44 $47,200 $139,500 $21,850
2011 $2,552.22 $48,300 $142,800 $22,370
| 2012 $2,646.67 $50,100 $148,000 $23,220
| 2013 $2,696.67 $51,100 $150,900 $23,670

Example:

In the following example, the employee reaches the age of 65 during the year 2010 (the year of birth is 1945), the rate of 1.345% will apply, and the calculation for the 2008 PA will be as follows:

  • Step 1: (1.345% x $44,900) + [2% x ($66,500 - $44,900)] = $603.91 + $432 = $1,035.91
  • Step 2: The result being less than the maximum benefit entitlement ($2,333.33), use $1,035.91
  • Step 3: Prorate of benefit entitlement: $1,035.91 x 26/26 = $1,035.91
  • Step 4: $1,035.91 x factor 9 = $9,323.19
  • Step 5: Prorate of PA offset: $600 x 26/26 = $600
  • Step 6: $9,323.19 - $600 = $8,723.19 rounded to next dollar = $8,724
  • Step 7: PA = $8,724

RULE 1

A PA is reported for all pensionable service that occurs on or after January 1, 1990.

For income tax purposes, the public service pension plan is treated as a multi-employer pension plan. The PA must be calculated the same way for all years, including the year of termination.

A PA will be reported for a period of pensionable LWOP. The PA is not subject to cancellation, even when the employee later elects not to count the leave as pensionable service.

In some cases where an individual is on LWOP and serving as a full-time paid official of a union, the union has been reporting the PA in respect of the LWOP under the PSSA. These individuals receive a PA from their current employer (the union) and a PA from the PSSA employer, in respect of the same period. This has the effect of reducing the individual's RRSP room twice for the same benefit accrual.

| Where an individual provides confirmation that the union (i.e. the current employer) has reported a PA for the pensionable LWOP under the PSSA, that period MUST NOT be included in the PA reported by the former employer (i.e. the department or corporation from whom the employee is on leave). This confirmation should be in the form of a letter from the union advising that the benefit accrual under the PSSA has been included in the PA reported by the union.

Only where the union has reported a PA for the benefit accrual is the former department or corporation not required to report a PA for that period of leave.

This situation applies only to individuals on who serve as a full-time official of a union.

Where an individual or Union has provided confirmation that the Union will include (or has included) the PSSA benefit accrual in the PA reported by the Union, the PA reported by the RPS must be reduced with the number of pay periods and pensionable earnings to be excluded from the PA calculation.

When an option not to count LWOP as pensionable has been made before the LWOP commences, a PA is reported only for the first three months of the LWOP.

When the employee, either on return to duty or while still on LWOP, opts not to count the LWOP before the end of calendar year, the period of non-pensionable LWOP for that year will not be included in the PA calculation. However, the PA reported for any calendar year previous to the year of the option not to count the leave cannot be reversed.

Where an employee has 35 years of service, the PA calculation will include service only up to the date on which the employee has completed 35 years of service.

For clients serviced by the RPS, and Crown corporations and Agencies not serviced by the RPS, where an amended PA is generated for a finalized account, the revised PA amount must be reported in writing to the Pension Centre.

EXAMPLES

  1. Election made prior to the LWOP;
    • PA is reported for the first three months only.
  2. Election made during the LWOP;
    • no PA is reported for the LWOP during the year the election is made;
    • no PA is reported for the subsequent ongoing LWOP.
    • e.g. LWOP commences June 1, 1995;
    • election not to count LWOP on November 15, 1995;
    • return to duty on June 1, 1996;
    • no PA reported from September 1, 1995 to May 31, 1996.
  3. Election is made on return to duty;
    • no PA is reported for the period of LWOP for the current year, unless the election is made by December 31st.
    • e.g. LWOP commences January 1, 1995;
    • return to duty June 1, 1996;
    • election not to count LWOP on July 1, 1996;
    • no PA reported from January 1, 1996 to June 30, 1996.

Note: PA cannot be cancelled if it is properly reported.

Last Update: May 2013