ARCHIVED CD 2003-010

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July 18, 2003 (Revised October 21, 2003)

SUBJECT: Pay Procedures for Employees Approved for Disability Insurance (DI), Long-term Disability Insurance (LTD) Benefits and/or Participating in an Approved Rehabilitation Program

1. PURPOSE

1.1 The purpose of the directive is to inform departments of the pay procedures that apply when an employee is participating in an approved rehabilitation program under the Disability Insurance (DI) or the Long-term Disability Insurance (LTD) plans or in another approved rehabilitation program such as departmental progressive return to work programs (e.g. Workers'Compensation Board (WCB), Société de l'assurance automobile du Québec (SAAQ), etc.)

This directive will also provide information relating to the creation of three new status codes, as per the following, and also a clarification of status Code 62 under Field 39 (Pension Type Code).

• Field 37 - Code 4: Death Benefit Eligibility - Premiums temporarily suspended, Rehabilitation Program
• Field 47 - Code 8: DI Participant - Premiums Waived
• Field 47 - Code 9: LTD Participant - Premiums Waived

1.2 In this text, use of the masculine is generic and applies to both men and women.

2. BACKGROUND

2.1 The purpose of an approved rehabilitation program is to provide an employee, who returns to work after a period of sick leave without pay (LWOP) or injury on duty leave, with the opportunity to gradually increase his hours of work until he is medically fit to resume his former work schedule. These procedures will apply to employees who are approved for DI, LTD, WCB, SAAQ benefits, etc.

3. PROCEDURES/INSTRUCTIONS

3.1 Where an employee returns to work under an approved rehabilitation program and is temporarily working reduced hours because of illness, it may be necessary to modify certain status fields and voluntary pay deductions for this period. It should be noted that statutory and voluntary deductions may be impacted by the reduced hours of work.

3.2 In the past, pension type Code 59 was used in cases where an  employee opted not to pay his current superannuation deductions when he returned to duty under an approved rehabilitation program. Unfortunately, this pension type code did not reflect the contributor's status while on the rehabilitation program. There has now been a change made to this code. Pension type Code 62 that is defined as "indeterminate employee or term employee of more than six months temporarily working reduced hours", will ensure that this period of employment remains pensionable, but that no superannuation contributions (or deficiencies)  are deducted during the rehabilitation period.

3.3 In addition to indicating the appropriate pension type code for employees participating in an approved rehabilitation program, compensation advisors must adhere to the following pay procedures so that the Regional Pay System reflects the correct data relating to DI/LTD insurances and Public Service Superannuation Act (PSSA) (Part II) Supplementary Death Benefit (SDB).

3.4. PSSA

A Miscellaneous Staffing Action (MSA) transaction will be required to modify Field 39 - (pension type code) to Code 62  effective the date of return to duty for employees who choose not to pay current superannuation deductions (and deficiencies) from their reduced pay.

When an employee resumes his regular scheduled hours of work, the pension type code in Field 39 must be reverted back to the original code effective the same date that was initially reported to temporarily suspend the current deductions (and deficiencies).  This will produce a message to the pay office to calculate the PSSA deficiencies for both the temporarily struck off strength (T- Struck-off-strength (SOS)) period and the rehabilitation period (based on the regular hours of work). The recovery period will extend over a period equal to twice the entire period of LWOP (T-SOS and rehabilitation period).

Departments must ensure that all current LWOP under an ongoing rehabilitation program are amended to reflect the new PSSA code. This is very important in order to ensure that the employee's pensionable service reflects the accurate situation. The Contributor System and the Regional Pay Salary Service History records should be reviewed for all employees who have been and are still on a rehabilitation program to ensure that the pension type code does not reflect Code 59 at all and instead  reflects Code 62 if the employee is still working reduced hours.

3.5. SDB

A Status Change (STC) transaction will be required to modify the Death Benefit Eligibility in Field 37 (SDB) effective the first day of the month of return to duty on an approved rehabilitation program.

