ARCHIVED CD 2009-016

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July 14, 2009

SUBJECT: Change of Employer Procedures -- Carry Over of the Public Service Superannuation Act (PSSA) Low Rate Contributions

1. PURPOSE

1.1. The purpose of this directive is to provide compensation advisors and pay and pension agents (PPA) with information concerning the carry forward of PSSA low rate contributions when employees move from a department where Treasury Board (TB) is the employer to a Crown Corporation/Separate Employer or vice-versa, or between two Crown Corporations/Separate Agencies which are serviced by the Regional Pay System (RPS).

1.2. A complete list of the departments where TBS is the employer (Financial Administration Act Schedule I and IV) and Crown Corporations/Separate Agencies can be found in the Population Affiliation Report at the following Web site: Population Affiliation Report.

1.3. This directive should be read in conjunction with Compensation Directive 2002-17 dated June 27, 2002.

2. BACKGROUND

2.1. When an employee moves from a department where TB is the employer to a Crown/Separate Agency or vice-versa, or between two Crown/Separate Agencies, this movement is actioned by using the "struck off strength" (SOS) reason code 19 and "taken on strength" (TOS) pay transactions. Previously, the pay office for the TOS employer took action to credit the Master Employee Record (MER) element M798 (PSSA 1/2 Low Rate - Other Pay Office) with the amount of PSSA low rate contributions from the SOS employer. If this process was not followed, the employee's pension contributions would not be accurate as the combination of deductions from both employers would exceed the PSSA low rate threshold.

2.2. Pension data integrity testing has identified a problem with this process, whereby employees going from one public service employer type to another during the same calendar year did not always pay the correct amount of pension contributions. This resulted in the need for labor-intensive corrective action to be undertaken by the pay offices (PO) and compensation advisors.

3. POLICY

3.1. Permanent or Temporary Change in Employment

3.1.1. A permanent change in employment between employers as defined above in section 1.2 does not constitute a transfer for pay administration purposes. Any movement between the above-mentioned employers must be processed by using the SOS and TOS pay transactions immediately upon being notified of the change in employment.

3.1.2. For pension purposes only, a temporary movement between employers that are both paid through the RPS and where the assignment is not an interchange should be treated as a "temporarily struck off strength" (T-SOS) pay transaction with the former employer, and as a TOS in a dual employment situation with the new employer.

3.1.3. It should be noted that dual remuneration and dual employment situations were out of scope for the purposes of the automated carry over of PSSA low rate contributions and, therefore, will remain a manual process.

3.2. Permanent Change in Employment

3.2.1. When individuals change employers, current legislation dictates that the Canada Pension Plan (CPP), Quebec Pension Plan (QPP), Employment Insurance Plan (EIP) and Quebec Parental Insurance Plan (QPIP) statutory deductions will recommence regardless of the previously deducted amounts. This means that, even if the employee has already contributed the annual maximum amount with the former employer, his annual contribution amount will begin again at $0.00, and the above-mentioned mandatory deductions will be taken until such time as the annual maximum amount is reached with the new employer. Employee contributions in excess of the annual maximum will be refunded to the employee when he files his income tax return.

3.2.2. If the new employer is subject to the PSSA and the employee is a contributor, he remains a contributor as long as he continues to meet the eligibility requirements. In order to determine when the employee reaches the annual PSSA low rate threshold, it is necessary that the MER, where the account is now active, be updated with the amount of contributions previously deducted.

3.2.2.1. Effective June 16, 2009, if both the new and the former employers are serviced by the RPS, regardless of which PO, the system will automatically update the PSSA Low Rate - Other Pay Office (element M798 of the TOS account) in the new employer's MER, using the sum of the value in the PSSA Low Rate - Year to Date (element M710) and the value of M798 from the former employer's MER. The former employer should endeavor to finalize the account before processing the SOS transaction. In addition, the PSSA low rate contributions on any subsequent adjustment to the SOS account, will automatically be transferred to the new employer's MER.

