ARCHIVED CD 2000-027
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Note This document has been modified. The changes are identified by a vertical line "|". Revision (|)
August 29, 2000
SUBJECT: Impact of the Pay Equity Agreement on DI and LTD Benefits
1.1 The purpose of this directive is to advise Compensation Advisors of the impact of the Treasury Board Secretariat (TBS)/Public Service Alliance of Canada (PSAC) Pay Equity agreement on benefits payable under the DI and the LTD plans, and explain the procedures to follow when reporting the Pay Equity adjustment.
1.2 This directive should be read in conjunction with other directives concerning Pay Equity namely:
- Compensation Directive 2000-001 dated January 10, 2000, entitled "Pay Equity Adjustments Reports",
- Compensation Directive 2000-004 dated February 1, 2000, entitled "Pay Equity Implementation - Clerical and Regulatory (CR),
- Stenographic and Typing (ST), DA -CON, Hospital Services (HS), LS and Educational Support (EU) Groups" and Compensation Directive 2000-015 dated May 19, 2000, entitled "Additional Information on the Implementation of the Pay Equity Agreement".
1.3 In this text, use of masculine is generic and applies to both men and women.
2.1. Pay Equity Agreement
The PSAC Pay Equity agreement for employees in the CR, Library Science (LS), EU, Data Processing (DA-CON), Secretarial, ST and HS groups was based on the Tribunal ruling rendered on July 29, 1998, and approved by the Canadian Human Rights Tribunal (CHRT) on November 16, 1999. This agreement authorizes retroactive adjustment from March 8, 1985 to July 28, 1998, and allowed blended rates of pay effective July 29, 1998, which were implemented on June 8, 2000. DI and LTD benefits may require adjustment as a result of this agreement.
A report entitled "PAYEQ06 - Employees on LWOP Due to Illness", was distributed to all departments on February 18, 2000. This report identifies all current and former employees in the affected groups that are eligible for a Pay Equity adjustment, for which a period of leave without pay (LWOP) for illness (reason code "C") was reported. It will assist Compensation Advisors in departments in identifying employees who may have received DI or LTD benefits during their absence.
3.1. DI and LTD Benefits
DI and LTD benefits are calculated based on the adjusted annual salary authorized to be paid to the employee at the end of the elimination period. The elimination period ends on the expiration of the employee's paid sick leave credits or after 13 weeks of total disability, whichever is later.
Prior to March 1993, a retroactive salary increase was effective the first of the month following the authorization date for DI or LTD purposes. Disability benefits were not adjusted to reflect retroactive salary increases if the authorization date of the salary increase was after the end of the elimination period (even if the salary rate was retroactive to a date prior to the date on which benefits became payable). Since March 1, 1993, a retroactive salary increase is used for benefit calculations provided the effective date of the increase is prior to the date benefits commenced.
The above rules remain in effect; however, based on the Pay Equity Agreement between TBS and PSAC all individuals in receipt of DI or LTD for any period between March 8, 1985 to present will be treated as if the total period was fully insurable. Where an employee becomes entitled to DI or LTD benefits the Pay Equity adjustment amount that forms part of the insured salary prior to the date benefits commenced will be included in the benefit calculation.
An LTD claimant (classified as a CR-5) is disabled on September 1, 1997, and becomes entitled to LTD benefits on December 1, 1997, after a 13-week elimination period. The Pay Equity agreement includes a retroactive Pay Equity adjustment effective April 1, 1997. His LTD benefits will therefore be recalculated to reflect the salary change effective April 1, 1997, since the Pay Equity adjustment is prior to the date benefits commenced.
3.2. Rehabilitation Program
Monthly benefits paid under a Rehabilitation Program are reduced by income earned in respect of a period of rehabilitative employment. Rehabilitation benefits are reduced in accordance with the plan rules in effect at the time those benefits were originally paid. Recalculation of the rehabilitation benefits will be required where an employee's income during a period of rehabilitative employment increases as a result of the Pay Equity agreement.
Please refer to the following addresses for further information:
3.3. DI/LTD Premiums
Please follow the procedures detailed in Compensation Directive 2000-004.
3.4. DI and LTD Reduced by Public Service Superannuation Act (PSSA) Entitlements
DI, LTD and PSSA benefits will be recalculated as a result of the Pay Equity adjustment. Since DI and LTD benefits are reduced by PSSA benefits, there will be a corresponding increase in the reduction of the disability benefits.
In most cases, recalculation of disability benefits will result in a retroactive payment owing to the employee. Should there be cases of overpayments, recovery will be requested by the appropriate Insurer in respect of the period starting July 29, 1998, the date on which the Pay Equity adjustments were blended into ongoing wages.
3.6. Canada Pension Plan (CPP) or Quebec Pension Plan (QPP)
CPP or QPP benefits are not affected by the Pay Equity agreement.
3.7. 5% Lump Sum Payment
DI/LTD premiums will not be deducted from this payment and this sum is not to be included in salary for the DI/LTD benefits calculation.
4.1. Reporting the new salary for DI or LTD
Compensation Advisors are to notify the appropriate Insurer of any change to the insured salary for current and former employees who were or are in receipt of DI or LTD benefits for any period between March 8, 1985 to present. Standard letters have been created for this purpose and should be used when reporting the new salary. Compensation Advisors should also send a copy of this letter to Superannuation Directorate.
