ARCHIVED CD 2009-009
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April 30, 2009
SUBJECT: Recovery of Superannuation Contributions Paid in Error
1.1 The purpose of this Directive is to clarify the procedures to follow when a return of contributions (ROC) is paid in error, or should not have been paid, and must be recovered. Recovery actions have been identified as per the following situations:
- Recoveries of ROC by direct deposit for the Canada Revenue Agency (CRA) employees;
- Repayment in full (by installments or lump sum) -- By the end of the year following the year in which the ROC was paid;
- Repayment (by installments or lump sum) -- After the end of the year following the year in which the ROC was paid.
1.2 In this text, use of the masculine is generic and applies to both men and women.
1.3 The new procedures will apply to cases where the recovery has not yet commenced.
1.4 Where the recovery has already commenced in accordance with previous procedures, there should be no changes made.
2.1 This document supersedes Compensation Directive 1995-040 (dated October 5, 1995).
Normally, with a few exceptions, the only entitlement payable to a contributor who terminates at any age after June 20, 1996, with less than two years of pensionable service, is a ROC, regardless of the reason for termination.
A ROC is a lump sum payment that consists of a return of the Public Service Superannuation Account (PSSA) (Fund 1) and/or the Public Service Pension Fund (PSPF) (Fund 2) contributions plus interest.
3.1 The Public Service Superannuation Act addresses only one situation where a ROC is paid in error; that is, where a person was entitled to a return but became re-employed as a contributor before it was paid ([subsection 10(7)]). However, there are other situations where a ROC has been paid and must be recovered. These situations include cases where the employee has been reinstated in his position retroactive to the date of termination, or where the amount of the ROC has simply been overpaid due to an error in calculation. It could also include a situation where the ROC was paid twice.
3.1.1 Once it has been determined that the ROC should not have been issued, if the ROC has not yet been mailed out or has very recently been paid, the department should hold the cheque or request that it be returned by the employee, whatever the case may be.
3.1.2 If the employee received the cheque but has not cashed it, then he needs to return it to his department, who in turn will return it to the Payroll Accounting Division (PAD) for cancellation. The PAD must advise the Public Service Pension Centre (PSPC) once the cheque has been canceled.
3.1.3 The PSPC must also delete the refund from the Contributor System, as per their procedures.
3.1.4 If the cheque was not available for return and has already been issued and/or cashed, the compensation advisor will inform the PSPC that the ROC must be recovered. The PSPC will determine the amount to be recovered and they will advise the plan member directly of the amount owed.
3.2 In accordance with the Public Service Superannuation Act, the service remains to the employee's pensionable service credit and the contributions must be recovered.
3.3 The process for making the recovery and/or the adjustments to the contributor's account will depend on whether the repayment is made in a lump sum (either by a registered retirement savings plan (RRSP) transfer or a cash payment) or recovered by monthly deductions from the employee's salary.
3.4 If the FULL recovery is not made prior to the employee's retirement, the compensation advisor must make sure to recover amounts due from any termination benefits they issue to the employee, and if there is still any outstanding balance, it must be recovered from the pension benefit payable to the individual or his survivor.
4. Recoveries of ROC by direct deposit for the CRA Employees
NOTE 1: The CRA is the ONLY department that issues ROC payments as automatic direct deposit.
4.1 If a ROC in error is deposited into the employee's bank account, the procedures should be as follows:
4.1.1 If possible, the compensation advisor needs to intercept the payment and cancel it immediately.
4.1.2 If the payment is too late to intercept or recall, the status in the Standard Payment System (SPS) will show that it has been paid. Then, the compensation advisor must communicate to the PAD the name and telephone number of the financial institution where the payment was deposited.
4.1.3 The PAD must, in turn, communicate with the financial institution to request that they return the net amount of the payment to the employee's department and, from there, the proper process will apply, depending on how the money was deposited (i.e. RRSP or cash payment).
4.1.4 The compensation advisor will send a pay action code (PAC) 18R with the proper ROC code (hard copy) to the pay office (PO).
4.1.5 The PO will create an overpayment using the appropriate PAC 30 and will also prepare a source 51 Internal Journal Voucher (IJV).
4.1.6 The ROC codes credit entered by the PAD will return the money to the PSPC (PSSA / PSPF contributions, plus interest).
