ARCHIVED CD 2005-017
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September 29, 2005
SUBJECT: Change of Employer -- Impact on Superannuation Contributions
1.1 The purpose of this directive is to remind client departments of the importance of communicating pension related information when employees move from a department where the Treasury Board of Canada Secretariat (TBS) is the employer to an organization where TBS is NOT the employer or vice-versa, or between organizations where TBS is NOT the employer of either one.
1.2 A complete list of the departments where TBS is the employer (Public Services Staff Relations Act, Schedule I, Part I) and the organizations where TBS is NOT the employer (Public Service Staff Relations Act, Schedule I, Part II, Crown corporations or other Government of Canada Entities) can be found in the Population Affiliation Report at the following Web site:
1.3 This directive should be read in conjunction with Compensation Directive 2002-017 dated June 27, 2002, entitled "Change of Employer -- Procedures" and Compensation Directive 2005-009 dated May 30, 2005, entitled "Pension Data Correction Project".
2.1 The Pension Data Correction Project (PDCP) started production this spring. The team at the Superannuation, Pension Transition and Client Services Sector (SPTCSS) in Shediac is reviewing and correcting pension accounts using a pension data integrity application.
2.2 Since the introduction of the PDCP, the SPTCSS has become increasingly aware that, in many cases, pension contributions are not accurately deducted at source when employees move from one employer to another because the new employer is not aware of the low rate contributions already deducted for the calendar year. As a result, insufficient employee pension contributions are being deducted.
3.1 A permanent change in employment between employers as defined above in Section 1.1 results in the previous pay account being struck off strength (SOS) and a new one created using the taken on strength (TOS) transaction. The data from the old pay account is not automatically transferred to the new pay account.
3.2 If the employer is subject to the Public Service Superannuation Act (PSSA), and the employee is a contributor to the Public Service Pension Plan (PSPP), he remains a contributor as long as he continues to meet the eligibility requirements.
3.3 The members'contributions to the PSPP are based on the following formula:
- A low rate of contributions (currently 4%) on the salary up to the maximum covered by the Canada Pension Plan/Quebec Pension Plan (CPP/QPP); and
- A high rate of contributions (currently 7.5%) on the salary above the maximum covered by the CPP/QPP.
4.1 The compensation advisor from the previous employer must communicate with the compensation advisor of the new employer to provide him with the amount of low and high rate pension contributions deducted from the employee during the current calendar year. In turn, the new employer's compensation advisor must communicate this amount to his pay service provider (for example: the pay office) so that it can be determined when the employee will reach (or has reached) the annual Public Service Pension Fund (PSPF) low threshold rate.
Note: For employers being serviced by the Regional Pay System (RPS), the Public Works and Government Services Canada (PWGSC) pay office will credit the Master Employee Record (MER) element 798 (PSSA Low) with the amount of PSPF low contributions.
5.1 To prevent pension contributions from being incorrectly deducted, the compensation advisor must request the low rate contributions from the previous employer and advise the pay office so that they can be updated in the pay system. Without this update, deductions at source are inadequate and cause a deficiency in pension contributions which also causes incorrect matching of the employers'share of contributions.
5.2 Using the pension data integrity application, this type of discrepancy will be identified for occurrences since the introduction of the PSPF on April 1, 2000. For each specific period the PDCP team determines that insufficient pension contributions have been received, a request will be made to the pay office of the current employer to determine the value of the pension contribution deficiencies and to take the necessary corrective action.
5.3 To avoid similar situations in the future, compensation advisors and pay service providers are asked to adhere to the process described above.
6.1 Any inquiries on the information contained in this directive should be addressed to your PWGSC Compensation Services Office.
Original Signed by
Acting Director General
Accounting, Banking and Compensation
Reference(s): CJA 9006-24-4, 9207-2-37
- Date modified: