ARCHIVED CD 2006-020
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Note This document has been modified. The changes are identified by a vertical line "|". Revision (|)
September 12, 2006 (Revised November 8, 2006)
SUBJECT: New Deduction Codes for Fondaction
1.1 The purpose of this directive is to provide compensation advisors with information regarding two new deduction codes that have been created in the Regional Pay System (RPS) for Fondaction (le Fonds de développement de la Confédération des syndicats nationaux pour la coopération et l'emploi), a labour-sponsored fund in Quebec.
2.1 The Union of Canadian Correctional Officers (UCCO) has requested that two deduction codes be created in the RPS to enable their members who are residing in Quebec to purchase Fondaction shares via payroll deduction. Treasury Board Secretariat (TBS) has recently approved that we proceed with this request and implement the two deduction codes within 90 calendar days upon signing of the new collective agreement for the Correctional Services (CX) group (signed on June 26, 2006).
3.1 An eligible employee can purchase Fondaction shares up to a maximum of $5,000 in a calendar year to receive a 15% federal tax credit and a 15% Quebec provincial tax credit. This maximum tax credit of $1,500 per year ($750 of federal tax credit, and $750 of Quebec provincial tax credit) is applicable to the total purchase of all types of labor-sponsored funds. Currently in the RPS, there is another type of labor-sponsored fund that can be purchased via payroll deduction: Fonds de solidarité des travailleurs du Québec (FSTQ), deduction codes 797 and 889). It is the subscriber's (i.e. employee's) responsibility to make certain that his subscription to the fund is eligible for tax credits and reductions. Subject to the governmental budgets, the special tax credits rates may change in the future.
3.2 The purchase of Fondaction shares via payroll deduction is on a voluntary basis. An employee who requests this deduction must submit the "Application and Subscription Form" jointly signed by the employee and Fondaction in order to authorize the deduction, and complete the form "Request for Modifications" to make any amendments to the deduction amount.
3.3 The employee has the option to participate in the registered retirement savings plan (RRSP) for shareholders of Fondaction (RRSP in the subscriber's name, or a spousal RRSP), and have the payroll deductions applied to the plan. The Fondaction is responsible for making the necessary arrangements to deposit the contributions into the RRSP if the employee has made this request on the subscription form. The employee has the choice of requesting or waiving the benefit of tax exemption at source for the RRSP contributions. It is the employee's responsibility to ensure that his total RRSP contributions do not exceed the maximum allowable deduction for RRSP contributions prescribed by income tax laws. He should refer to his previous year Notice of Assessment for the RRSP contribution limit available for the current year.
4.1 The new deduction code 5B3, "Fondaction" (with tax exemption), will be effective in the RPS on September 12, 2006. This code will be used to provide the employee with a 15% federal tax credit and a 15% Quebec provincial tax credit at source on purchasing Fondaction shares up to the maximum purchase of $5,000 for all labor-sponsored funds.
4.2 The new deduction code 5B4, "Fondaction no tax" (without tax exemption), will also be effective in the RPS on September 12, 2006. This code will be used if the employee has chosen to waive the right to benefit from tax reductions at source on the purchase of Fondaction shares, or if the total purchase of labor-sponsored funds exceeds the $5,000 maximum per year that is subject to the tax credits.
4.3 An annual contribution limit of $5,000 is established in the RPS for the sole purpose of calculating the 15% tax credit for the federal and Quebec tax respectively. However, there is no restriction on the total contribution amount that can be made by the employee in a calendar year.
4.4 If the employee has chosen to have the tax credits applied and to have the Fondaction purchase transferred to an RRSP, the deduction should be made under code 5B3. Compensation advisors will input the annual amount transferred to an RRSP into fields 43 "federal tax exemption" and 44 "additional provincial tax exemption". Compensation advisors will also be required to determine the tax exemption amount as described below.
If the deduction commences on the first pay period of the year, the actual exemption amount will be the total deductions under code 5B3 for the year that will be transferred to the RRSP plan (e.g. the deduction amount per pay period times 24 pay periods). If the deduction does not commence on the first pay period of the year, the compensation advisor will be required to determine the prorated exemption. Please refer to the following formula to calculate the prorated exemption amount:
Prorated amount = (a) x (b) [(c)]
Where (a) is the total amount to be deducted for the year that will be used to purchase RRSPs;
(b) is the total number of pay periods in the year; and
(c) is the number of pay periods remaining in the year.
The compensation advisor should then input the prorated amount in the field "HARDSHIP FED EXM" on the on-line Status Change (STC) screen. The corresponding Master Employee Record (MER) element is 43 "Hardship Federal Exemption Amount". On the on-line STC screen, the compensation advisor should also input the prorated amount in the field "ADDTNL QUE EXM" only if the employee works in the province of Quebec. The corresponding MER element is 44 "Quebec Tax Exemption Additional Amount". A reminder should be put in place to amend the exemption at the beginning of the next year.
| 4.5 Compensation advisors, upon receipt of the "Application and Subscription Form" signed by both the employee and the Fondaction, will be responsible for commencing the deduction using the on-line Deduction Commence (DEC) screen (Pay Action Code 16), a rate base of "X", the amount requested by the employee, and the contract number. Fondaction has provided a group number "422" for the CX group, and compensation advisors should input "000000422" as the contract number in Field 71, a mandatory field for this deduction. These deductions will be made from 24 pay periods per year (excluding the pay period plus) on a current basis only. No refunds or arrears adjustments will be allowed. If a cheque is cancelled, the amount of the deduction from the cancelled cheque will be subtracted from the next remittance to Fondaction.
4.6 If the employee wishes to cancel his subscription, the deduction should be stopped effective the date mentioned on the "Application and Subscription Form" or on the "Request for Modifications" form or upon receipt of written notice from the employee. Any exemption entered in fields 43 and 44 related to this deduction (refer to Section 4.3 of this directive) should also be removed at the same time.
4.7 The Personnel-Pay Input Manual (PPIM) will be updated to incorporate the relative information contained in this compensation directive.
4.8 The Payroll Accounting Division (PAD) will forward the remittances for Fondaction to the following address:
SSQ, Société d'assurance-vie inc.
Registraire et fiduciaire
CP 10510 Succ Sainte-Foy
5.1 Any inquiries on the information contained in this document should be addressed to your Public Works and Government Services Canada (PWGSC) Compensation Services Office.
Original Signed by
Acting Director General
Accounting, Banking and Compensation
Reference(s): DED 5B3, 5B4
- Date modified: