Retiring from the Public Service of Canada - Some Useful Tips Protecting our members
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Retiring
from the
Public Service
of Canada
Some Useful Tips
Protecting our members
Programs Section I Membership Programs Branch I 2008Retiring from the Public Service of Canada
Table of contents
Introduction................................................................................................................ 5
General Overview of Federal Superannuation Benefit Entitlements .................... 7
1.1 Superannuation Benefit Calculation................................................................... 7
1.2 Retirements Options .......................................................................................... 8
Return of Contributions ...................................................................................... 8
Immediate Annuity ............................................................................................. 8
Deferred Annuity and Annual Allowance............................................................ 8
Transfer Value.................................................................................................. 10
1.3 Retirement Due to Disability ............................................................................ 11
1.4 Lay-off Pursuant to Work Force Adjustment Appendices ................................ 12
1.5 «Operational Service» Employees of Correctional Service Canada (CSC) ..... 15
1.6 Limitations on Pensionable Service and Participation in the PSSA ................ 16
35 Years Pensionable Service ......................................................................... 16
Age 71.............................................................................................................. 17
1.7 Indexation......................................................................................................... 17
1.8 Integration with Canada/Québec Pension Plans .............................................. 20
Background ...................................................................................................... 20
C/QPP Reduction Formula............................................................................... 23
1.9 Survivor Benefits .............................................................................................. 25
Some Useful Tips – Fifth Edition 2008 1Retiring from the Public Service of Canada
Definition of « Survivor » .................................................................................. 25
« Survivor » Benefit Entitlement....................................................................... 26
Definition of « Child » ....................................................................................... 26
Surviving « Child » Allowance.......................................................................... 26
Minimum Benefit (e.g. PSSA contributor with no survivor or « children »)...... 27
1.10 Benefits in the Event of a Separation or a Divorce .......................................... 27
Advance Preparation and Planning for Retirement.............................................. 29
2.1 Verification of Length of Full-time and Part-time Pensionable Service ............ 29
2.2 Elective Pensionable Service and Pension Transfer Agreements ................... 29
Elective Service................................................................................................ 29
Pension Transfer Agreements ......................................................................... 30
2.3 Personal Documentation.................................................................................. 30
2.4 Pre-retirement Transition Leave Policy ............................................................ 31
Important Information for Implementing Retirement ........................................... 32
3.1 Severance Pay................................................................................................. 32
3.2 Annual, Compensatory, Furlough Leave Credits ............................................. 33
3.3 Sick Leave Credits ........................................................................................... 33
3.4 Public Service Health Care Plan (PSHCP) ...................................................... 33
3.5 Dental Care Plan (DCP) and Pensioners' Dental Services Plan (PDSP)......... 34
Some Useful Tips – Fifth Edition 2008 2Retiring from the Public Service of Canada
3.6 PSSA Elective Service Payments .................................................................... 35
3.7 PSSA and SDB Leave Without Pay Arrears .................................................... 36
3.8 Provincial Medical and Other Extended Insurance Plans ................................ 36
3.9 Supplementary Death Benefit (SDB) Plan ....................................................... 37
3.10 Public Service Management Insurance Plan (PSMIP)
Life Insurance portion....................................................................................... 39
3.11 PSAC Enhanced Coverage.............................................................................. 40
3.12 Association of Public Service Alliance Retirees (APSAR)................................ 40
3.13 Recovery of Miscellaneous Overpayments ...................................................... 41
3.14 Garnishee Summons and Other Debts Owed to the Crown ............................ 42
Post-Retirement – Considerations......................................................................... 43
4.1 Processing of Superannuation Benefit Entitlements ........................................ 43
4.2 Impact of Retroactive Pay Increases ............................................................... 43
4.3 Re-Employment in the Federal Public Service................................................. 44
a) As a Non-Contributor to the PSSA ............................................................... 44
b) As a PSSA Contributor................................................................................. 44
Prior to Receipt of a PSSA Benefit Entitlement............................................... 44
In Receipt of a PSSA Benefit Entitlement ........................................................ 44
Waiver of Reduction......................................................................................... 45
Re-employment of Less Than 2 Years............................................................. 45
Indexation......................................................................................................... 45
Some Useful Tips – Fifth Edition 2008 3Retiring from the Public Service of Canada
4.4 Marriage After Retirement................................................................................ 45
4.5 Canada/Québec Pension Plans ....................................................................... 46
4.6 Old Age Security .............................................................................................. 47
Quick Reference Guide : Federal Superannuation Information and Assistance ..... 48
Pre-Retirement................................................................................................. 48
Post-Retirement ............................................................................................... 48
List of Abbreviations......................................................................................... 49
APPLICATION FOR MEMBERSHIP - (APSAR) ...................................................... 50
Some Useful Tips – Fifth Edition 2008 4Retiring from the Public Service of Canada
Introduction
A significant number of members and Government Services Canada
of the Public Service Alliance of Canada (PWGSC).
(PSAC) are approaching the age of
retirement. As a result, it is not surprising Pay and Benefit Specialists employed
that pensions and other post-retirement with federal department and agencies
income and benefits are becoming of have access to personal information,
increased importance to the PSAC related superannuation regulations and
membership. The PSAC National Office administration manuals and are
has received numerous requests for responsible for providing direct individual
information to assist members in regards assistance to employees on all matters
to important retirement decisions. concerning the federal superannuation
plan. PSAC members are encouraged to
At the time of publication, the first approach their designated pay and
majority of PSAC members are benefits specialist with any questions
employed in the Federal Public Service or concerns regarding the federal
and, consequently, their pension benefit superannuation entitlements. On the
entitlements are governed in accordance other hand, complicated issues including
with the provisions of the Public Service marital divisions and Pension Transfer
Superannuation Act (PSSA). The Agreements should be referred to the
“Federal Public Service” for purposes of Superannuation, Pension Transition and
this particular publication is inclusive of Client Services Sector of PWGSC.
