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1989-143-e.html
SERVICES PAY DIRECTIVE: 1989-143 (49)
November 9, 1989
Ottawa, Canada
K1A 0S5
SUBJECT: New Codes for Separation Benefit and Severance Pay
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PURPOSE |
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1.1 |
The purpose of this directive is to advise you of the establishment of three new codes, two for the payment of the newly established Separation Benefit, and one for the payment of that portion of Severance Pay which is non-transferable to a Registered Retirement Savings Plan (RRSP) or Registered Pension Plan (RPP).
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POLICY |
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2.1 |
The Work Force Adjustment Policy has been revised to include payment of a Separation Benefit. Any surplus employee terminated in whatever manner under the provisions of this Policy, and who has not received more than one month's retraining is entitled to receive a Separation Benefit of one week's pay for each year of service with a department or agency for which the Treasury Board is the employer (PSSRA 1-1) up to a maximum fifteen weeks' pay, providing that the individual is entitled to opt for, or is entitled to an immediate annuity or an immediate annual allowance under the Public Service Superannuation Act.
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PROCEDURES/INSTRUCTIONS |
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3.1 |
Code 250, Separation Benefit, and Code 279, Separation Benefit - Non-transferable, have been established within the Regional Pay System for the payment of this benefit.
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3.2 |
Code 250 is to be used to requisition payment of that portion of the benefit of that portion of the benefit which is eligible to be transferred to an RRSP or RPP> This payment is subject to Income Tax and Unemployment Insurance deductions. Please note that if this payment is transferred to an RRSP or RPP it would not be subject to income tax.
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3.3 |
Code 279 is to be used to requisition that portion of the Separation Benefit which exceeds the established limits and is not eligible to be transferred to an RRSP or RPP and will therefore be automatically designated as non-eligible in Box I of the T4A. This payment is subject to Income Tax and Unemployment Insurance deductions.
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3.4 |
Code 280, Severance Pay - Non-transferable, has also been established for payment of that portion of Severance Pay which exceeds the established limits and is not eligible to be transferred to an RRSP or RPP. This payment is also subject to Income Tax and Unemployment Insurance deductions. The transferable portion of the payment should continue to be made under code 054.
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3.5 |
Please note that code 051, Retiring Allowance - Non-transferable, should now only be used in conjunction with Retiring Allowance payments requisitioned under code 108.
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3.6 |
For further information concerning the determination of the limits for the transfer of funds to an RRSP or RPP, please refer to Services Pay Directive 1988-025(19) dated April 19, 1988. Extra precaution should be taken to ensure that the proper codes are utilized. The limit is to be taken into consideration as one lump sum (i.e. the employee does not receive a limit for each different type of payment. One limit only can be used for all the retiring allowance payments). The proper codes must be used whether or not the employee requests a transfer of funds to an RRSP or RPP.
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Example:
An employee is to receive Severance Pay of $30,000, Separation Pay of $10,000, and a Separation Benefit of $7,000. The employee has 12 years of service (December 1978 to June 1989) during which he was a contributor to PSSA, and 3 years of part-time service (December 1973 to January 1975) during which the employee was not contributing to PSSA. This employee is entitled to transfer $34,000 to an RRSP or RPP ((3 years x $3,5000) + (12 years x $2,000)).
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Regardless of whether or not the employee elected to transfer any of these amounts to an RRSP or RPP, departments should request the payments under the following codes:
Severance Pay |
054
280 |
$30,000.00
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Retiring Allowance |
108
051 |
$ 4,500.00
$ 5,500.00 |
Separation Benefit |
250
279 |
-
$ 7,000.00 |
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3.7 |
If a new or separate line object is to be assigned by a department to identify payments made with codes 250, 279, or 280, in the department's accounting records, the Financial Products Branch (address below) must be advised of the line object assigned, so that the pay expenditure control file may be updated accordingly.
Manager
Financial and Reporting Products Group
Financial Products Branch
Accounting, Banking and Compensation Directorate
Finance Building
Room 220
Tunney's Pasture
Ottawa, Ontario
K1A 0T2
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INQUIRIES |
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4.1 |
Any queries on the foregoing may be directed by telephone to Advisory Services - Pay, M. Trudel (819) 956-2065 or A. Scrivener (819) 956-2062.
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Original Signed by
M.-J. Posen
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Marie-Josée Posen
Director
Personnel Products Branch
Accounting, Banking and Compensation Directorate
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