1997-002-e.html

SUPERANNUATION ADMINISTRATION MANUAL
SPECIAL BULLETIN: 1997-002

February 24, 1997

SUBJECT: Changes to the Public Superannuation Regulation ... Return of Contributions

P. Charko
Director General
Compensation Sector
Government Operational Service

APPENDIX:

Under the old Regulations, interest on employee contributions was updated on December 31st of each year based on the previous year's balance; e.g. interest updated on December 31, 1996 was added to the employee's contribution and interest balance at December 31, 1995. Starting in April 1997, interest will be updated based on the previous quarter's balance; e.g. interest updated on March 31, 1997 will be added to the contribution and interest balance at December 31, 1996. Interest updated on June 30, 1997 will be added to the contribution and interest balance at March 31, 1997 etc.

On the Contributor System, the contribution and interest report is similar to the illustration below:

FOR EXAMPLE PURPOSES ONLY: we have assumed an interest rate of 2.4470 for the 1st quarter of 1997; 2.5016 for the 2nd quarter of 1997; 2.4656 for the third quarter of 1997, 2.4786 for the 4th quarter of 1997. The appropriate interest rate per quarter will be provided to the Paying Offices via a Client Service Centre Directive BEFORE the end of the quarter in which the new rate is applicable.

The following examples show how interest on a Return of Contributions is applied in specific cases.

Example 1:

Employee terminated on February 9, 1996 and the ROC was paid on March 22, 1996:

ROC payment equaled the total employee contributions to termination date (1996) and interest, at 4%, updated to the end of 1995, i.e. $10,104.40 plus $1,065.34.

Under the old Regulations, 1995 contributions would not earn interest until December 31, 1996. Because the employee terminated prior to December 31, 1996, no interest is payable on either the 1995 or the 1996 contributions.

Example 2:

Employee terminated on December 13, 1996 and the ROC is paid on April 15, 1997:

ROC payment equaled the total employee contributions to termination date (1996) and interest, at 4%, updated to the end of 1995, i.e. $11,980.77 plus $1,065.34.

The employee terminated prior to January 1, 1997, and is not subject to the new Regulations. Under the old Regulations, the interest calculation was based on the date of termination. Because the employee terminated prior to December 31, 1996, no interest is payable on either the 1995 or the 1996 contributions.

Example 3:

Employee terminated on January 16, 1997 and the ROC is paid on March 13, 1997:

ROC payment will equal the total employee contributions to termination date (1997) and interest, at 4%, updated to the end of 1996, i.e. $12,827.95 plus $1,492.30.

Interest under the new Regulations is applied at the end of each quarter. In this case, the 1996 contributions would not be credited with the new interest until March 31, 1997. Since the refund is made prior to that date, there is no interest payable on the 1996 (or 1997) contributions.

Example 4:

Employee terminated on February 14, 1997 and the ROC was paid on April 11, 1997:

ROC payment will equal the total employee contributions to termination date (1997) and interest updated to the end of the first quarter of 1997, i.e. $13,333.22 plus $1,836.66.

In this case, the 1996 contributions are credited with the new interest on March 31, 1997, since the contributions were still in the fund at that date. Contributions made in the first quarter of 1997 would not earn interest (because the refund is made before the interest for that quarter is applied on June 30, 1997).

Example 5:

Employee terminated on June 19, 1997 and the ROC was paid on September 30, 1997:

ROC payment will equal the total employee contributions to termination date (June 1997) and interest to the end of the second quarter of 1997, i.e. $14,086.12 plus $2,216.15.

Contributions for the second quarter of 1997 are not credited with interest until the end of the third quarter. In this case, the refund was made on the last day of the third quarter, so interest in not payable for the second quarter.

Note that an ROC paid on the last day of a quarter does not earn interest for that quarter. Interest is based on the quarter preceding the date of payment.

Example 6:

Employee terminated on June 19, 1997 and the ROC was paid on October 3, 1997:

ROC payment will equal the total employee contributions to termination date (June 1997) and interest to the end of the third quarter of 1997, i.e. $14,086.12 plus $2,618.10.

In this case, contributions for the second quarter of 1997 are credited with interest at the end of the third quarter. Since the ROC was paid (on or) after the first day of the next quarter, interest is payable for the previous quarter.

Example 7:

Employee terminated on June 19, 1997 and the ROC was paid on January 6, 1998:

ROC payment will equal the total employee contributions to termination date (June 1997) and interest to the end of the last quarter of 1997, i.e. $14,086.12 plus $3,032.13. Interest on contributions is now based on the date of payment, not on the date of termination.