ARCHIVED CD 2006-002

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• Annex "A" - Retiring Allowances - Eligible Limit Amounts Table
• Annex "B" - Calculation Examples - Determining Eligible Limit Amounts
• Annex "C" - Samples of Required Documentation/Authorizations
• Information Notice to Employees

January 5, 2006 (Revised November 14, 2007)

Policy and Procedures

SUBJECT: Income Tax Information Concerning Retiring Allowances, Returns of Contributions, Transfers of Transfer Value Payments, and Transfers to Registered Retirement Savings Plans (RRSPs) and Registered Pension Plans (RPPs)

1 PURPOSE

1.1 The purpose of this directive is to provide you with an updated version of the policy and procedures relating to income tax information concerning retiring allowances, returns of contributions, transfers of transfer value payments, and transfers to registered retirements savings plans (RRSPs) and registered pension plans (RPPs).

| Note: This directive has been amended as a result of client inquiries.

1.2 A notice of information to employees concerning the above has been included with this Compensation Directive and will also be posted in the "Who are you? Public Service Employee" page of the Compensation Sector Web site. Clients may also find this notice helpful as the format is based on questions and answers.

2 BACKGROUND

2.1 This directive provides updated information to client organizations and replaces Compensation Directive 1999-017 dated March 25, 1999 (revised March 7, 2003).

2.2 The major changes made to Compensation Directive 1999-017 are:

1. Clients are no longer required to input a tax exemption for pension contribution deficiencies as the Regional Pay System (RPS) will now automatically provide a tax exemption.

2. This directive reflects the current pension legislation related to the subject matter covered in this directive.

3. Appendix "D" has been eliminated as the information previously contained in this appendix is now included in the Information Notice to Employees.

4. A new section (Part IV) has been added in the Information Notice to Employees to describe the documentation employees must provide to effect a transfer to an RRSP / RPP.

3 CANCELLATION

3.1 This directive cancels Compensation Directive 1999-017 dated March 25, 1999 (revised March 7, 2003).

4 POLICY

4.1 The policy is attached.

5 PROCEDURES/INSTRUCTIONS

5.1 The procedures and instructions are attached.

6 INQUIRIES

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

Original Signed by
B. Fortin

Brigitte Fortin
Acting Director General
Compensation Sector
Accounting, Banking and Compensation

Reference(s): CJA 9032-40, 9006-24-10

INCOME TAX INFORMATION
CONCERNING RETIRING ALLOWANCES,
RETURNS OF CONTRIBUTIONS,
TRANSFERS OF TRANSFER VALUE PAYMENTS,
AND TRANSFERS TO
REGISTERED RETIREMENT SAVINGS PLANS (RRSPs)
AND REGISTERED PENSION PLANS (RPPs)

TABLE OF CONTENTS

4   Policy

4.1 Definitions

4.2 Provisions Under the Income Tax Act

4.3 Limits of Transfer of Retiring Allowances

4.4 Payment of Pension Contribution Deficiencies and Past Service Elections from Non-eligible Retiring Allowances or Other Termination Payments

4.5 Transfer of a Return of Contributions (ROC) to an RRSP

4.6 Refund of Retirement Compensation Arrangement (RCA) Contributions

4.7 Transfer to a Registered Retirement Income Fund (RRIF)

4.8 Spousal RRSPs/RRIFs

4.9 Debts Due to the Crown and Deficiencies Owed (other than pension)

4.10 Cash Payments to Employee: Withholding of Income Tax

| 4.11 Exemption From Income Tax at Source Without Transferring to RRSPs

4.12 Minimum Tax

4.13 Required Documentation/Authorizations

4.14 Deferred Payments

4.15 Administrative Error

4.16 Disposition of Cheques Transferred Directly to an RRSP

4.17 Transfer of a Transfer Value Payment

| 4.18 Payments Other than a Retiring Allowance, ROC or Transfer Value in Relation to Transfers to an RRSP

5   Procedures

Client Department Responsibilities

5.1 General

5.2 Present Facts/Options to Employees (checklist)

5.3 Required Documentation/Authorizations

5.4 Reporting Payments/Deductions by Pay Code - General

5.5 Payment of Past Service from Retiring Allowances

5.6 Past Service Letter

5.7 Withholding of Income Tax at Source

5.8 Initiating Request for Payment of Retiring Allowances

5.9 Issuing the Payment for Transfers

5.10 Forwarding RRSP Cheques to the Financial Institution

5.11 Deferred Payments

Pay Office Responsibilities

5.12 General

5.13 Withholding of Income Tax at Source

5.14 Pension Contributions Deducted from Retiring Allowances and Other Termination Payments

5.15 Forwarding RRSP Cheques to the Financial Institution

5.16 Statements of Remuneration

6   Annexes

Annex "A" Retiring Allowances - Eligible Limit Amounts Table

Annex "B" Calculation Examples - Determining Eligible Limit Amounts

Annex "C" Samples of Required Documentation/Authorizations

1. Sample Letter from the Employee
2. Sample Letter from Personnel to Report:
   1. Eligible amounts transferred to an RPP under Section 60(J.1) of the Income Tax Act.
   2. Non-eligible amounts used to pay for past service.

4   Policy

4.1 Definitions

The following are definitions of terms used in this section:

A. Retiring Allowances

A retiring allowance is an amount received for loss of office or employment or in recognition of long service. A retiring allowance does not include payments such as returns of contributions, pension benefits or payments of unused annual leave.

B. Calendar Year (for calculation of eligible amounts)

A "calendar year" is considered to be any part of a calendar year before 1996 in which the employee was employed by the employer paying the retiring allowance (current employer) or by a related employer. For example, an employee who worked from December 1990 to January 1992 would have three calendar years.

Please note that there is no limit to the number of calendar years used in the calculation of eligible retiring allowances. For example, if an employee has 40 calendar years of service, you would use 40 years in the calculation as long as the calendar years are before 1996.