departments of the Federal Government PSAC members with specific
and specified federal public sector superannuation concerns of a
agencies and organizations. Ministerial particularly complex nature are advised
responsibility for the PSSA is vested with to contact the Superannuation, Pension
the President of the Treasury Board. The Transition and Client Services Sector at
PSAC has two representatives on the any of the following contact coordinates:
Public Service Pension Advisory
Committee which serves to review Superannuation, Pension Transition
matters respecting the administration, and Client Services Sector
design and funding of benefits provided Public Works and
under the PSSA and make Government Services Canada
corresponding recommendations to the P.O. Box 5010
Treasury Board President. The actual Shediac, NB E4P 9B4
administrative oversight of the federal
superannuation plan is managed by the
Superannuation, Pension Transition and
Client Services Sector of Public Works
Some Useful Tips – Fifth Edition 2008 5Retiring from the Public Service of Canada
Telephone Nos : Telephone No : (613) 560-4200
1 800 561-7935 (Toll Free - All regions Telecommunication Device for the
of Canada and Continental USA) Hearing Impaired: (613) 594-9394
(506) 533-5800
Facsimile No: (613) 236-9402
(Outside Canada – collect calls accepted)
(506) 533-5990 Telecommunication E-Mail: Programs@psac-afpc.com
Device for the Hearing Impaired
The primary purpose of this
(506) 533-5989 Facsimile No. publication is to serve as a technical aide
providing PSAC members and retirees
Once an employee has proceeded with information and contact sources
on retirement and terminated their which can assist with federal
employment, departmental pay and superannuation issues. Please note that
benefits specialists are no longer in a this document includes numerous
position to provide reliable assistance on references to website addresses and
federal superannuation matters. Retirees telephone numbers where additional
are therefore advised to direct all information is available to members on
superannuation-related questions, various superannuation/retirement
concerns or problems to the subject matter. An electronic version of
Superannuation, Pension Transition and this publication is available on the PSAC
Client Services Sector at the contact website at www.psac-afpc.com and is
coordinates indicated above. continually updated to ensure accurate
and timely information is being provided
The PSAC is also available to to the membership.
address and respond to concerns and
questions of PSAC members and PSAC members and retirees are
retirees in regards to the federal also invited to review the PSAC Policy
superannuation plan. PSAC members Paper on Pensions which was recently
can forward any federal superannuation endorsed by the PSAC National Board
enquiries or present any issues of of Directors and has now been
concern to the following contact posted on the PSAC website.
coordinates:
Pensions and Disability Insurance Officer
PSAC Programs Section
Membership Programs Branch
Public Service Alliance of Canada
233 Gilmour Street, Suite 901
Ottawa, ON K2P 0P1
Some Useful Tips – Fifth Edition 2008 6Retiring from the Public Service of Canada
General Overview of Federal Superannuation Benefit Entitlements
1.1 Superannuation Benefit amount of the federal superannuation
Calculation benefit payable:
The retirement benefits payable to 1) Years of pensionable service,
pensioners under the PSSA are 2) Age,
designed to meet the needs of federal 3) Average pensionable salary,
public service employees and their 4) In some instances, the reason for
various circumstances at retirement. termination of employment.
Four principal factors determine the
The basic superannuation benefit calculation provided under the PSSA is as follows:
Number of years of Average salary for 5
2 per 100 X pensionable service X consecutive years of
highest paid salary
The benefit for any period of part-time pensionable service will be calculated as
follows:
Number of Average salary for 5 Assigned
years of consecutive years of part-time hours
2 per 100 X part-time X highest paid service X / standard
pensionable based on full-time full-time hours
service salary rate
Notes:
1. Pensionable service means the years (complete or partial) to the employee’s credit at
retirement. It includes any periods of elective service regardless of whether that service has been
fully paid by the employee. For purposes of determining whether a service threshold has been met
(e.g., 2 years or 30 years), a year of part-time service counts as one year of pensionable service.
2. Average salary is the salary during five consecutive years of highest paid pensionable service. It
includes any salary earned after completing 35 years of service, if that salary is the highest. For
periods of part-time pensionable service, the equivalent full-time salary rate is used but the
pension benefit is adjusted to reflect the assigned hours of part-time work.
Some Useful Tips – Fifth Edition 2008 7Retiring from the Public Service of Canada
Examples : Return of Contributions
The calculation for a Basically, the only superannuation
superannuation benefit of an employee, entitlement available to a terminating
age 55 or older, who retires with 35 employee with less than 2 years of
years of service and an average salary pensionable service is a Return of
of $45,000 over the best five years would Contributions (ROC) plus interest.
be : Under this scenario, only the employee’s
share of contributions are refunded plus
2 p.100 x 35 x 45 000 $ = 31 500 $ per annum accrued interest based on the annual
rate of return of the Public Service
If the same employee had 25 years Pension Fund (PSPF).
of full-time service, along with 10 years
of part-time service working 20 hours Immediate Annuity
during a standard 37.5-hour work week,
the benefit calculation would be as Employees retiring at any time at
follows: age 60 or over with two or more years of
pensionable service; or after having
2 p.100 x 25 x 45 000 $ = 22 500 $ per annum attained age 55 with a minimum of 30
years of pensionable service are entitled
plus to an immediate annuity. An
2 p.100 x 10 x 45 000 $ x 20/37,5 = 4 800 $
immediate annuity is an unreduced
per annum superannuation benefit payable
immediately after retirement. The benefit
Total = 27 300 $ per annum entitlement formula described in the
previous section would be used to
calculate the annual superannuation
1.2 Retirement Options benefit entitlement.
Table 1 summarizes the various Deferred Annuity and Annual
retirement options available upon Allowance
termination of employment from the
Federal Public Service based on an For employees with a minimum of
employee’s age, pensionable service two years pensionable service retiring
and reason for termination. For part-time prior to age 60 and at or after age 50
employees, please note that a year of (except in cases of age 55 with a
part-time employment counts as one minimum of 30 years of pensionable
year of pensionable service for purposes service) the following two
of the retirement option threshold superannuation benefit entitlement
requirements. options are available:
Some Useful Tips – Fifth Edition 2008 8Retiring from the Public Service of Canada
• a deferred annuity which is an deferred annuity that would have
unreduced superannuation benefit been payable at age 60 reduced by
payable at the age of 60; 30 per cent. If the deferred annuity
was $31,500, the annual allowance
• an annual allowance which is a would be $22,050.