3.2.2.2. Before processing the SOS transaction, the compensation advisor must first verify if the new employer is serviced by the RPS. A list of employers serviced by the RPS can be found in the Personnel-Pay Input Manual (PPIM) Section 9-1.

3.2.2.3. If one of the two employers is not serviced by the RPS, it will be the responsibility of the pay office/payroll provider, where the account now resides, to obtain and record the amount of PSSA low rate contributions paid with the former employer. This is necessary to determine when the employee will reach the annual PSSA low rate threshold, thus ensuring contributions are accurate.

3.2.3. A pension adjustment (PA) will be reported by each employer based on the number of pensionable pay periods under that employer. Please note that this will be done automatically for those clients serviced by the RPS. In these cases, special year end procedures should be followed, as explained in Compensation Directive 1994-012.

3.2.4. When a change of employer occurs during a calendar year, a separate statement of remuneration (i.e. T4, Relevé 1) should be issued by each employer covering the employee's earnings, deductions and PA for that period of service with that employer. For this reason, the SOS and TOS transactions must be processed quickly.


4. PROCEDURES/INSTRUCTIONS

4.1 Permanent new employer - New and former employers serviced by the RPS

4.1.1. Immediately upon being notified that an employee is permanently moving between employers, the compensation advisor with the former employer is required to action a T-SOS reason code Y (pending SOS), finalize the account and then input an SOS reason code 19 (Employee changing employment). If the compensation advisor must intercept or recall regular pay, the payment must be canceled in the RPS and the Standard Payment System (SPS) before the SOS transaction is processed. Once the SOS transaction is done, a copy of the SOS transaction along with the value in the PSSA Low Rate - Year To Date (element M710) and the value in element M798 will be automatically stored in a separate data base (DB2) table which will then look for a matching TOS record. If the TOS has not yet been actioned, the SOS will remain in the DB2 table until the matching TOS record is stored in a separate TOS DB2 table as well. If the TOS has been actioned, a match will be made with the SOS record, and the corresponding PO transactions will process automatically by adding the values of M710 and M798 from the former employer's MER, to update element M798 on the employee's active MER.

NOTE: Where the SOS and TOS transactions have different Personal Record Identifier (PRI) numbers, the Central Index System (CIS) will be accessed to match the two records.

The compensation advisor with the former employer must also update the free form text (FFT) to identify the new employer and a contact person, if possible, at the same time as the SOS transaction is created. This will allow the PO to contact the new employer to make any adjustments, if necessary.

For information on FFT, please refer to PPIMChapter 20.

4.1.2. The compensation advisor with the new employer is required to commence all appropriate entitlements and deductions, including deductions for outstanding deficiencies and recoveries of gross overpayments. Once the TOS transaction is done, a copy of it will be automatically stored in the DB2 table waiting to be matched to the SOS record.

After the match has been made and element M798 is updated where the account currently resides, the SOS record will remain in the DB2 table until the end of the current calendar year. If any subsequent adjustments are required as a result of a transaction that affects PSSA being processed while the account is in SOS status, the system will automatically adjust M798 on the new employer's MER accordingly. Refer to PPIM Section 4-4-02 for the list of pay transactions that can be processed when an account is in SOS status.

4.2 Permanent new employer - New employer not serviced by the RPS

4.2.1. As stated in section 3.2.2.1, the compensation advisor must first determine if the new employer is serviced by the RPS. If the new employer is not serviced by the RPS, the compensation advisor will need to process an SOS reason code 50 (transferred to another pay system or a pay office not within the Public Works and Government Services Canada (PWGSC) Pay System). In this case, the automated process will be bypassed and a reason code 50 report will be sent to the former employer showing the values in M710 and M798. It will be the responsibility of the former employer to communicate the PSSA low rate amounts to the new employer. The new employer will need to communicate this information to their payroll provider or take the necessary action to consider the PSSA low rate amount from the previous employer and ensure PSSA contributions are recovered at the correct rate.