C. Federal Public Service (for the purpose of calculating eligible amounts only)

Federal public service is normally considered service with a federal organization such as: departments that have Treasury Board as an employer, the Canadian Armed Forces, the Royal Canadian Mounted Police, the House of Commons, the Senate and most separate employers (i.e. The National Film Board, the Canada Revenue Agency, the Canadian Food Inspection Agency, the Parks Canada Agency, the National Capital Commission, etc.).

D. Related Employer

A related employer means related in law or in fact. This would include previous employers whose businesses were acquired or continued by the current employer. As an example, if Health Canada were to take over a private hospital, the staff at that hospital would be able to count their service with the hospital during the time that it was a private organization.

Any previous employment with the federal public service will be included in the calculation of the eligible limit amount. Also, any employment with an organization outside of the federal public service where the employee elected for any part of the outside service, or a part of service was transferred under a pension transfer agreement (PTA), should include all calendar years with that employer in the calculation.

As an example:

Outside Employer: Ontario Hydro

Employment Period: January 2, 1982, to December 31, 1986

Period Elected: April 1, 1984, to December 31, 1986

While this employee is only electing for a part of his service with Ontario Hydro, the full employment period of five calendar years would be used in determining the eligible limit amounts for transfer purposes.

Generally, you would include the following types of service as being recognized related employer service:

1. Previous service within the federal public service (whether the employee elects for the service or not).
2. Service with an outside employer (the employee must elect for or transfer in a part of that service).

E. Vested Pension

For the purpose of the federal public service, the term "vested" means that the employer and employee contributions will provide the employee with a pension benefit, i.e. the employee opts for a deferred annuity, an immediate annuity, an annual allowance, a transfer out under a PTA or a transfer value payment.

F. Contributor

A contributor is an employee who contributes to the pension plan at any time during the calendar year. That is to say, if the employee was to make pension contributions for even one day during the calendar year, the employee is considered to be a contributor for that calendar year.

G. Non-contributor

A non-contributor is an employee who does not contribute to the pension plan at any time during the calendar year. Please note that an employee, whose pay only had the 1% indexation factor (formerly known as a contribution to the Supplementary Retirement Benefits Account (SRBA)) deducted throughout the entire year, is considered to be a non-contributor.

4.2 Provisions Under the Income Tax Act

Retiring Allowances and Returns of Contributions (ROC)

The Income Tax Act permits a deduction from income of amounts, in whole or in part, payable as an ROC (under Section 147.3) or a retiring allowance (under Section 60(J.1)), if the amounts are transferred to a registered pension plan (RPP) or a registered retirement savings plan (RRSP).

Section 147.3 also indicates that where an employer or plan administrator transfers an ROC to another RPP/RRSP, the amount that is transferred is not income for the person on whose behalf it is transferred, nor an amount that the person can deduct for the year. That is to say, neither a T4A (Relevé 2) will be issued by the employer nor will the financial institution issue a receipt for pension contributions transferred directly to an RRSP/RPP.

These amounts may be transferred, at the employee's discretion, directly to the employee's selected plan without the withholding of income tax at source. The Income Tax Act also permits the transfer of pension contributions to a registered retirement income fund (RRIF).

Treasury Board has authorized the transfer of retiring allowances and ROCs to an RRSP through T.B. Minutes 557089 dated March 17, 1960; 666003 dated March 15, 1967; and 735114 dated April 3, 1975.

While the Canada Revenue Agency (CRA) allows an exemption of income tax at source for other types of payments (e.g. vacation pay, acting pay, basic pay, etc.) which are transferred directly to an RRSP, Treasury Board has chosen, as an employer, to limit the application of transfers to retiring allowances and returns of contributions only. Transfers to RRSPs by employers are not mandatory and are at the employer's discretion.

Death Cases

ROC

In the case of death, the employee's ROC may be transferred (under Section 147.3(7)) directly to the surviving spouse's RRSP. Those monies transferred directly to an RRSP under these circumstances are not reported as income for the surviving spouse.

Retiring Allowances (employee dies after terminating employment)

A retiring allowance can never be transferred to a deceased employee's RRSP after the employee's death. This is because an RRSP is a contract between an individual and a financial institution, and such a contract cannot be established once the individual has died.

There is no provision for transferring retiring allowances and ROCs to an RRSP in the name of an "estate".

Where an employee terminates employment, but then dies before the retiring allowance is paid, the payment retains its character as a retiring allowance. This amount would be reported on a T4A slip in the name of whomever received it (i.e. the name of the individual if paid to an individual or "estate of the late" if paid to the deceased's legal representative).

If paid to a relation of the deceased, the retiring allowance must be included as income by that person as a retiring allowance under subparagraph 56(1)(a)(ii) of the Income Tax Act , and whatever portion is "eligible" can be transferred or invested in an RRSP/RPP for that person under Section 60(J.1).

Retiring Allowances Deemed as a Death Benefit (employee dies before terminating employment)

Where an employee dies before terminating employment, the severance pay that the government pays to a relation of the deceased or the deceased's legal representative is a "death benefit" within the meaning of subsection 248(1). This amount would be reported on a T4A slip in the name of whomever received it (i.e. the name of the individual if paid to an individual or "estate of the late" if paid to the deceased's legal representative).

Please note that this payment is not transferable to an RRSP or an RPP.

Registration of an RRSP/RPP

A recognized RRSP and RPP must be registered in accordance with the provisions of the Income Tax Act under Section 146 and Section 147.1 respectively. It is the responsibility of the employee to confirm with the financial institution that the plan is in fact registered. There is no provision to allow for the registration of retirement savings plans of foreign countries under the Canadian Income Tax Act.

Withholding of Income Tax

The withholding of income tax from retiring allowances and returns of contributions falls under Part 1 of the Income Tax Regulations, specifically subsections 103(4) and 103(6).

4.3 Limits of Transfer of Retiring Allowances

Eligible Amounts

The eligible dollar limit is based on a number of factors Which include whether the employee has chosen to receive a pension benefit (i.e. a transfer value payment, a PTA or a monthly pension benefit), whether the employee was a contributor or a non-contributor, and specific dates where legislation was passed which changed the eligible dollar limits.