superannuation benefit payable as
early as age 50 and subject to a 2) Secondly, if the employee has 25
permanent reduction factor. years or more of pensionable service
and is at least 50 at the date of
The calculation formula used to termination of employment, the
determine the amount of a deferred annual allowance is calculated by
annuity is the same as that used determining the amount of the
previously with the immediate annuity. deferred annuity and applying a
Once payable at age 60, the deferred reduction factor the greater of :
annuity will include accrued indexation
adjustments which are discussed later in • 5 per 100 for every year, to the
this document at Section 1.7. nearest one-tenth of a year, that the
employee is younger than age 55 at
There are two different methods for the date of termination of
calculating the annual allowance employment or the date the retiree
depending on the age and years of opts for the annual allowance,
pensionable service of the employee. whichever is later;
or
1) Firstly the amount of the deferred • 5 per 100 for every year, to the
annuity to which the terminating nearest one tenth of a year, that the
employee is eligible is reduced by 5 employee/retiree’s pensionable
per cent for every year, to the nearest service is less than 30 years.
one-tenth of a year, prior to age 60 at
the date of option for the annual For example, in the case of an
allowance. employee/retiree aged 54 with 27 years
of pensionable service, the reduction
For example, in the case of an calculation would be:
employee who is exactly age 54 with
23 years of pensionable service, who 55 – 54 = 1 years x 5 per 100 = 5 per 100
opts for an annual allowance, the
reduction calculation would be: or
60 – 54 = 6 years x 5 p. 100 = 30 p. 100 30 – 27 = 3 years x 5 per 100 = 15 per 100
In this instance, the annual As 15 per cent is the greater reduction,
allowance would be equal to the the annual allowance would be equal
Some Useful Tips – Fifth Edition 2008 9Retiring from the Public Service of Canada
to the deferred annuity reduced by 15 the most beneficial formula. In this
per cent. If the deferred annuity was instance, the employee/retiree would
$31,500 per annum, the annual receive an annual allowance equal to
allowance would be $26,775. the deferred annuity reduced by 10 per
cent as provided under Formula 1.
In certain instances, even if the
employee is 50 and has 25 years or
more of pensionable service on the date Transfer Value
of termination of employment, the
calculation conducted under formula 1) Employees with a minimum of two
above may provide a greater benefit than years pensionable service who resign
under formula 2). In these instances, the from their employment prior to age 50
greater annual allowance is paid to the also have access to a deferred annuity
retiree. payable at the age of 60, or an annual
allowance payable as early as age 50
For example, in the case of an and subject to a permanent reduction
employee/retiree aged 58 with 26 years factor. However, these employees also
of pensionable service, the annual have the option of the immediate receipt
allowance would equal the deferred of a transfer value of their
annuity reduced by: superannuation benefit entitlement as
opposed to future monthly benefit
60 – 58 = 2 years x 5 per 100 = 10 per 100 payments. The transfer value is the
equivalent lump-sum value of future
However, under Formula 2, superannuation benefit entitlements
the deferred annuity would be calculated in accordance with actuarial
reduced by the following amount: assumptions prescribed under the
PSSA. The transfer value must be
55 – 58 = -3 (therefore no reduction under
the age component) transferred to another registered pension
plan, to a locked-in retirement savings
or vehicle that complies with the
requirements of the Federal Pension
30 – 26 = 4 years x 5 per 100 = 20 per 100 Benefits Standards Act, or to a
financial institution to buy an annuity.
As 20 per cent is the greater reduction The Income Tax Act establishes limits on
under Formula 2, this calculation would the amount of the transfer value which
result in a 20 per cent reduction factor can be transferred to a locked-in
applied to the deferred annuity. retirement vehicle on a tax-deferred
basis. The portion which is not within the
However, with this combination of age tax limits is paid directly to the departing
and pensionable service, the annual employee and will be subject to income
allowance would be determined using
Some Useful Tips – Fifth Edition 2008 10Retiring from the Public Service of Canada
tax unless a Tax Waiver Letter is for the rest of the individual’s life. In
obtained from Canada Revenue Agency, order to qualify for “medical” retirement
and where applicable from Ministère du on these grounds, certification is
revenu, Québec. required from Health Canada that the
applicant satisfies the PSSA definition of
The calculation of the transfer “disability”. Approval by Health Canada
value will only include elective of an application for medical retirement
pensionable service which has been paid entitles the contributor to an immediate
by the PSSA contributor. Therefore, annuity based on the years of accrued
terminating employees should consider pensionable service. A retiree entitled to
the possibility of paying the balance a deferred annuity who subsequently
owing on any remaining elective service becomes disabled is also eligible to
in order to increase the amount of the apply for an immediate annuity under
transfer value benefit. Employees have the medical retirement provisions of the
one year subsequent to the date of PSSA. Should a recipient of an
termination to opt for a transfer value immediate annuity on medical grounds
benefit. Caution should be exercised in eventually regain their health and be
contemplating the transfer value as able to return to work, payment of the
such an option automatically precludes immediate annuity is discontinued and
future participation in other available converted to a deferred annuity payable
post-retirement benefit arrangements at age 60 or, at the option of the
such as the Public Service Health Care individual, converted to an annual
Plan and Pensioners’ Dental Services allowance after having reached the age
Plan. of 50.
In accordance with the current
1.3 Retirement Due to Disability Treasury Board Policy on Leave Without
Pay due to Illness/Injury, management is
The PSSA includes a provision that required to “resolve” such leave without
contributors with at least 2 years of pay situations within two years of the
pensionable service who retire due to commencement of leave. However,
disability prior to age 60 will be entitled to accommodation can be extended in
an immediate annuity. “Disability” is cases with exceptional circumstances.
defined in the PSSA as a physical or Normally, at the 2-year juncture of leave
mental impairment that prevents the without pay due to illness/injury the
individual from engaging in any employee will receive notification from
employment for which the individual is the employer that such leave is to be
reasonably suited by virtue of his or her terminated by either:
education, training or experience and
that can reasonably be expected to last • return to duty;
Some Useful Tips – Fifth Edition 2008 11Retiring from the Public Service of Canada
• resignation or retirement on medical employment for as long as they remain
grounds; “totally disabled” in accordance with the
• termination for reasons other than terms of the relevant group insurance
breaches of discipline or policy. Both the DI and LTD policies
misconduct, pursuant to Section include provisions which allow for
11(2)(g) of the Financial “offsets” to be applied to disability
Administration Act. benefits in cases where the claimants
are entitled to an immediate annuity due
It is the position of the PSAC that to a medical retirement under the PSSA,
this practice is discriminatory and as well as disability benefits payable
contrary to the employer’s obligations under the Canada/Québec Pension
under the collective agreement and the Plans.
Canadian Human Rights Act. The PSAC
proposes that in such situations leave It should be emphasized that in
without pay should be extended for as order to avoid overpayment
long as is reasonably possible in order to situations, the PSSA requires the
preserve the long-term financial interests recipient of an immediate annuity or
of the disabled employee. The PSAC annual allowance to advise the
has produced a strategy paper to assist Superannuation, Pension Transition
members in these predicaments and this and Client Services Sector upon
document has been widely circulated becoming entitled to Canada/Québec
amongst PSAC, locals, regional offices Pension Plan disability benefits.
and Component Unions. This information
has also been posted on the PSAC
Programs Section website and is entitled
1.4 Lay-off Pursuant to Work Force
“Termination of Employment with
Adjustment Programs
Treasury Board Due to Disability”. PSAC
members approached by the employer
The PSSA also contains special
under these conditions are advised to
provisions with respect to involuntary
obtain representation from a local PSAC
terminations of employment pursuant to
Officer.
the work force adjustment appendices
Employees in receipt of Disability contained in the collective agreements
Insurance (DI) benefits from Sun Life with Treasury Board and other major
Financial or Long-Term Disability (LTD) separate employers. In the case of
benefits from Industrial Alliance under employees at least 55 years of age and
the Public Service Management who have been employed in the Federal
Insurance Plan (PSMIP) are entitled to Public Service for a period or periods of
continue receiving such benefits at least 10 years and who are not
subsequent to termination of otherwise entitled to an immediate
Some Useful Tips – Fifth Edition 2008 12Retiring from the Public Service of Canada
annuity, the PSSA vests Treasury Board
with the authority to waive the reduction
factor that would otherwise apply to an
annual allowance. In practice, this waiver
authority has been delegated to
departmental deputy heads and other
designated officers.
This provision also applies to other
surplus employees who are laid-off or
resign in accordance with an involuntary
work force adjustment program where
Treasury Board is not the employer.
Some Useful Tips – Fifth Edition 2008 13Retiring from the Public Service of Canada
TABLE 1
A B C D
Reason for Age Pensionable Entitlement/ service options
termination service
Any reason Any age Less than 2 Return of contributions with interest
years
Retirement 60 or At least 2 Immediate annuity
over years
Retirement 55 or At least 30 Immediate annuity
over years
Retirement- Under 60 At least 2 Immediate annuity
disability years
Retirement 50 to 59 At least 2 Options :
years • Deferred annuity payable at 60
• Annual allowance payable from
the later of the date of option or
the date of ceasing to be
employed.
Resignation Under 50 At least 2 Options :
years • Deferred annuity payable at 60
• Annual allowance payable at any
time from age 50 to 60
• Transfer Value
Lay-off Under 60 At least 2 Options:
years • Deferred annuity payable at 60
• Annual allowance (at any time
between age 50 and 60)
• Transfer value (if less than 50)
Note: If you are over 55 with at least 10
years of public service employment, the
Treasury Board has the authority to
waive the reduction in annual
allowance.
Some Useful Tips – Fifth Edition 2008 14Retiring from the Public Service of Canada
1.5 « Operational service» 1) immediate annuity (unreduced
employees of Correctional pension) after:
Service Canada (CSC)
i) 25 years of “actual operational
service”, regardless of age or:
Effective March 14th, 1994, ii) age 50 and 25 years of “actual and
amendments to the PSSA came into deemed operational service”
force which provided “operational
service” employees of Correctional 2) annual allowance (immediate
Service Canada (CSC) with enhanced reduced pension) after:
superannuation benefit entitlements
tailored to their career patterns. Further i) 20 years of “actual operational
regulatory amendments came into force service”, regardless of age, with an
on May 30th, 2006 which improved the actuarial reduction of 5 per cent
special retirement options available to per year to the nearest one tenth of
these employees. a year, that the employee’s “actual
operational service” is less than 25
Firstly, “actual operational service” years, or;
is defined in the PSSA Regulations as
service by a person employed by CSC, ii) age 50 and 20 years of “actual and
whose principal place of work is not: deemed operational service”, with
an actuarial reduction of 5 per cent
i) the national headquarters or a per year to the nearest one tenth of
regional headquarters of CSC; a year, that the employee’s “actual
ii) the offices of the Commissioner, operational service” is less than 25
CSC; years, or;
iii) a regional Correctional Staff
College or any other institution iii) age 45 and 20 years of “actual and
that provides similar training. deemed operational service” of
which a minimum 10 years is
Upon completion of 10 years of “actual operational service”, with
“actual operational service” an employee an actuarial reduction the greater
who transfers to another non-operational of:
position with CSC is entitled to accrue
“deemed operational service” with an a) 5 per cent per year to the
additional contribution of .62% of nearest one tenth of a year, that
pensionable salary. the employee is younger than
age 50 when he/she retires or
The special retirement options provided opts for his/her benefit
are : whichever is later, or
Some Useful Tips – Fifth Edition 2008 15Retiring from the Public Service of Canada
b) 5 per cent per year to the accordance with formula iii)
nearest one tenth of a year, that above
the employee’s “actual and
deemed operational service” is v) age 45 and entitled to an
less than 25 years. immediate annuity after 25
years of
iv) age 45 and 20 years of “actual “actual operational service” and
operational service” in addition to also has some “deemed
some “deemed operational operational service” with an
service”, with an actuarial reduction actuarial reduction of 5 per cent
the greater of: per year to the nearest one
tenth of a year that the
a) the sum of: employee is younger than age
50 when he/she retires or opts
1) the amount of the annual for his/her benefit applied to the
allowance determined in “deemed operational benefit”
accordance with formula ii)
above, plus The indexation of the enhanced
superannuation benefit entitlements
2) the amount of the deferred provided to “operational service”
annuity benefit entitlement in employees of CSC, which is discussed in
respect of “deemed operational further detail in Section 1.7, commences
service”, with an actuarial only after the participant has attained a
reduction the greater of: combination of age and pensionable
I) 5 per cent per year to the service which totals 85. Also, the
nearest one tenth of a year, that indexation adjustments will not be
the employee is younger than applied prior age 55 or later than age 60.
age 50 when he/she retires or
opts for his/her benefit
whichever is later, or 1.6 Limitations on Accrual of
Pensionable Service and
II) 5 per cent per year to the Participation in the PSSA
nearest one tenth of a year, that
the employee’s “deemed 35 Years Pensionable Service
operational service” is less than
25 years. The PSSA stipulates that the
maximum years of pensionable service
or which a contributor can accumulate is
b) the amount of the annual 35. The contribution rate for a PSSA
allowance determined in participant with more than 35 years of
Some Useful Tips – Fifth Edition 2008 16Retiring from the Public Service of Canada
pensionable service declines to 1% of superannuation benefit entitlement is not
pensionable earnings. The salary earned available until the employee actually
by an employee with more than 35 years terminates employment with the Federal
of pensionable service is included in the Public Service.
calculation of the 5 consecutive years of
highest average earnings to determine 1.7 Indexation
the superannuation benefit entitlement.
Indexation is one the most
Age 71 important and beneficial features of the
federal superannuation plan. In
PSSA also requires that accordance with provisions of the
participants who reach age 71 cease Supplementary Retirement Benefits Act
contributions and accumulation of (SRBA), basic superannuation benefit
pensionable service effective as of entitlements are increased in January of
January 1st of the year following their 71st each year to compensate for increases
birthday. For employees who elect to in the Consumer Price Index (CPI). As
continue working beyond age 71 any illustrated in Table 2, the indexation
additional salary earned is not taken into adjustments since 1970, when the SRBA
consideration in calculating the 5 first came into force, have served to
consecutive years of highest average protect the value of superannuation
earnings. Also, access to a benefit payments against inflation.
Some Useful Tips – Fifth Edition 2008 17Retiring from the Public Service of Canada
TABLE 2
INDEXATION INCREASES
(SUPPLEMENTARY RETIREMENT BENEFITS ACT)
Year of Percentage Year of Percentage
Payment Increase Payment Increase
1970 2.0 1988 4.3
1971 2.0 1989 4.1
1972 2.0 1990 4.7
1973 2.0 1991 4.8
1974 6.7 1992 5,8
1975 10.1 1993 2.1
1976 11.3 1994 1.9
1977 8.6 1995 0.6
1978 7.2 1996 1.6
1979 9.1 1997 1.6
1980 8,9 1998 1.9
1981 9.7 1999 0.9
1982 12.2 2000 1.5
1983 6.5 2001 2.5
1984 5.5 2002 3.0
1985 4.6 2003 1.6
1986 3.9 2004 3.3
1987 4.1 2005 1.7
2006 2.2
2007 2.3
2008 1.8
Some Useful Tips – Fifth Edition 2008 18Retiring from the Public Service of Canada
The indexation of superannuation benefit October 1st and will reduce the number
entitlements normally commences of complete months prior to the
st
effective January 1 of the year following following January 1st from three to two.
the year of termination of employment. Using a hypothetical example of a
The first indexation adjustment is pro- $31,500 immediate annuity with a
rated to reflect the number of full months scheduled 2% annual indexation
remaining in the year of termination of adjustment, the impact of this additional
employment to January 1st of the one day of employment could result in
following year. Administratively, the future superannuation benefit losses of
effective day upon which an employee is $52.50 per year (indexed). PSAC
deemed to have ceased to be employed members are advised to seriously
in the Federal Public Service is on the consider this issue when determining
day following the last day for which the their actual date of termination of
employee received or is deemed to have employment.
received remuneration in respect of
employment in the Federal Public The foregoing pro-rating provision
Service. The PSSA and the SRBA also only applies to the first indexation
stipulate that a participant is required to increase following termination of
have at least one day of superannuation employment. In all subsequent years, the
benefit entitlement in a given month in entire annual indexation adjustment
order to be considered “retired” in that applies to superannuation benefit
month. As superannuation benefits are entitlements. Table 3 below provides the
paid for 365 days a year, Saturdays schedule of the pro-rated portion of the
Sundays and holidays are considered indexation adjustment by month of
days for which superannuation benefits termination.
are also paid and therefore would also
count as the first day of a
superannuation benefit entitlement.
For example, if an employee’s last
day of remuneration is September 29th,
he or she will be deemed to have ceased
to be employed on September 30th and
will therefore be entitled to indexation for
the three remaining months of that year
(i.e. October, November and December).
Alternatively, if the employee’s last day
of remuneration is specified as
September 30th, he or she will be
deemed to have ceased employment on
Some Useful Tips – Fifth Edition 2008 19Retiring from the Public Service of Canada
TABLE 3
INITIAL INDEXATION INCREASE
Month of Pro-Rated Increase
Termination For the following year
January 11/12
February 10/12
March 9/12
April 8/12
May 7/12
June 6/12
July 5/12
August 4/12
September 3/12
October 2/12
November 1/12
December 0/12
1.8 Integration with Canada/Québec concerns expressed by members and
Pension Plans retirees regarding this issue. As a
consequence, it is important to provide a
complete background and explanation
The employee contribution rates on the C/QPP integration provisions of
and benefit entitlements of the PSSA are the PSSA.
integrated with the Canada/Québec
Pension Plans (C/QPP). This design Background
feature is one of the more controversial
and misunderstood aspects of the PSSA. Effective January 1, 1966, the
The PSAC is in constant receipt of C/QPP were introduced by the Federal
Some Useful Tips – Fifth Edition 2008 20Retiring from the Public Service of Canada
Government and the Province of Québec replacement income were most likely to
to provide virtually all working Canadians opt for integration with the C/QPP.
and their families with a degree of
earnings-replacement protection in the In 1966, the existing Federal
event of the retirement, disability or Government decided that the terms of
death of the wage earner. Initially, the PSSA would be integrated with the
employees and employers were each provisions of the C/QPP. This decision
required to contribute 1.8% of earnings was based primarily on the fact that the
up to a level reflective of average wages PSSA was providing an appropriate level
in Canada and benefits were designed to retirement income for employees earning
represent 25% of earnings up to this below the average industrial wage and
level. these individuals were already diverting
a significant portion of their income to
As C/QPP participation was retirement savings in the form of
compulsory, pension plans already in superannuation contributions. In other
existence at the time (such as the PSSA) words, for Federal Government
required a decision as to whether or not employees, the retirement income
their plans would be amended to account system, composed of Old Age Security
for the new mandatory public pension (OAS), C/QPP, and employer-sponsored
scheme. There were basically two pensions, would replace approximately
choices available: a private plan could 85% of the pre-retirement income of a
ignore the introduction of the C/QPP and PSSA participant earning at or below the
simply “stack” benefit and contributions average wage. To require such
rates on top of the C/QPP or coordinate employees to provide themselves with
the plan provisions to recognize the an even higher replacement rate, by
contributions required and coverage increasing contributions above what was
provided under the C/QPP. In general, already required under the PSSA, was
this decision was, for the most part, considered to be too great a diversion of
determined in accordance with the level earnings from current consumption
of protection afforded by the private plan. needs.
For example, if the private plan in
question provided a very basic level of As a result, the Federal
pension protection, or was a defined Government, in consultation with the
contribution (money purchase) plan, then Advisory Committee on the PSSA,
the decision was likely not to amend or adopted the following integration
coordinate with the features of the method:
C/QPP. On the other hand, more
generous pension arrangements that 1. The combined contributions under the
already provided a significant level of superannuation plan and the C/QPP
Some Useful Tips – Fifth Edition 2008 21Retiring from the Public Service of Canada
would equal the existing contribution disability benefits both under C/QPP
rates under the PSSA. and the PSSA.
2. The superannuation benefit earned 5. There would be no reduction in
before the inception of the C/QPP survivor and children’s benefits under
would remain the same. In other the PSSA, despite the provision of
words, for years prior to 1966, there these benefits under C/QPP. This
would be no integration in the benefit decision was based both on the
calculation. Furthermore, as a result recommendation of the Department of
of “full” C/QPP benefits not being Insurance which had advised against
payable prior to age 65, there would integration given the number of very
be no benefit reduction between ages small survivor and children benefits
60 and 65. payable under the PSSA, as well as
the administrative difficulties which
3. At the time the C/QPP retirement would result because of the various
benefit became payable: criteria which had to be met to qualify
for a survivor’s benefit under the
a) the portion of the C/QPP and the varying formula that
superannuation benefit existed to determine the amount of
based on the salaries on the benefit that would be payable
which “split” contributions under that plan.
applied would be reduced
from 2% to effectively 1.3% As a federal statute, the PSSA is
of average salary for each not subject to “negotiations” with federal
year of service after C/QPP public service bargaining agents.
commenced and; Therefore, the input of the PSAC to the
CPP/QPP integration discussions in
b) The balance of the 1965-66 was restricted to the limited
superannuation pension legislated mandate provided to
benefit based on the salaries representatives on the Advisory
above the Yearly Maximum Committee of the PSSA. The current
Pensionable Earnings C/QPP integration formula represents
(YMPE) on which only the the extent of the protections the PSAC
PSSA contributions had been was capable of attaining in this forum to
paid would be 2%; protect the interests of the membership
and their families.
4. The reduction described in 3a) above
would be applied immediately in the The entire issue of the coordination
case of a disability retirement, where of the PSSA with the C/QPP is further
the disabled employee was entitled to complicated by the revisions introduced
Some Useful Tips – Fifth Edition 2008 22Retiring from the Public Service of Canada
to the public pension system by the 2008 - .00685
Federal Government in agreement with 2009 - .00670
the majority of the provinces. Since 2010 - .00655
1987, the required contribution rates to 2011 - .00640
the C/QPP have increased considerably. 2012 - .00625
The resulting implications for the PSSA
are illustrated in Table 4. As of January The AMPE refers to the average of
1, 2003, employee contribution rates to the C/QPP earnings ceilings (YMPE) for
C/QPP have risen to 4.95%. As a result, the year of retirement (or for the year of
had a decision been made in 1966 to entitlement to C/QPP, if this occurs
“stack” the contribution rates and benefit before retirement) and the four preceding
formulae of the C/QPP and the PSSA, as years. The C/QPP ceilings for 2004
of 2003, 12.45% of salary (below the through to 2008 are $40,500, $41,100,
YMPE) of federal public service $42,100, $43,700 and $44,900
employees would be deducted for respectively. The AMPE for 2008,
purposes of pension contributions. therefore, is $42,460. If an employee’s
average salary is lower than the AMPE,
C-QPP Reduction Formula the actual average salary would be used
in the calculation.
At present, upon attaining the age
of 65 (or upon entitlement to C/QPP By way of example, an employee
disability benefits), a retiree in receipt of with 35 years of service and an average
a PSSA benefit will have his/her salary in excess of the AMPE who retires
superannuation benefits reduced by the on December 30, 2008, would have
following pre-determined formula as his/her PSSA benefit reduced at age 65
specified in legislation: (or upon receipt of C/QPP disability
benefits) by $10,179.79 per annum
“.007 x number of years of (.00685 x 35 x $42,460) or $848.32 per
contributory service since January 1, month. This amount could vary
1996 x average maximum pensionable according to years of contributory service
earnings (AMPE), or average salary, and/or average salary. Please note that
whichever is lower.” in 2008, the maximum C/QPP retirement
benefit payable from age 65 is $884.58.
As a result of legislated
amendments incorporated in Bill C-13 Departmental pay and benefits
(Budget Implementation Act) and which specialists provide terminating
received Royal Assent on June 22nd, employees with a projected estimate of
2006, the C/QPP offset reduction factor the C/QPP reduction which would apply
will be revised in accordance with the at either age 65 or the commencement
following schedule: of receipt of C/QPP disability benefits.
Some Useful Tips – Fifth Edition 2008 23Retiring from the Public Service of Canada
TABLE 4
Year PSSA Contribution - C/QPP Contribution Rate PSSA Contribution Formula
Below YMPE1 Above YMPE
1966-1986 5.7%2 1.8% 7.5%
1987 5.6% 1.9% 7.5%
1988 5.5% 2.0% 7.5%
1989 5.4% 2.1% 7.5%
1990 5.3% 2.2% 7.5%
1991 5.2% 2.3% 7.5%
1992 5.1% 2.4% 7.5%
1993 5.0% 2.5% 7.5%
1994 4.9% 2.6% 7.5%
1995 4.8% 2.7% 7.5%
1996 4.7% 2.8% 7.5%
1997 4.5% 3.0% 7.5%
1998 4.3% 3.2% 7.5%
1999 4.0% 3.5% 7.5%
20003 4.0% 3.9% 7.5%
2001 4.0% 4.3% 7.5%
2002 4.0% 4.7% 7.5%
2003 4.0% 4.95% 7.5%
2004 4.0% 4.95% 7.5%
2005 4.0% 4.95% 7.5%
20064 4.3% 4.95% 7.8%
2007 4.6% 4.95% 8.1%
2008 4.9% 4.95% 8.4%
2009 5.2% 4.95% 8.4%
2010 5.5% 4.95% 8.4%
2011 5.8% 4.95% 8.4%
2012 6.1% 4.95% 8.4%
2013 6.4% 4.95% 8.4%
1
This column refers to contributions to the PSSA required on those earnings subject to the C/QPP. For example, in 2003, employees are only required to contribute to C/QPP on
earnings between $3,500 (Year’s Basic Exemption (YBE)) and $39,900 (Yearly Maximum Pensionable Earnings (YMPE)). Prior to 2000, earnings below the YBE and above the
YMPE were subject to a PSSA contribution rate of 7.5%.
2
Prior to the implementation of indexation in 1970 under the Supplementary Retirement Benefits Act, employee contribution rates were 6.5%. In addition, prior to February 1,
1976 female employees contributed 5% of pensionable earnings.
3
The passage of the Public Sector Pension Investment Board Act (Royal Assent: September 14th, 1999) resulted in a delinking of the employee contribution rates to the PSSA and
the C/QPP. Between January 1, 2000 and December 31st, 2003, the employee contribution rate to the PSSA for earnings below the YMPE will remain frozen at 4.0%. Effective
January 1, 2004, the legislation allows for annual increases in the employee PSSA contribution rate of up to .4% for salary less than, equal to or more than the YMPE.
4
On July 7th, 2005, President of Treasury Board announces increases in employee contribution rates to the PSSA for the period 2006 to 2013.
Some Useful Tips – Fifth Edition 2008 24Retiring from the Public Service of Canada
1.9 Survivor Benefits In the case of cohabitation in a
relationship of a conjugal nature,
In the event of the death of a PSSA documentary evidence must be provided
contributor, the survivor and children that such a relationship remained
become entitled to an immediate continuously in effect at least one year
allowance. prior to and including the date of the
contributor’s death. In this instance, the
Definition of « Survivor » survivor must submit proof to the
Superannuation Directorate of the
The PSSA defines survivor as: existence of cohabitation in a
1) A person who is the lawful spouse of relationship of a conjugal nature. Such
the contributor, providing the evidence normally takes the form of
marriage occurred prior to retirement statutory declarations from disinterested
(i.e. ceasing to be employed in the persons who know the circumstances of
Public Service). In cases where a the relationship, along with copies of
relationship of a conjugal nature bills, receipts, mortgage papers, leases,
existed prior to the date of marriage, joint bank accounts credit accounts and
the President of the Treasury Board any other relevant documentation.
may direct that the marriage be In the event a contributor has both
deemed to have occurred at an a legal spouse and an eligible survivor
earlier date. with whom he/she has lived in a
2) A person with whom the contributor relationship of a conjugal nature, the
was cohabiting in a relationship of a survivor benefit will be apportioned
conjugal nature for at least one year between the two claimants. Each
prior to the death of the contributor. survivor’s share of the benefit will be
The relationship must have existed based on the length of cohabitation with
prior to the contributor’s retirement. the contributor.
In the event of death within one Within 3 months from the date of
year of marriage, no survivor benefit is notice of entitlement to survivor benefit,
payable unless the President of the the survivor has the option of waiving
Treasury Board is provided with entitlement to the survivor benefit if such
satisfactory proof that the contributor’s a waiver results in the payment of a
health at the time of the marriage was minimum benefit or a double rate child’s
such that he/she was expected to live allowance. The two preceding benefit
for at least one year. entitlement options are discussed in
further detail below.
Some Useful Tips – Fifth Edition 2008 25Retiring from the Public Service of Canada
« Survivor » Benefit Entitlement Definition of « Child »
The PSSA provides a survivor The term “child” in accordance
benefit equal to one-half the basic with the PSSA, includes a natural child,
accrued superannuation entitlement stepchild or adopted child and means a
of the deceased contributor with at least child of a contributor who is:
two years of pensionable service. In
other words, the survivor benefit is a) less than 18 years of age, or
calculated without regard to C/QPP
integration or any reduction which would b) over 18 but less than 25 years of age
apply to an annual allowance option. and in full-time attendance at a school
or university, having been in such
For example, the calculation of a attendance substantially without
survivor benefit payable in the event of interruption since reaching age 18 or
the death of a PSSA contributor at age since the contributor died, whichever
45 with 25 years of pensionable service is later.
and highest average earnings of $45,000
would be: Surviving « Child » Allowance
Each eligible surviving “child” is
1 p.100 X 25 X 45 000 $ = 11 250 $ per annum entitled to an immediate allowance equal
to one-tenth of the basic accrued
superannuation entitlement of the
In this particular instance, the deceased PSSA contributor. If there is
calculation of the survivor benefit no “survivor”, then each eligible
foregoes any actuarial reduction surviving “child” is entitled to an
regarding the fact that the deceased immediate allowance equal to one-fifth of
PSSA contributor had not satisfied the the basic accrued superannuation
age or service requirements for an entitlement of the deceased PSSA
immediate annuity as of the date of contributor.
death. The survivor benefit allowance
formula also does not include provision The maximum combined amount of
for the C/QPP “reduction factor”. The “child” allowances payable with respect
survivor can receive survivor benefits to one contributor is four fifths of the
under C/QPP and will also receive the “survivor” benefit. If there is no
“full” survivor benefit in accordance with “survivor” the maximum combined
the formula above as prescribed in the amount payable would be four fifths of
PSSA. the basic accrued superannuation
entitlement of the deceased PSSA
contributor. If there are more than 4
surviving “children”, the maximum
Some Useful Tips – Fifth Edition 2008 26Retiring from the Public Service of Canada
combined amount payable may be If the PSSA participant has not
divided among the “children”. named a beneficiary, or the designated
beneficiary has not survived the PSSA
Benefits are payable to the participant, or the PSSA participant has
survivor and children immediately and declined coverage under the SDB Plan,
are normally paid directly to the then amount is payable to the estate of
survivor. If there the children are not the deceased PSSA participant. If the
residing with the survivor, the amount is less than $1,000, the
children’s allowances are paid to the President of the Treasury Board will
person designated as responsible for designate the person or persons entitled
their custody and control. Also, to payment.
allowances are normally paid directly to
children who are over the age of 18. Concerns have been raised in
regards to the adequacy and fairness of
Minimum Benefit (e.g. PSSA the minimum benefit provisions of the
contributor with no survivor or PSSA particularly by PSAC members
« children ») who are “single” and without “children”.
This issue is currently being pursued by
In the event of the death of a PSSA the PSAC at the Public Service Pension
contributor with a minimum of two years Advisory Committee.
of pensionable service where there is no
eligible or no longer any eligible
survivor or “children” the greater of 1.10 Benefits in the Event of
the two following amounts is payable to Separation or a Divorce
the beneficiary named under the
Supplementary Death Benefit (SDB) In the event of a divorce/separation
Plan: or a permanent conclusion to a
relationship of a conjugal nature, the
• Return of Contributions (ROC) plus superannuation benefit entitlements
interest accrued by a PSSA participant during
the course of a marriage or period of
or cohabitation in a relationship of a
conjugal nature may be divided in
• Five years of basic accrued
accordance with the provisions of the
superannuation entitlement (i.e.
Pension Benefits Division Act (PBDA).
immediate annuity) payments.
Married persons who have
Any benefits already paid to a
separated or divorced, and persons who
survivor or “children” (excluding indexing
have lived in a relationship of conjugal
benefits) are subtracted from the
nature for a minimum of one year and
foregoing amounts.
Some Useful Tips – Fifth Edition 2008 27Retiring from the Public Service of Canada
have separated are eligible to receive a • the court order or agreement between
division of accrued superannuation the parties has been changed or is no
benefit entitlements. The PBDA requires longer valid;
a formal application for division from
either party to the marriage or • the terms of the court order or
relationship of a conjugal nature and agreement between the parties have
must be accompanied by a court order or been satisfied, or are being satisfied,
separation agreement between the by some other means;
parties providing for the division of
accrued superannuation benefit • the court order has been appealed or
entitlements. In the event the application the terms of the agreement between
is based on a separation agreement, the the parties are being challenged in
couple must have been separated for a court.
minimum of one year.
The PBSA also delegates
Should the application for division discretion to the Minister of Public Works
be approved, a lump sum representing and Government Services to refuse to
the share of the accrued superannuation approve a division if he/she is satisfied
benefits subject to division will be that it would not be just to do so.
transferred to either a registered savings
vehicle designated by the receiving party Due to the complexity of issues
or a life insurance company to purchase associated with the administration of
a life annuity. The lump sum amount can superannuation benefits division under
never exceed 50 per cent of the value of the PBDA, any PSAC member requiring
accrued superannuation benefit information or assistance in this area is
entitlements subject to division. The encouraged to contact directly PBDA
superannuation benefits of the PSSA Client Advisory Services with the
participant will be reduced to reflect the Superannuation, Pension Transition and
division. Client Services Sector at the following
telephone or facsimile numbers:
PSSA participants will receive
notification of any application filed for Telephone No.: 1-800 883-1411
division of his/her accrued
superannuation benefit entitlements. An Telecommunication Device for the
objection to the division may be filed Hearing Impaired: 1-506 533-5990
within 90 days of the date the notice of
Facsimile No.: 1-506 533-5457
application was sent and can only be
based on the following grounds as E-mail:
specified under the PBSA: www.pwgsc.gc.ca/compensation/pbda
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