In the past, Field 37 (SDB) offered two options: 1 (yes - contributor) and 2 (no - non-contributor). When this field was modified to Code 2, the employee's status reflected that he was not covered under the SDB when in fact he should remain covered. Therefore, status indicator Code 4 has been created to indicate that the employee remains covered even though the SDB premium is temporarily suspended during the rehabilitation period. Please note that the term "contributor and non-contributor" will be changed to "participant and non-participant" in the Personnel-Pay Input Manual (PPIM).

When an employee resumes his regular scheduled hours of work, the  SDB indicator (Field 37) must be modified to a Code 1 effective the first of the month that the rehabilitation period commenced  in order to reinstate the premium deductions from the employee's pay for the T-SOS period and the rehabilitation period. The pay office will calculate the deficiencies and recover the premiums over twice the period of LWOP including the rehabilitation period.

3.6 It must be noted that pension type Code 62 and SDB Indicator 4 are used only for the purpose of suspending deductions. When the rehabilitation period is finished the codes must be revised to reflect the actual contributor status.

3.7. DI/LTD

An employee who becomes entitled to LTD or DI benefits is not required to pay any premiums in the following situations:

1. any full month of LWOP during which he is in receipt of such benefits; and
2. any full month of the qualifying period for such benefit during which he is on LWOP.

A person engaged in a rehabilitation program who is in receipt of LTD or DI benefits is considered on LWOP. Therefore, he would not be required to pay premiums while on a rehabilitation program for any full month he receives rehabilitation benefits.

Employees in receipt of other disability benefits such as WCB, SAAQ, etc, for which the insurer, Sun Life Assurance Company of Canada or National Life Assurance Company of Canada, has been asked to adjudicate the DI or LTD claims and has determined that the employees are totally disabled, will also have their DI or LTD premiums waived.

In order to properly identify an employee who does not have to pay premiums, a Status Change (STC) transaction will be required to modify Field 47 - DI or LTD indicator code to either a Code 8 (DI Participant - Premium Waived) or a Code 9 (LTD Participant - Premium Waived), effective the first of any full month for which he is not required to pay any premiums. Please note that employees currently entitled to a waiver of premiums should also have Field 47 modified to reflect the new codes.

The above process eliminates the need for compensation advisors to communicate with pay offices in order to advise them NOT to recover premiums for periods for which an employee is in receipt of DI or LTD benefits or for periods for which the insurer, Sun Life Assurance Company of Canada or National Life Assurance Company of Canada, has adjudicated the claim of an individual in receipt of other types of disability benefits such as WCB, SAAQ, etc. and has determined that the employee is totally disabled.

3.8 When an employee resumes his regular scheduled hours of work, the DI or LTD indicator Field 47 must be modified to either Code 1 (DI) or Code 2 (LTD) effective the first of the month for which he was not in receipt of DI or LTD benefits for the FULL month.

Example a)

• Rehabilitation period ends June 27th;
• the DI/LTD indicator Field 47 must be changed to a "1" or a "2" effective June 1st.

Example b)

• Rehabilitation period ends June 2;
• the DI/LTD indicator Field 47 must be changed to a "1" or a "2" effective June 1st.

3.9 Other voluntary deductions may be amended or stopped by completing, either a Deduction Amend (DEA) or Deduction Stop (DES) transaction. Compensation advisors should first determine that the regular cheque (for the reduced hours) will have sufficient monies available to allow for the employee's deductions. Second, compensation advisors should consult with the employee to determine whether some or all of the voluntary deductions should be amended or ceased. It should be noted that the statutory deductions for income tax, Canada Pension Plan or Quebec Pension Plan contributions, and Employment Insurance premiums cannot be ceased. When the rehabilitation period ends, compensation advisors must ensure that all other mandatory (e.g. PSSA, SDB) or voluntary deductions are resumed accordingly.

3.10 During a rehabilitation period, all LWOP must be reported by completing a Reduction Commence (REC) transaction. Departments have an option of reporting these hours on an ongoing basis using Code 383 or reporting hours not worked using Code 301. Please note that the reason for the LWOP Code "C" (illness and disability) should be used as the LWOP reason. If the employee is paid  on a 7A frequency for the hours worked,  then no  REC transaction is required.