The limits are as follows:

A. $2,000 times the number of calendar years before 1996 employed by the federal public service or a related employer, if applicable. As per the February 27, 1995, Federal Budget, there is no provision for transferring retiring allowances for service in calendar years after 1995. That is to say, client departments will calculate eligible amounts using the limits in effect for those calendar years prior to 1996, but will allow the employee "0" for any periods after 1995.

B. An additional $1,500 times the number of calendar years before 1989 where the employee was employed by the federal public service or by a related employer, for which employer contributions to the pension plan are not vested (those calendar years during which the employee was not a contributor). Where this situation occurs, the total amount for the calendar year will equal $3,500 (A. $2,000. plus B. $1,500).

C. For employees who terminated employment after November 12, 1981, and a retiring allowance was transferred to an RRSP or an RPP after November 12, 1981 , by the federal public service or a related employer, the amount that was transferred must be subtracted from the total of A. plus B. above.

If an employee is in this situation, the client department must verify the amount transferred. Where this information is not available on the employee's personnel file, the client department should obtain a written statement from the employee declaring the amount that was transferred to an RRSP/RPP after November 12, 1981.

The formula that is used to calculate an employee's total eligible amount for transfer purposes is:

[ (A + B) - C) ] = TOTAL ELIGIBLE LIMIT AMOUNT

Please refer to Annex "A" (Retiring Allowances - Eligible Limit Amounts Table) which has been prepared to assist client departments in determining the eligible limit amounts, and, Annex "B" (Calculation Examples - Determining Eligible Limit Amounts) which contains examples of calculations to illustrate the various possible scenarios that might be encountered.

Please refer to Section 4.16 " Disposition of Cheques Transferred Directly to an RRSP" of this document for procedures in issuing a cheque to be deposited into an RRSP.

Non-eligible amounts

The non-eligible amounts will be the remainder of the total retiring allowance payable less the eligible limit amount.

The transfer of non-eligible retiring allowances amounts to an RRSP, with the income tax waived at source, is based on the employee's personal RRSP room available which is calculated each year by the CRA and reported on the employee's "Notice of Assessment". Employees should be encouraged to check with the CRA to confirm that they have sufficient RRSP room available in the current year.

To transfer the non-eligible portion of retiring allowances, the employee must provide the following documents:

(1) a letter that the employee will sign and date, certifying that sufficient RRSP room is available and requesting that a specific amount of the non-eligible portion be transferred to an RRSP;

OR

(2) a copy of the employee's latest "Notice of Assessment" indicating the available RRSP room available. The employee must sign and date this copy and also indicate the amount to be transferred.

Please refer to Section 4.16 " Disposition of Cheques Transferred Directly to an RRSP" of this directive for procedures in issuing a cheque to be deposited into an RRSP.

Should the employee wish to deposit the money into an RRSP and wants the federal and/or Quebec income tax waived, the employee must provide a letter of authorization from the CRA and/or the ministère du Revenu du Québec (MRQ).

Income Tax Implications

Those monies, whether eligible or non-eligible amounts, being transferred to an RRSP will not have income tax deducted at source as long as the proper authorizations have been received. Where an employee opts to receive the payments in cash, whether eligible or non-eligible amounts, income tax will be withheld at source unless the employee has provided a letter of authorization from the CRA/MRQ.

The employee does however have up to 60 days following the end of the calendar year in which the retiring allowance was paid to purchase RRSPs representing the eligible limit amount and apply the deduction to the year of the payment. In doing so, employees will be able to claim the deduction and obtain a refund of income tax from the CRA/MRQ upon filing their income tax returns.

4.4 Payment of Pension Contribution Deficiencies and Past Service Elections from Non-Eligible Retiring Allowances or Other Termination Payments

In addition to transferring eligible retiring allowances (under Section 60(J.1), to either an RRSP or an RPP, an employee may also make payment for pension contribution deficiencies and/or elected past service with non-eligible retiring allowances or other termination payments (e.g. vacation pay, final salary etc.), without income tax being withheld at source subject to the limits set out below. Where client departments follow the policy set out below, employees are not required to obtain a letter from the CRA/MRQ to waive income tax at source. Furthermore, it should be noted that these payments do not affect the eligible limit amount. Please refer to Section 5.5 of this document.

(A) Pension Contribution Deficiencies:

Payment of pension contribution deficiencies is fully tax deductible and therefore, no income tax should be withheld at source. The Regional Pay Systems (RPS) will automatically waive the income tax at source on amounts deducted as pension contribution deficiencies.

(B) Pension Contributions for Past Service Post-1989:

Payment of pension contributions for past service relating to service after 1989 is fully tax deductible and therefore no income tax should be withheld at source.

(C) Pension Contributions for Past Service Pre-1990:

(i) While Not A Contributor

An employee is limited to $3,500^FN1 per year in addition to the contributions paid for current service. Therefore, an employee may make payment of up to $3,500^FN1 annually without income tax being withheld at source.

(ii) While A Contributor

An employee is limited to $3,500^FN1 per year less contributions paid for current and past service during that year. Therefore, the income tax exemption will equate to $3,500^FN1 less current contributions less past service contributions.

¹ The $3,500 represents the deduction limit for federal income tax. Residents of Quebec will have a deduction limit of $5,500 for Quebec income tax purposes. As such, client departments must do two separate calculations.

