Your tentative collective agreement contains the new provisions on severance that end accumulation of voluntary severance and provide for pay out of existing severance entitlements. You should have received your statement indicating the number of weeks of voluntary severance, and the monetary value calculated based on your salary as of 2012 June 30. Also included in the package is a form for selecting which option, as well as a form for transferring funds to your RRSP.
ROLL-OVER PROCESS FOR PAYMENTS INTO RRSP
There is a process through the Employer for rolling over payments in lieu of severance pay into RRSPs. Please refer to the recent bulletin on myAECL at http://myaecl/News/Company_News_2012/Info_update_Elimination_of_VTC.htm.
The employer will provide all employees with a copy of the form required to be completed and returned to the employer if they want to proceed with the roll-over
Only in cases of deferring the severance payment until retirement, an employee may benefit from a special RRSP contribution, which is not affected by your RRSP cap, of an additional $2000 for each year of employment up to and including 1995. This special provision can only be used upon termination and cannot be used for a payment in lieu of severance. You should consult the latest Canada Revenue Agency Income Tax Interpretation Bulletin IT-337R4 on severance (Retiring Allowances) for complete details and paragraph 60(j.1) of the Income Tax Act.
ADDITIONAL QUESTIONS AND ANSWERS
Q. What is this “severance deal”
A: Currently, most collective agreements with Treasury Board or Separate Employers provide for severance benefits for voluntary and involuntary termination. In this round of bargaining the Government has made it a priority to remove Voluntary severance provisions from collective agreements. This affects severance entitlements for resignation and retirement. Under this scheme accumulation of severance will cease for these voluntary departure situations effective the date of signing of the collective agreement. Severance entitlement will continue to accrue for involuntary termination such as lay off, death or incapacity. All indeterminate and term employees will be eligible for a termination benefit equal to one week of pay for each year of continuous employment.
Q. What are my options?
A: There are three options:
1. Cash out the severance pay you’ve accumulated right away at one week of pay for each year of employment, or
2. Defer the payment of the accumulated severance and have it paid out at retirement or when you resign, or
3. Cash out part of the accumulated severance pay immediately and defer the remainder to be paid when you either retire or resign.
Pay outs, whether immediate or deferred, are calculated based on your substantive rate of pay either as of 2012 June 30 or at the time of termination of employment with AECL.
Q. I am looking to have some of my severance cashed out this year. When will it be paid?
A: The Employer will try to issue payments in a timely fashion. Keep in mind that the earlier you make your decision, the earlier your payment will be made.
Q. What if I have pensionable service I would like to buy-back with my severance pay?
A. If you would like to buy-back previous service you need to be in contact with the Public Service Pension Centre who can provide all the necessary information.
Q. I am thinking of depositing some of my payout into a Tax Free Savings Account. What do I do?
A. Deposits to a Tax Free Savings Account are not tax deductible. Contributions to such accounts are made after income tax has been deducted
Q. I want to place part or all of my payout into my RRSP. How do I do that?
A. The employer has included this information with your statement. You need to make sure you have the available RRSP contribution room. Once that is confirmed you will need to fill out the form provided by The Employer. If you do not provide a valid Tax Waiver Form, the employer will be required to withhold income tax based on the value of your severance payout.
Q. I don’t believe that my continuous employment date has been properly calculated. Is there something I can do?
A. What you need to do is contact Payroll or Compensation & Benefits. It may simply be a miscalculation based on misinformation. If you think it is more likely a misinterpretation of the rules governing the calculation of continuous employment, contact a local steward or Employment Relations Officer for assistance.
Q. I am currently receiving disability benefits. Will taking my severance pay out affect my benefits?
A. No, receiving your severance pay out will not affect your disability benefits.
Q. If I am on Maternity or Parental Leave, will taking my severance pay out affect my EI entitlements?
A. Receiving any money while receiving Maternity or Parental Benefits under EI can affect your entitlements. If you are on Maternity or Parental Leave, you are entitled to defer your severance payout until you return to work. You should discuss this decision with Payroll.
Q. If I am on leave or in an Acting Position in another bargaining unit, will I have to choose what to do with my severance immediately?
A. No. The Employer will present you with the options for your severance entitlement when you return to your substantive position in the bargaining unit affected by the new severance regime.
Q. If I take my severance pay out now, will it have an impact if I get laid off in the future?
A. Yes, if you take your severance pay out now, should you be laid off in the future your lay off severance entitlement will be reduced by the period for which you took the pay out. If you defer the severance pay out, your lay off severance will not be reduced.
IF YOU HAVE FURTHER QUESTIONS, PLEASE REFER TO INFORMATION PROVIDED BY THE EMPLOYER OR THE PIPSC WEBSITE AT www.pipsc.ca.
The Professional Institute of the Public Service of Canada (PIPSC) gratefully acknowledges the work of the Public Service Alliance of Canada in developing many of these FAQs.
Working Together For The Public Good
Note: Link to list of Executive embedded in CRPEG Executive.