You will find enclosed appendices "A", "B" and "C" that outline the procedures to follow for rehabilitation cases and the appropriate reporting methods for each specific employee situation.

3.11 The PPIM will be updated to incorporate all related information contained in this Compensation Directive.

4. INQUIRIES

4.1 Any inquiries on the information contained in this directive should be addressed to your Public Works and Government Services Canada (PWGSC) Compensation Services Office.

Original Signed by
G. Blacker

R. Jolicoeur
Director General
Compensation Sector
Accounting, Banking and Compensation

Reference(s): CJA 9021-1 and 9006-15

APPENDIX "A"

Scenario:

The employee will be returning to a reduced work week that is more than one-half of his scheduled work week (SWW).

OPTION 1

Employees in this situation would have the option of continuing current deductions for superannuation and the Supplementary Death Benefit (SDB) and would pay regular deductions (on ten days of pay) as well as  deficiencies for the temporarily struck off strength (T-SOS)  period and for  the reduced hours. The pension type code would remain unchanged and the  SDB code would reflect "1" as well. Reduction Commence (REC) transactions (PAC15C301, PPIM 4-4-15 and PPIM 4-4-18 "R" applies) would be reported for the days (or hours) not worked as per normal processing. Please keep in mind that the Master Employee Record (MER) has a limit  as to the number of allowance/deduction transactions per pay period (including the normal ongoing deductions and recoveries);  therefore, this method of reporting is NOT appropriate for employees with allowances who are working reduced hours each day. The number of transaction input lines required to report the necessary recoveries will likely exceed the available space on the allowance/deduction block. In addition, the total number of recovery days input per pay period should never exceed six to ensure that a regular pay cheque can be produced.

As soon as the insurer confirms that the claim has been approved, the Disability Insurance (DI) or the Long-term Disability Insurance (LTD) indicator should ALWAYS be changed to indicate "8" or "9" for the period during which the employee is receiving benefits.

OPTION 2

These employees also have the option of deferring the current superannuation deductions as well as the deficiencies for the T-SOS period and in this case, the pension type, SDB and DI or LTD indicators should be changed to reflect the rehabilitation codes (i.e. for pension type Code 62, SDB Code 4 and DI Code 8 or LTD Code 9, as applicable). All superannuation deficiencies (for the T-SOS period and for the rehabilitation period) will be collected when the rehabilitation period ends and the pension type code and SDB indicator have  been reversed using  the same effective date that was initially reported to temporarily suspend the deductions.

As soon as the insurer confirms that the claim has been approved, the DI or LTD indicator should ALWAYS be changed to indicate "8" or "9" for the period during which the employee is receiving benefits.

Note Automated Retroactivity

There will be no impact on  automated retroactivity as the T-SOS periods and leave without pay (LWOP) periods (REC transactions) will be automatically adjusted if the collective agreement is signed after the employee has returned to his or her regular work schedule.

If the retroactivity payment is prior to the end of the rehabilitation period, the pay office must ensure that the correct rates are used for the superannuation recovery, i.e. old salary rate up to the rehabilitation period, the rate when the employee was retaken on strength (RE- TOS) and the new salary rate from the effective date of the RE-TOS depending on how the retroactivity  for the T-SOS period is paid.

APPENDIX "B"

Scenario:

The employee will be returning to a reduced work week that is less than one-half of his SWW or for which Appendix "A" is not appropriate and the rehabilitation period will be prolonged.

OPTION 1

When an employee returns from his period of T-SOS in  rehabilitation status and will consistently work the same number of hours in a two week period, the ongoing LWOP reporting process is appropriate. Again the employee has options concerning his superannuation current deductions and deficiencies. Deduction Code 383 resides on the allowance/deduction block of the MER and reduces the gross pay for the number of hours reported until the rehabilitation period is over and the ongoing recovery is stopped. If superannuation is to continue while the employee is on rehabilitation status, then the pension status fields remain unchanged. Superannuation will be deducted based on the assigned work week (AWW) and the deficiencies for the T-SOS period will be recovered  from the reduced salary.

As soon as the insurer confirms that the claim has been approved, the DI or LTD indicator should ALWAYS be changed to indicate "8" or "9" for the period during which the employee is receiving benefits.

OPTION 2

The same process as above, but the pension indicator and the SDB code are adjusted to reflect the rehabilitation status and neither current superannuation deductions nor the deficiencies for the T-SOS period will be recovered until the rehabilitation period ends and the employee returns to his regular work schedule.

As soon as the insurer confirms that the claim has been approved, the DI or LTD indicator should ALWAYS be changed to indicate "8" or "9" for the period during which the employee is receiving benefits.

Note Adjustment of Hours

It is suggested that instead of offsetting deduction Code 383 as currently proposed in the PPIM, more LWOP hours  should be reported via a Reduction Commence (REC) transaction, and if  additional hours are worked during a pay period they should  be reported using Entitlement Commence (ENC) transaction Code 049 (additional hours). When the rehabilitation schedule of work is changed, an Ongoing LWOP Stop (OLS) transaction Code 383 and a new REC transaction must be commenced with the effective date of the start of the current pay period. When reporting more LWOP transactions, caution should be used to ensure that the total recovery will not exceed six days.

Note Automated Retroactivity

Since there  is no indication of specific hours not worked, only a reduction of hours for the pay period, a close verification of the automated retroactive payment is required.

The following example may help in completing the required transactions based on the above information.

Employee was on paid sick leave from February 10, 2003, and began his LWOP on March 31, 2003. The employee was in receipt of DI benefits from May 12, 2003, to July 2, 2003. This person returns to work under a rehabilitation program effective July 3, 2003. This employee works three days a week: Tuesday, Wednesday and Thursday, (3 days @ 7.5 hours = 22.5 hours), so every two weeks the employee works 45 hours and is on LWOP for 30 hours.

The following transactions would be required:

• RE-TOS (RET) effective July 3, 2003,
• Miscellaneous Staffing Action (MSA) to change Field 39 to "62" effective July 3, 2003,
• Pay Status Change (STC) to change Field 37 (SDB) to "4" effective July 1, 2003,
• Pay Status Change (STC) to change Field 47 (DI) to "8" effective April 1, 2003, ¹
• Reduction Commence (REC) using Code 383 (Ongoing LWOP) to recover 30 hours per pay period using reason Code "C" (illness and disability). If the employee's new schedule is not as precise as in this example, then use Code 301 to recover the additional days of LWOP.

Once the above transactions have been processed, compensation advisors must look at any voluntary deductions that the employee may have. With this reduced schedule, the employee may not have enough earnings to cover all voluntary deductions. Care must be taken to ensure that you do not exceed six days of LWOP to be recovered in any particular pay period, and that you do not exceed the allowable number of transactions per pay period.

¹ This transaction would not be required, upon RE-TOS, if the compensation advisor had already changed the employee's DI indicator to an "8" when he was informed by the insurer that the employee was approved for receiving benefits.

APPENDIX "C"

Scenario:

The employee will be returning to a reduced work week that is not immediately determined or the employee is unsure of the hours that will be worked. Employee's hours of work will be reported by a Time Summary (TIM) transaction.

In these instances, it is mandatory to change the  Superannuation, SDB and DI or LTD indicators to reflect the rehabilitation codes and modify the employee's pay cycle to a 7A pay frequency. Hours worked will be reported via TIM input. This will enable the employees to be paid and when they return to their former status, the superannuation deficiencies and DB are calculated as usual, the status codes are revised to reflect contributor status and the pay  frequency is changed to 7C.

As soon as the insurer confirms that the claim has been approved, the DI or LTD indicator should ALWAYS be changed to indicate "8" or "9" for the period during which the employee is receiving benefits.

Note Automated Retroactivity Impact

A close verification of the automated retroactive payment is required.

Any automated retroactivity will revise the hours reported via time summary reporting; therefore, the department must process Entitlement Adjustment (EAJ)  202 transactions to adjust the superannuation for the unreported hours while the employee was on the 7A pay frequency. The compensation advisor  must input these transactions to coordinate with the retroactive payment or via memo after the retroactive payment to enable the pay office to adjust the superannuation for the hours not worked via deductions from regular pay.