Example of an election with " while a contributor " and " while not a contributor":

A resident of Quebec is terminating employment effective February 28, 2005. The employee has had an ongoing deduction for elective service of $500 a month. The percentage breakdown of the total election is 70% "while a contributor" and 30% "while not a contributor". The employee has a total of $6,500 remaining to pay on this election. In the 2005 calendar year (to February 28, 2005), the employee has paid a total of $1,000 in past service pension contributions deducted from regular pay. This translates into $700 while a contributor (70%) and $300 while not a contributor (30%). In addition, the employee has paid $400 in current pension contributions. The calculation to determine the amount that would be tax exempt at source if the employee chooses to pay a lump sum from the employee's non-eligible retiring allowances is as follows:

Calculation of amount exempted from federal tax at source if the employee chooses to make a lump sum payment:

Deduction Limit: $3,500

Less Current Contributions: $400

Less "While not a contributor" Contributions: $300

Less "While a contributor" Contributions: $700

Equals the amount that may be exempted from federal income tax at source: $2,100

Calculation of amount exempted from Quebec Tax at source if the employee chooses to make a lump sum payment:

Deduction Limit: $5,500

Less Current Contributions: $400

Less "While not a contributor" Contributions: $300

Less "While a contributor" Contributions: $700

Equals the amount that may be exempted from Quebec income tax at source: $4,100

The employee, who is a resident of Quebec, decides to have $4,000 deducted from the non-eligible monies. Based on this choice, the employee will have an exemption of federal income tax in the amount of $2,100, and for Quebec income tax an exemption of $4,000 (the tax exemption cannot exceed the amount being deducted).

To make a lump sum payment towards the payment of past service, the employee must advise in writing the amount to be deducted in respect of past service. The pay office will advise the Superannuation, Pension Transition and Client Services Sector (SPTCSS) of the amount deducted paid in respect of past service. Please refer to Compensation Directive 1997-010 dated April 9, 1997, for additional information.

Client departments will be required to provide the employee with a letter identifying the lump sum amounts paid in respect of past service. Pension deficiencies (A) above should not be included in the letter. Annex "C" 2 provides a suggested format for the letter. Again, please refer to Section 5.5 of this document. Employees will use this letter when filing their income tax returns. The reporting of these amounts should be prorated in the same manner (i.e. by the same percentage) as is currently done for the ongoing monthly deductions of past service. Please refer to Services Pay Directive 1992-008(04) dated February 26, 1992, for additional information.

4.5 Transfer of a Return of Contributions (ROC) to an RRSP

There is no limit applicable to the transfer of an ROC to an RRSP. The ROC may be transferred in whole or in part to an RRSP. Those monies being transferred to an RRSP will not have income tax deducted at source, and will not be reported as income of the recipient. However, any amounts payable directly to the employee will have income tax withheld at source and will be reported as income for the recipient for the year in which it is received.

It should be noted that unless the direct transfer of amounts is effected at the actual time of payment, the employee/beneficiary loses the transferability of the amount. In other words, if the employee/beneficiary opts for a cash payment, there is no provision to consider RRSPs bought at a later date. The tax shelter is lost once the employee/beneficiary receives this payment in cash.

NOTE: Refunds of excess pension contributions or pension contributions deducted in error are not transferable to an RRSP.

4.6 Refund of Retirement Compensation Arrangement (RCA) Contributions

A refund of RCA contributions is not transferable to an RRSP. Furthermore, income tax will be withheld at source from the refund.

4.7 Transfer to a Registered Retirement Income Fund (RRIF)

The employee has up to the end of the calendar year in which he reaches age 71 to transfer retiring allowances to an RRSP. However, retiring allowances can not be transferred to a RRIF and must be paid directly to the employee. After that date, an ROC can be transferred to a RRIF instead of an RRSP.

4.8 Spousal RRSPs/RRIFs

There is no legislative provision for transferring retiring allowances ROCs to spousal RRSPs/RRIFs. It should be noted that in the event of an employee's death, an ROC could be directed to an RRSP/RRIF in the name of the surviving spouse.

4.9 Debts Due to the Crown and Deficiencies Owed (other than pension)

It is important that the employee be offered the opportunity to pay any debt due to the Crown or deficiencies owed (other than pension) in cash rather than deduct these monies from retiring allowances or ROCs that are payable. The reason for this is if monies are deducted from retiring allowances or ROCs, the monies being deducted are considered to be a cash payment to the employee and therefore, the employee must pay income tax at source on the monies being deducted.

Example:

If the employee has a debt due to the Crown deducted in the amount of $100, income tax will be calculated according to the gratuity tax rates of the province of residence and deducted from the retiring allowance payable.

Employee who works and resides in Ontario:

Employee's eligible limit amount = $2,000

Employee's debt due to the Crown = $100

Income tax on debt (at rate of 10%) = $10

In the above scenario the employee would be in a position to transfer only $1,890 to an RRSP/RPP. However, had the employee paid the debt in cash (cheque or money order) he would have been able to transfer the entire $2,000.

4.10 Cash Payments to Employee: Withholding of Income Tax

Where an employee is no longer employed, the withholding rates are to be based on the lump sum tax rates (otherwise known as gratuity tax rates) for payments of retiring allowances, ROCs, refunds of Retirement Compensation Arrangement (RCA) contributions, and the "Out Limit" of a transfer value payment. These rates will be based on the province where the former employee resides at the time of the payment and on the total amount to be paid in the taxation year.

For residents of all provinces except Quebec (federal and provincial tax):

(1) if payment does not exceed $5,000, the rate is 10% ;

(2) if payment exceeds $5,000 but does not exceed $15,000, the rate is 20% ;

(3) if payment exceeds $15,000, the rate is 30%.

For residents of Quebec

Quebec Provincial Tax:

(1) if payment does not exceed $5,000, the rate is 16% ;

(2) if payment exceeds $5,000, the rate is 20%.

Federal Tax:

(1) if payment does not exceed $5,000, the rate is 5% ;

(2) if payment exceeds $5,000 but does not exceed $15,000, the rate is 10% ;

(3) if payment exceeds $15,000, the rate is 15%.

For Non-residents

Special rates apply to retiring allowances and ROCs for residents of a country outside Canada. Generally the rate is 25% regardless of the amount being paid. However, some countries have tax treaties with Canada which provide a lower taxation rate. Only those individuals who have been deemed non-residents by the CRA will be taxed using the non-resident tax rates. Employees must provide written proof from the CRA stipulating their non-resident status.

