CD 2011-012: Information Notice to Employees

The purpose of this notice is to provide information on the lump sum amount in lieu of severance, payable to employees under various collective agreements or other authorizing instruments.

Changes to Severance Benefits

The articles on the severance benefit payable on resignation or retirement have been removed from applicable collective agreements or other authorizing instruments. As a result, severance benefits for the voluntary termination of employment shall cease to accumulate for impacted employees on the specified eligibility date.

Employee Options

Employees who are eligible to receive a severance liquidation payment will have the option to either cash-out the amount in full, or in part with the remainder to be paid upon resignation or retirement; or to retain their accumulated severance benefit for payment upon resignation or retirement.

Employees will receive a notice providing information on the different options available to them, the number of weeks of accumulated severance to which they are entitled and other pertinent information concerning the severance liquidation payment.

Eligibility Criteria

The lump sum amount is payable to all active employees and employees on leave without pay who were members of the affected groups on the specified eligibility date. This includes indeterminate employees, seasonal employees, term employees appointed for a period equal to or greater than three months, as well as employees working on an 'as required' basis. Excluded employees are also entitled to receive the payments.

The lump sum is not payable to term employees of less than three months or casual employees.

The lump sum is not payable for acting situations outside the bargaining unit. Therefore, employees acting outside of the applicable bargaining unit will not be eligible to receive the payment until they return to their substantive position. In addition, employees in an acting position who are from outside the applicable bargaining unit will not be eligible to receive the payment.

Deductions

The lump sum is subject to the following deductions:

• federal and provincial income tax
• employment insurance (EI)
• Canada Pension Plan (CPP) or Quebec Pension Plan (QPP)
• Quebec Parental Insurance Plan (QPIP)

The payment is not subject to the Public Service Pension Plan, the Disability Insurance (DI) Plan, the Long-term Disability Insurance (LTD) Plan, the Supplementary Death Benefit (SDB) Plan and the Public Service Management Insurance Plan (PSMIP) deductions.

Reduction / Exemption for Withholding Tax

Tax Waiver

The Canada Revenue Agency (CRA) has provided administrative approval allowing the Government of Canada to reduce the required income tax on the full or partial amount paid. This approval is conditional on you making deductible Registered retirement savings plan (RRSP) contributions for the year you receive your payment.

The approval is for a maximum amount of $10,000, provided you have sufficient RRSP room for the year of the payment and that the amount will be used to purchase an RRSP.

If you wish to use the tax waiver, complete the form provided in Annex A and return it to your compensation advisor.

Under income tax policy, the cash-out of severance pay is considered regular employment income, not a retiring allowance.

If you wish to have the full amount or a portion of the lump sum payment exempt from income tax, you will require a tax waiver. Employees residing and working in Quebec will require two tax waivers, one from the Canada Revenue Agency (CRA) and one from the Ministère du Revenu du Québec (MRQ). All other employees will require only a tax waiver from the CRA.

To ensure that the waiver is applied before the payment is issued, you must provide the tax waiver to your compensation advisor by the deadline specified in the 'Option Notification' provided to you by your department.

In the request to the CRA and MRQ you should indicate that the tax waiver request is for 'an early payout of severance pay'.

This tax waivers can only be applied to the severance liquidation payments.

You will need to apply for a tax waiver, with the CRA, for the full amount if you wish to transfer more than $10,000 to an RRSP.

Buyback of Elective Service pursuant to the Public Service Superannuation Act (PSSA)

Employees can apply all or a portion of their payment towards the buyback of elective service pursuant to the PSSA (including arrears).

It is important to note that the compensation advisors will not be able to transfer the payment to the Public Service Pension Center (PSPC) on your behalf. Once the severance liquidation payment is received, you will be responsible to submit a request for the required amount, along with a personal cheque, to PSPC directly.

For information in this regard, employees can refer to the Service Buyback Information Package available at the following address: Service Buyback Package. They can also contact the Public Service Pension Centre (see the Your Public Service Pension and Benefits Web portal, under "Contact Us").

DI / PSMIP LTD and EI benefits

The severance liquidation payment will not be offset from benefits provided under the DI or PSMIP LTD plans.

For employees in receipt of employment insurance benefits, there may be a potential impact if you choose to receive the lump sum payment in lieu of severance. Therefore, you may wish to inquire with Service Canada about the impact of the options available.

Processing of Severance Liquidation Payments

Compensation advisors are responsible for manually processing the payments. The method of payment (cheque or direct deposit), will be determined by your individual account status for supplementary payments.

Any request for information regarding the foregoing should be addressed to your compensation advisor.