4.1.7 The federal and provincial tax debit will reduce the ROC.
4.1.8 The appropriate source 051 IJV must be completed = net amount of cheque. The two source 051 IJV 's total MUST equal $0.00.
4.1.9 Once the payment is deposited by the PAD, the compensation advisor will do a credit transfer to apply the returned payment towards the outstanding payment.
NOTE 2: If the financial institution refuses to return the payment, the employee will have to reimburse the payment. The following procedures will apply:
5. Repayment in full (by installments or lump sum) -- By the end of the year following the year in which the ROC was paid
5.1 The ROC payment transaction must be reversed and the contributions are to be restored to the corresponding accounts (PSSA, PSPF and/or Retirement Compensation Arrangement Account (RCAA) 1-Fund 1 and/or RCAA 1-Fund 2, if applicable), as if the payment had never occurred and the service remains to the employee's pensionable service credit.
5.2 The employee should be placed in the same tax position as if the payment had never been made. The amount to be recovered from the employee will be equal to the difference between the gross amount of the ROC and the tax withheld. The amount of the tax withheld will be recovered from CRA.
5.3 The following are the new* codes created in order to facilitate the reconciliation of the monies:
- PSSA = 815
- PSPF = 5E9*
- RCAA Fund 1 = 5F1*
- RCAA Fund 2 = 5F2*
NOTE 3: The PSPC has to be advised when a ROC has been paid in error and that the amount has to be recovered.
5.4 The PSPC will advise the contributor directly of the amount that must be recovered. In this case, it is the gross amount of the ROC less federal and provincial tax withheld that will be recovered.
5.5 The tax withheld will be recovered from CRA and/or the "ministère du Revenu du Québec" (MRQ) via the IJV process where applicable. Thus, the T4A, T4A-RCA, Relevé 1 and/or Relevé 2 must be cancelled, as applicable.
5.6 If all or a portion of the ROC had been transferred to an RRSP, the funds need to be transferred back to the PSSA or the PSPF. Thus, the contributor will remit his RRSP transfer to the PSPC via the Tax Form T-2033. A receipt will be issued which is NOT valid for tax purposes since the T4A / T4A-RCA / Relevé 1 and/or Relevé 2, will be cancelled by the PO, as applicable.
5.7 If applicable, the PSPC will issue, amend or cancel either the past service pension adjustment (PSPA) or the pension adjustment reversal (PAR), as per their procedures.
NOTE 4: It is the responsibility of the PSPC to advise the PO to cancel/amend the T4A / T4A-RCA / Relevé 1 and/or Relevé 2, as applicable, when the ROC is repaid in FULL by the end of the year following the year in which the ROC was paid.
NOTE 5: The PSPC will update the Contributor System by amending the fields 218 (option indicator code) and 219 ("struck off strength" (SOS) reason), as per their procedures.
5.8 If the tax withheld is deducted from the ROC, the PO will prepare a PAC 30 to debit the elements 729 (federal tax) and 730 (Québec tax). A requisition of a source 051 IJV will be prepared by the PO to debit tax and credit pension.
5.9 The PAC 30, prepared by the PO, will also need to reset to zero the elements T4A / T4A-RCA / Relevé 1 and/or Relevé 2, as applicable, where the ROC has been paid in error (i.e. 726, 727, 749, 743).
6. Repayment (by installments or lump sum) -- After the end of the year following the year in which the ROC was paid
6.1 Where the ROC payment is not fully recovered before the end of the year following the year in which the ROC was paid, the payment transaction cannot be reversed.
6.2 The service will remain to the employee's credit, but contributions are re-credited only as and when they are repaid.
6.3 If the amount is repaid in a lump sum, a receipt will be issued which will be valid for tax purposes, since the T4A / T4A-RCA / Relevé 1 and/or Relevé 2 will be amended by the PO, as applicable.
6.4 If the amount is to be recovered by installments, it is the responsibility of the PSPC to advise the PO of the amount to be recovered from the employee.
6.5 If the recovery is made from the employee's salary, the recovery will be reported on the employee's T4 and/or Relevé 1, along with the current PSSA or PSPF contributions.
6.6 If applicable, the PSPC will issue a PSPA, as per their procedures.
7.1 Any request for information regarding the content of this document should be addressed to your Public Works and Government Services Canada (PWGSC) Compensation Services Office.
Original Signed by
R. Di Paola
Accounting, Banking and Compensation
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