4.11 Exemption From Income Tax at Source Without Transferring to RRSPs

| Normally cash payments are taxed at source. However, a payment should not have federal income tax (which includes the provincial income tax component for all provinces/territories except Quebec income tax) withheld at source when a letter is received from the CRA stipulating that a specific amount should be exempted from tax at source. Furthermore, if the employee provides a letter from the MRQ stipulating that a specific amount should be exempted from Quebec income tax at source, income tax should not be withheld.

| For purposes of Quebec income tax for an employee who intends to deposit the money into an RRSP, the MRQ's position is that the request for this waiver is based on a deduction for an RRSP contribution, therefore the employee must prove to the MRQ that the contribution to the RRSP has already been made.

| Refer to Compensation Directive 2002-020 dated August 21, 2002 (revised September 9, 2002) for additional information concerning reducing source deductions of income tax.

4.12 Minimum Tax

Changes have been proposed to the calculation of "adjusted taxable income" for purposes of determining whether a taxpayer has to pay "minimum tax". The effect of the change is that the amount deducted for an RRSP/RPP contribution will not be added back to calculate adjusted taxable income for minimum tax purposes.

4.13 Required Documentation/Authorizations

Please refer to Annex  C" (Samples of Required Documentation and Authorizations) for examples of documentation required to process payments and documents that should be issued by the department.

Retention of Documentation

As departments are now responsible for reporting amounts transferred to an RRSP and amounts for which income tax should be waived, departments will be required to retain these documents. Upon request, the pay office may contact you to obtain this documentation in the event the CRA/MRQ carries out an audit of payroll accounts.

In addition, the pay offices (and/or the Payroll Accounting Division of Public Works and Government Services Canada [PWGSC]) will retain documents required to process payments that are issued through their offices (i.e. death cases, non-residents, ROCs).

Elimination of Forms

Effective in 1998, the TD2 form was eliminated. In its place, departments are to request that the employee states, in writing, the disposition of the eligible monies.

Transfer of Eligible Retiring Allowance Amounts

The only documentation required to transfer eligible retiring allowances is a letter from the employee. The information must include the amount to be transferred, the name and full address of the financial institution where the monies are to be transferred, and the RRSP account number to which the monies are to be transferred.

Transfer of Non-eligible Retiring Allowance Amounts

The only documentation required to transfer non-eligible retiring allowances to an RRSP without the withholding of income tax at source, is:

(1) a signed letter by the employee certifying that sufficient RRSP room is available, or

(2) a copy of the employee's latest "Notice of Assessment" from the CRA, which will also have to be signed and dated by the employee.

The information must also include the amount to be transferred, the name and address of the financial institution, and the RRSP account number to which the monies are to be transferred. Employees should be encouraged to check with the CRA to confirm that they have sufficient RRSP room available in the current year.

Should the employee decide to personally deposit the money in an RRSP, the employee is required to provide an approval letter from the CRA to waive the federal income tax at source and from the MRQ to waive the Quebec income tax at source. The letter must reflect the amount of the retiring allowance that should be exempted from income tax at source.

Transfer of an ROC

To transfer an ROC to an RRSP/RRIF, the employee must provide written direction as to the disposition of the monies. The information must include the amount to be transferred (or "FULL AMOUNT"), the name and full address of the financial institution where the monies are to be transferred, and the RRSP/RRIF account number to which the monies are to be transferred.

The Income Tax Act dictates that where there is a transfer from one pension plan, such as the Public Service Superannuation Act (PSSA), to another pension plan (e.g. RRSP) income tax is not to be withheld. Since all the pertinent information as described in the paragraph above is included on the CRA's T2151 form, client departments may wish to accept this form completed by the employee instead of a letter from the employee. It should be noted that a separate T2151 is required to transfer parts of an ROC where multiple transfer destinations (i.e. more than one financial institution) are involved. This form is simply an aid for employers and not a CRA requirement.

Transfers by Non-residents

Non-residents must complete form NRTA1 which allows the exemption of income tax at source on monies (both retiring allowances and ROCs) transferred to an RRSP in Canada. This aforementioned form is available from the CRA. As previously mentioned in Section 4.2 of this document, there is no provision to allow for the registration of retirement savings plans of foreign countries under the Canadian Income Tax Act.

4.14 Deferred Payments

Treasury Board policy is that severance pay is payable immediately upon termination. All other retiring allowances may be deferred over a two year period only, that being the year the employee terminates employment and the following calendar year in January.

Where an employee chooses to defer authorized payments (refers to retiring allowances only; does not include severance pay), the employer will report on the T4A slip the amounts paid first as the eligible amounts. The appropriate documentation must be completed for each transfer.

It should be noted that an employee may never exceed the total eligible limit amount for transfer purposes. In addition, the employee may not transfer more than the amount of retiring allowances paid in the year. As an example:

Retiring allowance: $60,000

Eligible for transfer: $40,000

Payment schedule: $30,000 each year for two years

	2004	2005
Payments issued:	$30,000	$30,000
T4A reporting:
Eligible	$30,000	$10,000
Non-eligible	$0	$20,000
Acceptable scenarios for transferring to an RRSP/RPP:
(1)	$30,000	$10,000
(2)	$20,000	$20,000 FN2
(3)	$10,000	$30,000 FN2
(4)	$28,000	$12,000 FN2

Any other scenario may be possible as long as the two transfers do not exceed the eligible limit of $40,000 and that a transfer in a year does not exceed the actual amount paid ($30,000) in that year.

² If the employee is claiming a deduction for a retiring allowance transferred to an RRSP/RPP in the year that a T4A slip shows a non-eligible amount or exceeds the eligible amount, a statement must be attached to the employee's income tax return that reconciles the total amount eligible for transfer and the amounts actually transferred. The employee must prepare this statement.

4.15 Administrative Error

When a payment has been issued to the employee in accordance with the employee's request and legislative requirements, re-issuance directly to an RRSP is not permissible. That is to say the original payment cannot be cancelled and reissued.

There are, however, instances where re-issuance may be considered because of the extenuating circumstances which led to the issuance of the original request. These extenuating circumstances will normally be those which have arisen for reasons beyond the control of the employee and executed by the employer.

Please note that when an employee provides the employer with a tax waiver letter after the payment is issued, this is not to be considered an administrative error.