When reporting a salary change due to a Pay Equity adjustment the following information should always be provided to the Insurers and Superannuation Directorate:
- the salary that was previously reported at the end of the elimination period (basic rate of pay plus any allowances such as, bilingual bonus; ongoing equalization allowance [e.g. $994 - refer to Compensation Directive 1990-027 ] ;
- the new salary (this includes the amounts as reported in a) above plus the Pay Equity adjustment payable for that year [e.g. $1,694]);
- he last day of the elimination period;
- the effective date of the pay equity adjustment (e.g., April 1, 1987).
| A CR-4 became entitled to DI benefits on January 3, 1988.
Last day of the elimination period for this employee: January 2, 1988.
Basic rate of pay previously reported to the Insurer for a CR-4: $25,817
Ongoing equalization allowance: N/A
Insured salary reported to the Insurer at that time: $25,817
| Compensation Advisors should report the new salary as follows:
Basic rate of pay: $25,817
Ongoing equalization allowance: N/A
Pay Equity Adjustment payable as of April 1, 1987: $1,694
New salary to be reported to the Insurer: $27,511 (i.e. $25,817 + $1,694)
The letter to report the new salary should be completed as follows:
|Salary Previously Reported||New Salary|
|Basic Rate of Pay: $25,817||Basic Rate of Pay: $25,817|
|Bilingual Bonus: Not eligible||Bilingual Bonus: Not eligible|
|| Equalization Allowance: N/A||Equalization Allowance: N/A|
|| Total Salary: $25,817||Pay Equity Adjustment: $1,694|
||||Total Salary: $27,511|
Last day of the elimination period for this employee: January 2, 1988
Effective date of the Pay Equity adjustment for this employee: April 1, 1987
TBS has indicated that, in some cases, Compensation Advisors have been reporting salary adjusted to a multiple of $250 when a retroactive salary revision under a new collective agreement was signed. Compensation Advisors should report the insured salary without adjusting it to a multiple of $250, since the Insurers will automatically do so.
For multiple claims a standard letter is necessary for each claim since the insured salary of the employee may change each time.
Please note that interest will not be paid on DI or LTD adjustments. Therefore, Compensation Advisors should report to the Insurers and Superannuation Directorate any Pay Equity adjustments as soon as possible.
A list of the Pay Equity adjustment amounts can be found in Compensation Directive 2000-001.
4.2. Reporting the New Monthly Earnings from Rehabilitative Employment
In addition to the information described in subsection 4.1 above, Compensation Advisors should also report the new monthly earnings from employment under a Rehabilitation Program approved by the Insurer.
Compensation Advisors are to advise the Insurers of the adjustment to employment income due to the Pay Equity agreement for employees who were or are participating in a Rehabilitation Program for any period between March 8, 1985 to present. The standard letters created for this purpose should be used when reporting the new monthly earned income.
The following details should always be provided to the Insurers when reporting the new monthly earned income:
- the dates broken down in a month/year format;
- the monthly earned income previously reported;
- the new monthly earned income.
The new monthly earned income should include all remuneration received, as follows:
- basic salary for hours or days worked;
- allowances paid, e.g. bilingual bonus, ongoing equalization allowance, Pay Equity adjustments;
- vacation leave used or cashed out;
- sick leave used;
- any extra-duty compensation including compensatory leave granted.
Monthly Earned Income Previously Reported
Annual salary of a CR-04 at the maximum: $33,886 (i.e. $32,892 + $994)
Employee returned to work on a partial week basis working 22.50 hours per week effective July 6, 1998, for one month, total hours worked was 90 hours for the month of July 1998.
Old monthly income previously reported to the Insurer for the month of July 1998 under the Rehabilitation Program was $1,558 (i.e. $33,886 per year ÷ 1,956.6 working hours in one year = $17.31 per hour; $17.31 per hour x 90 hours = $1,558).
New Monthly Earned Income
Annual salary of a CR-4 at the maximum: $35,475 (i.e. $32,892 + $994 + $1,589)
Compensation Advisors must report the Pay Equity adjustment on earnings for the month of July 1998. The new monthly earned income to be reported to the Insurer for the month of July 1998 should be $1,631 (i.e. $35,475 per year ÷ 1,956.6 working hours in one year = $18.13 per hour; $18.13 per hour x 90 hours = $1,631).
The letter to report the new monthly earned income must be completed as follows:
|Date (month/year)||Monthly Earned Income Previously Reported||New Monthly Earned Income|
4.3. Acting Pay and Acting Premium
Compensation Advisors should determine if there will be a change in the insured salary for an employee whose disability benefit was based on acting pay or acting premium. If there is a change in the insured salary, the new amount must be reported to the appropriate Insurer.
Compensation Directive 2000-004 explains the rules for these situations.
4.4. DI or LTD Benefits Adjustment for Individuals in Receipt of a PSSA Pension
Former employees in receipt of both DI/LTD benefits and PSSA benefits will have both the disability and pension benefits adjusted as a result of the Pay Equity adjustment.There will also be a corresponding increase in the reduction from the DI or LTD benefits.
4.5. Superannuation Directorate
The Superannuation Directorate will be responsible for confirming to the Insurers the new insured salary and will verify the employee's date of entitlement to DI or LTD benefits. Should there be any discrepancies with the date reported, Superannuation Directorate will advise the Compensation Advisor accordingly.
The Directorate will also report to the Insurers any changes in the pension entitlement.
5.1 Any request for information regarding the foregoing should be addressed to your Public Works and Government Services Canada (PWGSC) Compensation Services office.
Original Signed by
Government Operational Service
- Date modified: