ARCHIVED CD 2007-014
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August 21, 2007
SUBJECT: Correctional Service Canada - Changes to the Additional Pension Contributions Rate
1.1 The purpose of this directive is to provide Correctional Service Canada (CSC) personnel offices and pay offices with information about the changes to the additional pension contributions rate for employees in operational service (refer to definition in Section 2.2).
1.2 A notice of information to employees concerning the above subject has been included with this Compensation Directive.
2.1 At the request of CSC, the Treasury Board Secretariat (TBS) has reviewed the early retirement provisions for public service employees employed in operational service at CSC and has announced changes to the special retirement provisions under the Public Service Superannuation Regulations (PSSR), namely, the requirement for additional pension contributions. The changes to the additional pension contributions rate are deemed to have come into force on May 30, 2006.
2.2 These changes also provide for "actual operational service" to be distinguished from "deemed operational service".
Actual operational service refers to CSC employees working in federal correctional facilities, parole offices, and community correctional centres. More specifically, operational service is defined as service by a person employed by CSC whose principal place of work is not:
- the national headquarters or a regional headquarters of CSC;
- the offices of the CSC Commissioner; or
- a regional CSC Staff College or any other institution that provides similar training to CSC employees.
Deemed operational service refers to CSC employees in operational service for one or more periods totalling at least 10 years, who then cease to be engaged in operational service but continue to be employed by CSC and elect to continue to accumulate operational service.
3.1 CSC employees who are engaged in operational service and required to contribute to the Public Service Superannuation Act (PSSA) were required to contribute an additional 1.25% of pensionable salary.
3.2 The portion of the PSSR that deals with members of the Public Service Pension Plan (PSPP) who are employed in operational service has been amended to eliminate the additional 1.25% contribution rate currently being paid by employees in actual operational service, effective May 30, 2006.
3.3 However, employees in deemed operational service will continue to pay an additional contribution for all additional years of service in CSC at a new reduced rate ; i.e. 0.62% effective May 30, 2006.
4.1 These changes will be implemented using a phased-in approach. Please note that the time frame presented below is tentative. As each phase is implemented, a Compensation Directive and/or a Superannuation Administration Manual (SAM) Special Bulletin will be issued.
- June 2007: Pension Type Code 18 will no longer withhold the additional pension contributions of 1.25%.
- August 2007: Payments issued and overpayments created after "i)", with effective dates prior to May 30, 2006, will be adjusted to reflect the missed additional pension contributions of 1.25%.
- October 2007: Refund of over-contributions will be issued.
- November 2007: Introduction of the new Pension Type Code for deemed operational service and related deduction codes, and the amended version of the retaken on strength (RE- TOS) application will be released.
- April 2008: Pension calculations for employees with operational service will be implemented by the Pension Support System (PSS) according to the new special retirement provisions.
4.2. Stopping the Additional Pension Contributions
4.2.1 Pension Type Code 18 no longer withholds the additional pension contributions of 1.25% as of the regular pay dated June 27, 2007, and from all supplementary payments issued from June 13, 2007. This is done automatically by the Regional Pay System (RPS).
4.2.2 As a result, the additional pension contributions of 1.25% is not calculated on any payments or overpayments, regardless of the effective date.
4.2.3 Effective June 13, 2007, any pensionable pay transaction (e.g. payments of regular salary or allowances including the creation of overpayments) that compensation advisors create with an effective date prior to May 30, 2006, must be split on May 29, 2006: the pay transaction for the "EFFECTIVE TO" date must be 29-05-06 2 and the subsequent transaction for the "EFFECTIVE FROM" date must be 30-05-06 1.
Payments for entitlements subject to the 10-day pay rule for the month with an effective date prior to May 30, 2006, must also be split. These transactions must start on the first day of the calendar month. In order to ensure that the correct rates and ceilings are applied special input instructions are required; for example:
- ENC code 141 (closed period) from 01-05-06 1 to 31-05-06 2 for $800.00, the H/D/W field must be completed for 2 days (May 30 and 31);
- EAJ code 141 for 01-05-06 1 to 29-05-06 2 for $800.00, the H/D/W field must be completed for 21 days;
- ENC code 141 (closed period) from 01-06-06 1 to 30-11-06 2 for $800.00, the H/D/W field must be completed for 131 days;
- ENC code 141 (closed period) from 01-12-06 1 to 31-12-06 2 for $800.00, the H/D/W field must be completed for 2 days (December 28 and 29);
- EAJ code 141 for 01-12-06 1 to 27-12-06 2 for $800.00, the H/D/W field must be completed for 19 days;
- ENC code 141 (open period) for 01-01-07 1.
4.3. Retaken on strength (RE-TOS)
4.3.1 Until such time as the RE-TOS application is amended to reflect these new regulations for the purpose of calculating deficiencies for employees with operational service, the following procedures will apply when using this application.
4.3.2 Employees with actual operational service:
- When performing the calculation, use Pension Type Code 18 up to an including May 29, 2006, in order to have the correct deficiency amounts for both the regular PSSA and the additional 1.25% pension contributions. Effective May 30, 2006, use Pension Type Code 01 to determine accurate PSSA deficiencies.
- For RPS input, perform the usual pay transactions with the usual deduction codes for LWOP deficiencies up to and including May 29, 2006; i.e. deduction codes 5B7 and/or 5B8. From May 30, 2006, only use the regular PSSA deduction codes, as employees no longer have to pay the additional 1.25% pension contributions effective May 30, 2006.
4.3.3 Employees with deemed operational service: the new deduction codes will not be available until later this fall. In addition, the RE-TOS application will not be revised to calculate deficiencies for employees with deemed operational service, also until later this fall. As such, only the regular PSSA deficiencies will be withheld from pay until the new deduction codes and the new version of the RE-TOS application are available.
- Use Pension Type Code 01 for the entire period of LWOP for deemed operational service in order to have the correct amount of regular PSSA deficiencies.
- For RPS input, perform the usual pay transactions with the usual deduction codes for LWOP deficiencies for regular PSSA.
4.3.4 Once the new deduction codes and the new version of the RE-TOS application are available, a new calculation will be required for employees with deemed operational service that have been RE-TOS since June of 2007 where only the regular PSSA deficiencies have been recovered. Also, all accounts with actual or deemed operational service that have been RE-TOS since May 30, 2006, where the LWOP period includes a period after May 30, 2006, will have to be recalculated to adjust the amount of deficiencies currently being deducted. Further instructions will be provided when the new deduction codes and the new version of the RE-TOS application become available.
4.4. Additional Pension Contributions Prior to May 30, 2006
Later this summer (end of August), all payments and overpayments that have been created since June 13, 2007, with an effective date prior to May 30, 2006, will be revised to take into consideration the additional 1.25% pension contributions that were not withheld as a result of stopping the deduction of extra contributions that took effect June 13, 2007. No action will be required by compensation advisors during this stage of the implementation.
4.5.1 In early fall (October), the extra 1.25% contribution deductions taken from accounts with Pension Type Code 18, for active, temporarily struck off strength (T- SOS) and struck off strength (SOS) accounts, will be refunded retroactively to May 30, 2006. Employees with actual operational service and employees who were identified as deemed operational service after May 30, 2006, will receive the full 1.25% reimbursement while employees that were identified as deemed operational service on May 30, 2006, will receive a reimbursement of 0.63% that represents the difference between 1.25% and 0.62% (rate that deemed operational service employees should have paid).
4.5.2 Therefore, employees that were identified as deemed operational service on May 30, 2006, will be in arrears status for the additional pension contributions of 0.62% from June 14, 2007, and those who were identified as having deemed operational service after May 30, 2006, will be in arrears status from the effective date of deemed operational service.
As per the Income Tax Act, income tax will be deducted at source from the portion of the refund that is for calendar year 2006 and a T4A will be issued for that portion of the refund. No income tax will be deducted at source for the portion of the refund that is for calendar year 2007.
4.6. New Pension Type Code
4.6.1 The new Pension Type Code will be introduced in the RPS later in the fall of 2007. Compensation advisors will then be able to recreate the history of employees that have operational service to distinguish actual operational service from deemed operational service by using the new Pension Type Code. This step will be essential in order to provide accurate pension estimates to these employees once the PSS is available and also to provide accurate Employee Pension and Benefits Statements in the spring of 2008.
4.6.2 At this stage of the implementation, the compensation advisor, in collaboration with the pay offices, will take the necessary measures to recover the missed additional pension contributions of 0.62% for employees with deemed operational service.
4.7. Pension Support System (PSS)
The calculation of pension estimates for employees with operational service will be available in April 2008. Until such time as the PSS is functional, the Superannuation, Pension Transition and Client Services Sector (SPTCSS) will perform the calculation of pension estimates for compensation advisors who will in turn be able to inform employees.
4.7.1 In order for SPTCSS to perform these calculations, compensation advisors will be required to certify the service of the employee requesting the pension estimate. Actual operational service must be distinguished from deemed operational service. This distinction of service will be reported on a form for which instructions and procedures will be provided shortly.
4.7.2 Employees must be advised when requesting a pension estimate that the usual time frames for providing them with this information will be somewhat prolonged.
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.
Accounting, Banking and Compensation
Original Signed by
Reference(s): CJA 1270-1-65
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