Should a client department feel that extenuating circumstances warrant the re-issuance of the payment, it is the responsibility of the client department to ensure that all legislative requirements (Financial Administration Act and Income Tax Act) are adhered to and that the circumstances for the re-issuance are well documented on the employee's file.

4.16 Disposition of Cheques Transferred Directly to an RRSP (relates to payments of retiring allowances and ROCs)

If the payment is being transferred to an RRSP, the cheque will be made payable to the employee with the proviso "for deposit to an RRSP account only". Departments are responsible, upon receipt of the cheques, to forward the cheques directly to the financial institution. Under no circumstances should these cheques be given directly to the employee. It should be noted that the Payroll Accounting Division of PWGSC will forward the ROC cheques to be transferred to an RRSP directly to the financial institution.

4.17 Transfer of a Transfer Value Payment

The transfer value payment always includes what is known as the "inside the income tax limits" and sometimes includes an "outside the income tax limits". The "inside the income tax limits" payment must always be transferred to a locked-in retirement vehicle. The "outside the income tax limits" payment is payable to the employee and is subject to income tax at source.

To make the transfer of the "inside the income tax limits" payment to a locked-in RRSP, the employee must provide the following documents:

(1) form PWGSC-TPSGC 2347-18, entitled Certification of Lock-in for Purposes of the Public Service Superannuation Act or the Pension Benefits Division Act, which has been completed by the employee's financial institution;

AND

(2) form T2151, entitled DIRECT TRANSFER OF A SINGLE AMOUNT UNDER SUBSECTION 147(19) OR SECTION 147.3, which is completed by the employee and the financial institution receiving the payment. This form is available from banks and other financial institutions. Employees can also download the T2151 from the CRA's Web site at the following address:

T2151 Direct Transfer of a Single Amount Under Subsection 147(19) or Section 147.3

A transfer of the "outside income tax limits" payment to an RRSP without the deduction of income tax at source is possible. This type of transfer is based on the employee's available personal RRSP room which is calculated each year and reported on the employee's "Notice of Assessment". Employees should be encouraged to check with the CRA to confirm that they have sufficient RRSP room available in the current year.

To make a transfer of the "outside the income tax limits" payment, the employee must provide the following documents:

(1) a letter signed and dated by the employee certifying that he has sufficient RRSP room available. The letter must also indicate the specific amount of the payment that is to be transferred to an RRSP;

OR

(2) a copy of the employee's latest "Notice of Assessment" indicating the available RRSP room amount. The employee has to sign and date this copy and also indicate the amount to be transferred.

Please refer to Superannuation Administration Manual (SAM) Special Bulletin 1997-05 dated April 30, 1997, and Section 4-15-1 of the SAM for details regarding the transfer value provision.

| 4.18 Payments Other than a Retiring Allowance, ROC or Transfer Value in Relation to Transfers to an RRSP

| While CRA will allow the direct transfer of salary payments to an RRSP, CRA recognizes that it is the employer's choice whether or not to do so. For public servants paid via the Regional Pay System, the Treasury Board Secretariat has provided PWGSC with the authority to transfer only retiring allowances (both eligible and non-eligible) and pension benefits (ROC and transfer value payments only) to an RRSP. As such, a transfer of any other type of payment (e.g. ongoing regular salary, overtime etc.) is not permitted. References: TB Minute 557089 dated March 17, 1960, TB Minute 666003 dated March 15, 1967, and, TB Minute 735114 dated April 3, 1975.

5   Procedures

Client Department Responsibilities

5.1 General

Retiring Allowances

The client department is responsible for reporting retiring allowance payments, via input to the RPS. In addition, the client department is now responsible to input RRSP transfers, tax exempted amounts, and termination deductions (e.g. deficiencies, overpayments, past service contributions, etc.). Once the employee has decided on the disposition of all payments, the client department should ensure all necessary documentation is completed accurately, that payments are made in accordance with legislation, that cheques for transfers to an RRSP are forwarded to the financial institution and that all required documentation is retained on the employee's personnel file.

ROCs

Client departments must advise the pay office concerning the disposition of the employee's ROC. The required documentation must be provided to the pay office which will then initiate the request for payment and transfer to an RRSP, if applicable.

Transfer Value Payments

Client departments must advise the SPTCSS concerning the disposition of the employee's transfer value payment. The required documentation must be provided to the SPTCSS who will then initiate the request for payment and transfer to the registered locked in vehicle for the "inside the income tax limits" payment amount. Where there is an "outside the tax limits" amount, client departments must ensure that the SPTCSS is advised how the payment is to be processed and to provide the appropriate documentation. Please refer to Section 4.17 of this document.

5.2 Present Facts/Options to Employees (checklist)

To eliminate any misunderstanding concerning the disposition of funds, departments should ensure that the employee is made aware of the various choices available and the information concerning income tax at source when transferring payments directly to an RRSP.

CHECKLIST

The following could serve as a checklist when client departments meet with the employee.

1 Total retiring allowance payable: $___________

2 Option chosen by employee:

(a) Return of contributions* (yes or no) ________

OR

(b) Pension benefit - Monthly or transfer value** (yes or no) ________

OR

(c) Will complete pension option (a) or (b) within one year (yes or no) _________

* If the employee chooses a return of contributions, the amount will be approximately: $________

**If the employee chooses a transfer value payment, the amount will be approximately: $________

^4.3 The eligible retiring allowance amounts for transfer are: (please refer to Section 4.3 of this document.)

SERVICE DATES AMOUNT ELIGIBLE

Service prior to 1989:

______

year(s) x $3,500 =

+ $______

______

year(s) x $2,000 =

+ $______

Service after 1988 but prior to 1996:

______

year(s) x $2,000 =

+ $______

Retiring Allowances previously transferred to an RRSP/RPP after November 12, 1981 =

 

- $______

TOTAL ELIGIBLE RETIRING ALLOWANCES =

 

+ $______

4 The total amount of the employee's retiring allowance is $______. Of this amount, $______ is the eligible limit amount and $_______ is the non-eligible amount.