4.2.2. In the event that, during the calendar year, an adjustment is done to the SOS account (e.g. returned cheque, revision, etc.) which impacts PSSA, a subsequent reason code 50 report will be produced and sent to the former employer showing the amended values of M710 and M798. These amended values will need to be communicated to the new employer who will take the necessary action as stated in section 4.2.1.

4.3. A quarterly unmatched SOS report will be sent to the former employer using the Paylist/Address Control File (PACF) for mailing information. This report containing all the unmatched SOS reason codes 19 and 50 transactions will show the following information:

  • Department/Paylist/ PRI /Name/Initials/ SOS reason code/ SOS effective date/value in M710 and M798

4.3.1. The former employer will use this report as a tool to ensure that the information has been communicated to the new employer where an SOS reason code 50 was actioned. Where an SOS reason code 19 remains unmatched on two consecutive quarterly unmatched SOS reports, the compensation advisor should contact the new employer and possibly the employee to confirm that the employee is still employed in the Public Service. If not, the employee could be eligible for PSSA benefits and other action would need to be taken by the former employer.

4.4 Permanent new employer - Former employer not serviced by the RPS

4.4.1. If only the new employer is serviced by the RPS, the compensation advisor responsible for the account must update the FFT to identify the former employer, a contact person and the former employee PRI and pension number at the same time as the TOS transaction is created. It is also important that the compensation advisor informs the PO that they will need to contact the former employer, which will have been identified in the FFT. In turn, the PO will need to obtain the PSSA data, update the MER, and adjust any PSSA contributions deducted at an incorrect rate.

4.5. Permanent new employer - Former and new employers not serviced by the RPS

4.5.1. If both the new and former employers are not serviced by the RPS, the new employer will be responsible to contact the former employer to obtain and record the PSSA low rate amount to ensure that the correct amount of PSSA contributions are deducted from the employee's pay.

5. INSTRUCTIONS TO PO

5.1. All generated pay action codes (PAC) 30 will be written to a Restructure file (Generation Data Group) which will be input into the Bulk Restructure Validation program (PAF10) to be split by PO and automatically updated to the TOS account during a normal RPS update. This will ensure that valid generated PAC 30s are posted to the transaction data base (TDB), audit trail, transaction suspense files, and are available to be viewed on-line and printed by the corresponding programs for audit purposes. A report of all PAC 30s generated through this process will be produced in each supplementary update. In the case where no PAC 30 transactions are generated in the supplementary update, the PAC 30 report will not be generated.

Generated PAC 30 report - this report will be sent to the new PO.

Department/Paylist/ PRI / PAC 30 dollar value for M798 generated.

5.2. The new DB2 TOS and SOS tables will be created and will contain all TOS transactions and SOS reason code 19 and5 0 transactions for superannuable accounts, except pension code 06 (diplomatic service), dual remuneration or dual employment situations where M19 (dual remuneration) = 1 (employee receives dual remuneration), and/or 18C027 (dual remuneration--subject to superannuation) is on the allowance and deduction (A/D) block of the MER


5.3. Supplementary Pay (PAG34)

5.3.1. Where the TOS transaction is processed after the fact and the compensation advisor must input an Entitlement Adjustment (EAJ / PAC 71) to pay the difference between the TOS effective date and the pay period in which the TOS transaction is processed as well as any retroactive Entitlement Commence (ENC / PAC 18C) transactions to start entitlements, these payments must be taken into consideration as PSSA deductions will be calculated.

The matched TOS transaction will generate a PAC 30 with the value from element M798 on the SOS reason code 19 which will be held in "suspense" until the following update, at which point M798 will be updated.

Therefore, during this run, the following will occur: the TOS, ENC s and the accompanying EAJ s will be processed, the account's matching data for the value in M798 on the SOS table will be checked, and the PSSA will be calculated as low or high rate depending on whether the PSSA low rate has been or will be reached during the update. These calculated values will then generate the necessary supplementary payments, and update M710 and/or M711 (PSSA High), as is normal.

