1996-006-e.html

PURPOSE

POLICY

PROCEDURES

Employees must be made aware that the option will become available on June 20, 1996. They may wish to delay making a benefit option until the full details regarding the Transfer Value are in place and Compensation Specialists are provided with the Systems necessary to provide an estimate. (see Section 3.4). At that time, an eligible employee can then determine whether he wishes to opt for an ROC, the normal PSSA options, or a Transfer Value.

SPECIFIC DETAILS REGARDING THE TRANSFER VALUE WILL BE PROVIDED ONCE THE REGULATIONS ARE PASSED. THE FOLLOWING INFORMATION IS FOR GENERAL PURPOSES ONLY AND MAY CHANGE ONCE THE APPROPRIATE REGULATIONS ARE IN PLACE

INQUIRIES

For purposes of the Public Service Superannuation Act (PSSA), "vesting" means that an employee, or survivors, could become entitled, on the employee's termination or death, to a PSSA pension ot its value rather than to a return of PSSA contributions plus interest.

In the past an employee was (normally) required to have five years of pensionable service to his credit, at termination, in order to be eligible to opt for a pension benefit other than a Return of Contributions (ROC). With "two year vesting", an employee who, at termination, has at least 2 years of pensionable service to his credit will be eligible to opt for a PSSA benefit other than a ROC.

Plan members who terminate employment, or die, on or after June 20, 1996 are affected by this change.

Pension benefits that were previously available to employees with at least five years of pensionable service are now available to employees with at least two years of pensionable service. These include an option for an immediate annuity, annual allowance, deferred annuity, or the new "Transfer Value" option.

Employees with two or more years of pensionable service will be eligible for the ERI Program providing they meet the requirements for the ERI as described in the Superannuation Administration Manual 4.3.4.

The survivor benefits that were previously available to eligible survivors of members with at least five years of pensionable service are now available where the employee dies in service on or after June 20, 1996 and had at least two years of pensionable service credit. These include the pension benefit payable to a spouse, children or students, and the five year minimum benefit payment.

No. The PSSA pension benefit is still based on 2% x the average salary x the employee's pensionable service credit. The average salary continues to be based on the best six consecutive years of pensionable service. Where the employee has less than 6 years of pensionable service, the average salary is based on the total salary/total service.

A PSSA member who cannot accumulate two years of pensionable service because he has more than thirty-three years of pensionable service under the CFSA or RCMPSA can become entitled to a PSSA benefit based on less than two years of pensionable service. This is similar to the provision that existed for these employees where the threshold was five years.

The only change to the SDB is that employees must now have been an SDB participant for at least two years, or have two years of substantially continuous employment, rather than five, in order to continue SDB coverage after termination. Coverage will continue automatically for an eligible employee with an immediate annuity. Other employees, including employees with an entitlement to an Annual Allowance (either reduced or unreduced) must complete an election if they wish to continue SDB coverage.

In the past, an employee's PSSA contributions were "locked-in" when the employee had reached the 45 and 10 threshold (i.e. age 45 with at least 10 years of pensionable service). When an employee was "locked-in", his pension contributions were retained in the PSSA to provide a pension benefit.

Under the new requirements, subject to the two year current service requirement and a transitional period, an employee who has at least two years of pensionable service will be locked-in. A locked-in employee may opt for the normal PSSA pension benefits, or, if eligible may elect for a Transfer Value payment.

An employee who was a PSSA contributor on June 20, 1996, will be locked-in on June 20, 1998, or on reaching the previous 45 and 10 threshold, whichever is earlier. New employees will be locked-in as soon as they have accumulated at least two years of pensionable service credit.

Yes. Where an individual voluntarily terminates and was not employed, substantially without interruption, for a period of two years immediately prior to termination, he is entitled only to a return of contributions.

An employee who is locked-in is not entitled to an ROC payment. The employee has a choice, at termination, of opting for a continuing pension benefit, either immediate or deferred, or, if eligible may opt for the new Transfer Value benefit.

A Return of Contributions plus interest will normally be payable only to non-vested employees, that is to employees with less than two years of pensionable service credit. However, during the Transitional period, employees who are vested but not yet locked-in, (i.e. have not reached the 45 and 10 threshold), will still be able to opt for a ROC. As well, an employee who does not meet the two year current service requirement, as described in the Superannuation Administration Manual 4.3.6, is entitled to only a Return of Contributions.

Effective from January 1, 1997, there will be a change to the way interest on employee contributions is calculated. Interest will be earned and credited quarterly, instead of annually and will be based on the rate of interest earned by the pension fund rather than 4%.

A Transfer Value is a lump sum payment representing the value of a contributor's pension benefits. A Transfer Value payment must be transferred to a locked-in RRSP or fund, another Registered Pension Plan, or to a financial institution to purchase an annuity. The types of financial vehicles that will be acceptable for Transfer Value purposes will be described in a later Bulletin.

The Transfer Value is an actuarial value transfer and would normally be a larger payment than a simple ROC. However, a Transfer Value payment must be deposited directly to a locked-in vehicle to provide the member with an eventual pension benefit.

The Transfer Value option will not be fully operative until the necessary Regulations have been developed. The Transfer Value will be available to eligible employees who terminate on or after June 20, 1996. In addition, it is expected that an employee who terminated this date and had chosen a Deferred Annuity will be given a one year opportunity to change that option to a Transfer Value as long as all other requirements are met.

The Regulations will specify who is eligible to opt for a Transfer Value. It is anticipated that a Transfer Value will be available to a vested employee who at termination is not entitled to an immediate pension benefit, either an Annual Allowance or an immediate annuity.

In general, the following employees would not be eligible to opt for a transfer value: i) an employee who terminates prior to June 20, 1996; ii) an employee who terminates after June 20, 1996 with less than two years of pensionable service credit; iii) an employee who terminates on or after age 50; iv) an employee who terminates for reasons of disability and has applied and is eligible for a PSSA disability benefit (such an employee could choose not to opt for a PSSA disability benefit however, and could, if eligible, opt for a Transfer Value).

An employee who terminated before June 20, 1996 and has already received a return of pension contributions, or whose only entitlement is an ROC cannot now receive a Transfer Value payment in respect of that period of service. It is anticipated that an employee who had opted for a Deferred Annuity however, may, if eligible, change that option to a Transfer Value payment once the appropriate Regulations are in place.

The Transfer Value will not be fully operative until the Regulations are in place. An eligible employee who is interested in a Transfer Value option should consider a delay making his pension option until the Transfer Value Regulations are passed. An eligible employee could also opt for a DA, and if eligible, change the option to a Transfer Value payment once the Regulations are in place. At this time, Compensation Specialists will not be in a position to provide an estimate of the Transfer Value for employees to make their decisions.

Yes. Like other PSSA options, the Transfer Value option is an irrevocable option.

The Transfer Value is an actuarial value of the member's accrued pension benefits including indexing benefits. The actuarial present value is the lump sum equivalent of the future benefits expected to be paid, and is calculated in accordance with generally accepted actuarial principles. The Transfer Value will never be less than the amount of the employee's contributions plus interest.

Systems are being developed to provide Compensation Specialists with a facility to calculate the Transfer Value. The Transfer Value is an actuarial value transfer; Compensation Specialists will not be able to perform the calculation manually. Estimates of the Transfer Value will have to wait until the automated facility is developed.

Only the "paid up" portion of the elective service is included in the Transfer Value. This is different from a continuing pension benefit such as an immediate annuity where the full service is included and the arrears payments continue from the pension. In the Transfer Value calculation, if the employee had past service, first a calculation is performed to determine what portion of the service has been paid for. Only that "paid-up" portion of service is included in the Transfer Value payment.

Periods of pensionable Leave Without Pay will be included in the Transfer Value calculation, unless the employee opted not to count the LWOP as pensionable. Any outstanding LWOP deficiencies will be deducted from the Transfer Value Payment.

The Transfer Value will be paid out as a lump sum, and must be transferred directly to a locked-in RRSP, another Registered Pension Plan, or to a financial institution for the purchase of a life annuity. The acceptable vehicles will be described in the Regulations and further details will be available once the Regulations are developed. The Transfer Value cannot be paid directly to the individual.

No. In order to ensure that the funds are eventually used to provide a continuing pension benefit to the member, the funds can only be transferred to the vehicles described above.

Yes. An employee who terminates and receives a Transfer Value payment, could upon return to the Public Service, as a PSSA contributor, elect for that service.

The cost of re-instating service for which a Transfer Value has been paid will be specified in the Regulations. The detail will be provided once it becomes available.

Yes. Where a Reciprocal Transfer Agreement exists, an employee can continue to transfer to or from an outside employer. The method of determining the amounts of funds to be transferred will change in the future to more closely reflect the new Transfer Values. More detail will be provided when these changes take effect.