A. The employee has an outstanding debt/deficiency (other than pension) of $______.

Does the employee wish to pay by cash or have the monies owing deducted from the retiring allowance (from the ROC, from the refund of Retirement Compensation Arrangement monies, or from the "outside the income tax limits" portion of the transfer value payment, as applicable)? Please refer to Section 4.9 in this document.

B. The employee currently has a statutory set-off (tax arrears) in the amount of $______.

Does the employee wish to pay by cash, have the monies owing deducted from the retiring allowance (from the ROC, from the refund of Retirement Compensation Arrangement monies, or from the "outside income tax limits" portion of the transfer value payment, as applicable), or will the employee make other arrangements with the CRA and provide the employer with a letter from the CRA stating that the amount is no longer required to be withheld at source?

C. Does the employee intend to make pension contribution payments towards contribution deficiencies and/or past service from non-eligible retiring allowances or other termination payments?

6. These forms/letters will be required if the employee wishes to have the employer transfer the funds to an RRSP/RPP:

TYPE OF PAYMENT REQUIRED DOCUMENTATION

Eligible retiring allowances Letter from employee (Canadian residents) CRA's form NRTA1 (non-residents)

Non-eligible retiring allowances A copy of the latest "Notice of Assessment" from the CRA, signed and dated by the employee; (Canadian residents and non-residents), or Letter from the employee (Canadian residents and non-residents)

Return of contributions Letter from the employee or Form T2151 (Canadian residents) CRA's form NRTA1 (non-resident)

Transfer value payment Inside income tax limits - The CRA requires that their tax form T2151 is completed to verify that the funds, within the tax limits, are transferred from an RPP (Public Service Pension Plan (PSPP)) to an RRSP, another RPP or to an insurance company to purchase a life annuity. Form PWGSC-TPSGC 2347-18 must also be completed by the employee's financial institution. In the case of a non-resident, the CRA's NRTA1 form is required. Outside the income tax limits - A copy of the latest "Notice of Assessment" from the CRA, signed and dated by the employee with the amount to be transferred indicated (Canadian residents and non-residents) or a letter from the employee signed and dated by the employee with the amount to be transferred indicated (Canadian residents and non-residents).

7 Cash payments paid directly to the employee will have income tax deducted at source unless the employee provides a letter from the CRA (and the MRQ, as applicable) exempting income tax at source. The lump sum (gratuity) tax rates of the employee's province of residence will be used to effect this calculation. Please refer to Section 4.10 of this document.

8 Where the employee has opted for a deferred payment, the employee should be made aware of the implications as per Section 4.14 of this document. Departments should maintain a "bring forward" for the deferred payment. (DATE:______)

9 Suggest that the employee may wish to consult with a financial advisor prior to making any decisions and with the CRA/MRQ concerning tax-related issues. You may also wish to provide the employee with a copy of the attached Annex "D" which provides answers to questions most frequently asked by employees.

5.3 Required Documentation/Authorizations

Client departments should ensure that the employee has provided all of the required documentation/authorizations and that all documentation is retained by the department. Please refer to Section 4.13 of this document and to Annex "C".

5.4 Reporting Payments/Deductions by Pay Code - General

Client departments are required to request payments of retiring allowances and deductions utilizing the proper entitlement/deduction codes.

It should be noted that the use of the entitlement codes is two-fold; (1) for statistical purposes used by the employer and (2) for the CRA/MRQ reporting requirements on the T4A, Relevé 1 and Relevé 2. The codes to reflect eligible retiring allowances are to be used even if the employee is not transferring monies directly to an RRSP/RPP.

Please note that non-eligible amounts transferred to an RRSP or used to make lump sum payments towards pension deficiencies or past service are still considered as non-eligible monies and must be reported as such.

To transfer amounts directly to an RRSP, clients should use deduction code 582 "Transfer to RRSP" which will automatically waive income tax (federal and Quebec, where applicable) on the amount reported under that code.

5.5 Payment of Past Service from Retiring Allowances

Departments should ensure that income tax is not withheld from eligible retiring allowances transferred under Section 60(J.1) to pay for past service. Departments should also ensure that income tax is not withheld from non-eligible retiring allowances or other termination payments used to make a lump sum payment towards past service. Please refer to Section 4.4 of this document for the allowable limits which will assist client departments in determining the amount which is not subject to income tax.

Code 395 "Tax Exemption Supplementary - Federal" and code 396 "Tax Exemption Supplementary - Québec" should be utilized to waive the income tax for payment towards elective service. You may also wish to refer to Section 5.8 of this document which provides an example relating to the reporting of codes.

5.6 Past Service Letter

Client departments will be required to provide the employee with a letter identifying the eligible amounts transferred to an RPP under Section 60(J.1).

In addition, client departments will also be required to provide the employee with a letter identifying the amounts paid as contributions towards past service from non-eligible retiring allowances and other termination payments. The amounts must be identified by the type of past service, i.e. Pre-1990 "while a contributor", pre-1990 "while not a contributor", and past service post-1989. Please refer to Section 4.4 of this document.

5.7 Withholding of Income Tax at Source

Departments are responsible to ensure that income tax is withheld at source on retiring allowance payments made directly to the employee except any amounts for which tax deductions have been waived (i.e. NRTA1, letter from the CRA/MRQ) or where legislation permits (i.e. transfer under Section 60(J.1), (transfer of an ROC to an RRSP/RPP/RRIF).

The RPS will automatically use the income tax rates for the withholding of income tax from cash payments as reflected in Section 4.10 of this document. However, it should be noted that where multiple payments will be issued within the same taxation year, departments must request each payment via batch mode with a note in the "Remarks" stating the total amount that will be paid during the taxation year. The pay office will then manually calculate the income tax at the appropriate rate.

5.8 Initiating Request for Payment of Retiring Allowances

The following example demonstrates the various steps involved in reporting an employee's retiring allowances and deductions. This example should be viewed from a taxation perspective and is not all encompassing in the SOS of an account:

Employee data

TOS : October 1971,

Contributor under the PSSA since April 1972,

SOS: June 2005,

Employee will receive a monthly pension benefit,

Total retiring allowances payable is $70,000.