The following describes the flow when the SOS transaction is processed before the TOS transaction:

RUN A 1. SOS transaction is received - load SOS to SOS table (PAG28)
2. No match can be made at this point
RUN B 1. TOS transaction is received - load TOS to TOS table (PAG28)
2. Match is made - PAC 30 created - PAC 30 reported (PAG28)
3. EAJ and ENC received - supplementary calculate (PAG34) sees the match and uses the carried over PSSA amounts to calculate PSSA contributions
RUN C PAC 30 updates M798 on MER (PAG10)

As is done today, the PO will receive a copy of the TOS snapshot via e-SNAP, with the updated values in M710 and/or M711, and a copy of the generated PAC 30 with the SOS reason code 19 value for M798. Once the PAC 30 has processed, they will receive another PAC 30 report showing that the value of M798 for the TOS transaction has been updated.

5.4. In some cases, the TOS will update, process and generate payments that will update M710, prior to the SOS reason code 19. In these instances, once the SOS reason code 19 is processed, a notification will be produced to the TOS PO advising them that a matching SOS reason code 19 has processed and PSSA contributions must be verified.

NS1 notification will be generated and read as follows:

  • "TOS PRIOR TO SOS REASON CODE 19, PAC 30 GENERATED - VERIFY PSSA / PE AVANT RE CODE RAISON 19, CIP 30 GENERE - VERIFIER LPFP "

When this situation occurs, the PPA will need to verify the pension contributions deducted from any supplementary and regular payments to determine if they were deducted at the correct rate and, if not, an adjustment will be required. Finally, the PPA will need to verify the PSSA amount carried forward and process a new PAC 30 to accurately update element M798.

5.5. During the same calendar year, an account can be SOS reason code 19 in one department, TOS with another employer, then returned to the previous department or with another employer as an SOS reason code 19.

Example:

SOS reason code 19 from the Department of National Defence (DND) → TOS in the House of Commons (HOC)

SOS reason code 19 in HOCTOS in DND

In these instances, the PAC 30 generated on the second SOS transaction will reject, and the TOS PO will receive the following report:

  • NA9 - TRANSACTION REJECTED MULTIPLE SOS REASON 19 / MOUVEMENT REJETE MULTIPLE RE RAISON 19

Because the PAC 30 will have been rejected in this situation, any EAJ s processed might not have the correct rate of PSSA contributions deducted. Therefore, the PPA will need to verify the amount of PSSA contributions deducted on the EAJ s and make an adjustment, if applicable. In addition, the PPA will need to determine the amount to be reported in element M798 using the PAC 30 report, and process a PAC 30 with the correct amount.


5.6. Year End Roll-over

5.6.1. When the roll-over is executed in mid-December, a new MER is created with the new year indicator. The old M710 element amount is moved to the new M930 element, and the old M798 is moved to Previous Year YTD PSSA 1/2 Low Rate - Other Pay Office (MP798).

When the roll-over is executed in mid-December, a new MER is created with the new year indicator. The old M710 element amount is moved to the new M930 element, and the old M798 is moved to Previous Year YTD PSSA 1/2 Low Rate - Other Pay Office (MP798).

When the roll-over is carried out, all the TOS records will be deleted from the TOS DB2 table, and all the matched SOS records will be deleted from the SOS DB2 table. In addition, all unmatched SOS records with an "effective from" date in the prior calendar year will be deleted from the SOS DB2 table. For example, when rolling from 2010 to 2011, any unmatched SOS records with a "effective from" date in 2009 will be deleted. In this instance, no report of purged SOS records will be generated as they will have been reported upon quarterly. All the remaining unmatched SOS records will be kept in the SOS DB2 table and reported in the quarterly report.

5.6.2. Where the effective date of the SOS / TOS is in the previous calendar year, the RPS will produce the following notification to the TOS PO:

  • NA4 - WARNING - OVERLAPPING CALENDAR YEARS - REVISE PREV YR PSSA / AVERTISSEMENT: CHEVAUCHEMENT D'ANNEES CIVILES - REVISER LPFP ANNEE PREC

5.6.3. Where the SOS transaction is processed before the roll-over and the TOS transaction is processed after, with effective dates before the roll-over, a match will be made, but the PAC 30 will not be created and the NA4 notification will be generated. When the EAJ is received, the supplementary calculate will see the matched SOS / TOS, but will not use the carried over PSSA amount for the PSSA contributions calculation, because the amounts now belong to the previous year. The PPA will need to verify and adjust the pension contributions deducted from the EAJ payment and create PAC 30 transactions to accurately update the current year elements M798 and the previous year element M930.

Example:
Transaction Effective from date Processing date Result
SOS 05/12/2009 09/12/2009
  1. SOS loaded to DB2
  2. No match made
Year end roll-over 17/12/2009 New MER created - unmatched SOS is kept on SOS table
TOS 07/12/2009 04/01/2010
  1. TOS loaded to DB2
  2. Match made to SOS
  3. No PAC 30 created
  4. NA4 notification generated
  5. EAJ and ENC received - Supp calc sees the match but will not use the carried over PSSA amounts for the PSSA calculations (the amounts now belong to the previous year)

5.6.4. Where the TOS transaction is processed before the roll-over and the SOS transaction is processed after with effective dates before the roll-over, the EAJ will process without the carried over PSSA amounts, the roll-over will occur creating new MER and the TOS transaction will be deleted from the DB2 table. Once the SOS transaction is received and loaded to the SOS DB2 table, the match cannot be done. The unmatched SOS transaction will be reported in the quarterly report that will be sent to the client and the SOS record will be deleted on the following roll-over cleanup. When this situation occurs, it is the former and new employers' responsibility to inform the PO of the PSSA carry-over amounts that are showing on the quarterly report. Once the PO has received this information from the client, the PPA will update element M798 and/or M930 as well as verify and adjust the PSSA contributions deducted from any payment since the TOS transaction was processed, if applicable.

Example:
Transaction Effective from date Processing date Result
TOS 05/12/2009 09/12/2009
  1. TOS loaded to DB2
  2. No match made
  3. EAJ and ENC received
  4. Supp calc does PSSA calculations without carried over PSSA amounts
Year end roll-over 17/12/2009
  1. New MER created
  2. TOS deleted from DB2
SOS 07/12/2009 04/01/2010
  1. SOS loaded to DB2
  2. No match made
  3. Unmatched SOS will be reported in the quarterly report (sent to former employer)
  4. Unmatched SOS record will be deleted on the following Roll-over cleanup

5.6.5. Where the SOS and TOS transactions have an effective date before the roll-over but are both processed after the roll-over, the match will be made once the TOS transaction is loaded to the DB2 table, and a PAC 30 will be created (it could be $0 if no payment was made between roll-over and SOS / TOS). In this instance, an NA4 notification will be produced once the PAC 30 updates element M798 on the MER. The Supplementary calculate will see the match and use the carried over PSSA amounts to calculate PSSA contributions on the EAJ and ENC. Once the PAC 30 updates M798 on the MER, an NA4 notification will be produced at the end of the run. The PPA will need to verify the PSSA contributions deducted from the EAJ to determine if they were deducted at the correct rate and, if not, an adjustment will be required. He will also need to determine the amount to be reported in the current year element M798 and the Previous Year PSSA 1/2 Low Rate (element M930), using the PAC 30 report, and process the PAC 30 transactions accordingly.

Example:
Transaction Effective from date Processing date Result
Year end roll-over 17/12/2009 New master created
Possible payment processed after the roll-over, before SOS / TOS received
SOS 05/12/2009 23/12/2009
  1. SOS loaded to DB2
  2. No match made
TOS 07/12/2009 04/01/2010
  1. TOS loaded to DB2
  2. Match made to SOS
  3. PAC 30 created
  4. PAC 30 updates element M798
  5. NA4 notification produced
  6. EAJ and ENC received
  7. Supp calc sees the match and uses the carried over PSSA amounts to calculate PSSA contributions

5.6.6. Where the TOS is processed before the SOS and after the year end roll-over, no match will be made and the supplementary pay will process without the carried over PSSA amounts. Once the SOS is received and loaded to the DB2 table, the match will be made to the TOS, the PAC 30 will be created and the NS1 notification will be generated (see 6.2). Then, once the PAC 30 updates element M798 on the MER, an NA4 notification will be produced at the end of the run. The PPA will need to verify the pension contributions deducted from the EAJ and ENC to determine if they were deducted at the correct rate and, if not, an adjustment will be required. Finally, he will need to determine the amount to be reported in the current year element M798 and the previous year element M930, using the PAC 30 report, and update accordingly.

Example:
Transaction Effective from date Processing date Result
Year end Roll-over 17/12/2009 New MER created
Possible payment processed after the roll-over, before SOS / TOS received
TOS 05/12/2009 23/12/2009
  1. TOS loaded to DB2
  2. No match made
  3. EAJ received and paid without considering the PSSA contributions with the previous employer
SOS 07/12/2009 04/01/2010
  1. SOS loaded to DB2
  2. Match made to TOS
  3. PAC 30 created
  4. NS1 notification generated
  5. PAC 30 updates M798
  6. NA4 notification produced

5.6.7. In cases where the SOS and TOS transactions are processed in the same update, a match will be done. However, where the TOS transaction is processed before the SOS transaction, a match will be done, but an NS1 message will be produced. An NA4 notification may also be produced in some cases (e.g. year-end roll-over scenarios).

5.7 Permanent new employer - New employer not serviced by the RPS

5.7.1. In the case where the new employer is not serviced by the RPS, the client will process an SOS transaction reason code 50 (transferred to another pay system or a pay office not within the PWGSC Pay System). In this case, the automated process will be bypassed and a "reason code 50 report" will be sent to the former employer showing the values in M710 and M798. It will be the responsibility of the former employer to communicate the PSSA low rate contribution amounts to the new employer. The new employer will have to make the necessary deductions based on the previous PSSA low rate amounts deducted.

5.7.2. In the event that, during the calendar year, an adjustment is done to the SOS account (ex. returned cheque, revision, etc.) which impacts PSSA, a subsequent "reason code 50 report" will be produced and sent to the former employer showing the amended values of M710 and M798. These amended values will need to be communicated to the new employer who will take the necessary action.

5.8 Permanent new employer - Former employer not serviced by the RPS

5.8.1. If only the new employer is serviced by the RPS, the compensation advisor with the new employer must update the FFT to identify the former employer, a contact person and the employee's former PRI and pension number, at the same time as the TOS transaction is created. The compensation advisor will also inform the PO that they will need to contact the former employer, which will have been identified in the FFT. In turn, the PO will need to obtain the PSSA data, process the PAC 30 to update element M798 on the current MER, and adjust any PSSA contributions deducted at an incorrect rate, if applicable.

5.8.2. It will be important that the PO ask the former employer to inform them of any subsequent adjustments done to the SOS account in the calendar year which have an impact on PSSA. In turn, when informed of an adjustment, the PO will process a PAC 30 to update element M798 and adjust PSSA contributions deducted at an incorrect rate, if applicable.

6. INQUIRIES

6.1. Any request for information regarding the foregoing should be addressed to your PWGSC Compensation Services Office.



Original Signed by
B. Fortin

Brigitte Fortin
Director General
Compensation Sector
Accounting, Banking and Compensation

Reference(s): CJA 9006-24-4, 9203-5(1.2)