STEP 1 (calculating eligible limit amount)

Calculating the eligible limit amount for transfer purposes:

Service prior to 1989:

(1971) 1 year x $3,500 = + $3,500

(1972-1988) 17 years x $2,000 = + $34,000

 

Service after 1988 but prior to 1996:
(1989-1995) 7 years x $2,000 =

 

+ $14,000

Retiring allowances previously transferred to an RSP/RPP after November 12, 1981 = - $0

TOTAL ELIGIBLE RETIRING ALLOWANCES = $51,500

STEP 2 (reporting retiring allowance codes)

An employee will receive retiring allowances totalling $70,000. The $70,000 retiring allowance is comprised of severance pay in the amount of $45,000, a separation benefit in the amount of $10,000 and a retention payment in the amount of $15,000. The eligible amount for transfer is $51,500.

Severance pay (eligible)

Code 054

$45,000

Retiring allowance (eligible)

Code 108

$ 6,500

Retiring allowance (non-eligible)

Code 051

$ 3,500

Retention payment (non-eligible)

Code 364

$15,000

STEP 3 (employee's chosen options)

From the eligible amount of $51,500:

• Transfer $50,000 (1) to an RRSP;
• Transfer $1,500 (2) to pay for elective service.

From the non-eligible amount of $18,500:

• Transfer an additional $5,500 (3) to an RRSP (employee provided a signed letter or a copy of the latest "Notice of Assessment" from the CRA which the employee has signed and dated);
• Waive the income tax on the amount of $3,000 (4) and issue payment to the employee (employee has letter of authorization from the CRA/MRQ);
• Pay $3,000 (5) for elective service for which the income tax should be waived on $1,000 (6) as per calculation in Section 4.4 of this document;
• Pay $1,000 (7) for pension deficiencies (fully tax deductible as per Section 4.4 of this document). The RPS will automatically waive the income tax.

STEP 4 (reporting deductions and tax exemptions)

Transfer to an RRSP

Code

582

$55,500  (1) + (3)

NOTE: No federal or Quebec tax will be calculated on amounts reported under code 582. In this case, the employee is transferring the funds to one financial institution under one plan number. Multiple RRSP accounts will require the input of a separate code 582 for each transfer.

PSSA arrears (elective service)

Code

577

$4,500 (2) + (5)

PSSA deficiencies (report proper code. The RPS will automatically waive the income tax therefore this amount is not to be included in entitlement code 395)

Code

581

$1,000 (7)

Tax Exemption Supplementary - Federal

Code

395

$5,500 (2) + (4) + (6)

NOTE: No federal tax will be calculated on amounts reported under code 395. In this case, the employee is a resident of Ontario (code 396 "Tax exemption supplementary - Quebec" would be reported to waive Quebec income tax, when applicable).

5.9 Issuing the Payment for Transfers

The RPS will automatically issue "transfer to an RRSP" payments by making the cheque payable to the employee with the provision "FOR DEPOSIT TO AN RRSP ACCOUNT ONLY".

5.10 Forwarding RRSP Cheques to the Financial Institution

Departments are responsible, upon receipt of the cheques, to forward the cheques directly to the financial institution. Under no circumstances should the cheques be given directly to the employee. It is suggested that a copy of the employee's letter accompany the cheque being sent to the financial institution to assist the institution in identifying in which RRSP account to deposit the monies.

5.11 Deferred Payments

Client departments should maintain "bring forward" mechanisms to ensure the timely issuance and transfer of payments. Remember, that the employee must clearly state in the written request for disposition of monies, all information required to effect the transfer.

Pay Office Responsibilities

5.12 General

Retiring Allowances

The pay office is responsible for processing payments of retiring allowances in death cases, and where multiple payments will be issued in the same taxation year. It is still, however, the responsibility of the client department to advise the pay office of the nature of the payments and deductions, etc., as outlined under the client department responsibilities in Section 5.1 of this document. The client department must provide the pay office with all required documentation (e.g. tax waivers, letter from the employee, etc.) before the pay office is in a position to process the payment.

ROCs

The pay office is responsible for processing payments of ROCs. Client departments must advise the pay office concerning the disposition of the employee's ROC. The required documentation (e.g. T2151, letter from the employee) must be provided to the pay office before the request for payment and transfer to an RRSP can be initiated.

5.13 Withholding of Income Tax at Source

Pay offices are responsible for ensuring that income tax is withheld at source on those retiring allowance payments and ROCs which the pay office has initiated and made directly to the employee.

For the taxation of non-residents, pay offices should contact the Advisory Services Division, Pay Policies and Training Services Directorate, Compensation Sector, PWGSC.

Refer to Section 4.10 of this document to determine the applicable tax rate.

5.14 Pension Contributions Deducted from Retiring Allowances and Other Termination Payments

The pay office will advise the SPTCSS of the amount deducted in respect of past service. Pay offices are to refer to Compensation Directive 1997-010 dated April 9, 1997 for more information.

5.15 Forwarding RRSP Cheques to the Financial Institution

Where the pay office has initiated the transfer of a ROC to an RRSP, the Payroll Accounting Division is responsible, upon receipt of the cheques, for forwarding the cheques directly to the financial institution. Under no circumstances should the cheques be given directly to the employee.

It is suggested that a copy of the employee's letter or a copy of the T2151 accompany the cheque being sent to the financial institution to assist the institution in identifying in which RRSP account to deposit the monies. The pay office should forward copies of the aforementioned documents to the Payroll Accounting Division.

5.16 Statements of Remuneration

Payments and deductions in relation to termination of employment will be reported on statements of remuneration as follows:

T4A

• The amount of the eligible and non-eligible retiring allowances whether transferred or paid in cash;
• The amount paid in cash as an ROC or a portion of a transfer value outside the income tax limits payment;
• Income tax.

T4A-RCA

• The amount paid as an ROC within a retirement compensation arrangement (RCA);
• Income tax.

T4

• Final salary;
• The amount deducted for past service pension contributions (reminder - refer to Section 5.6 of this document);
• The amount deducted in respect of pension contribution deficiencies;
• Income tax.

Relevé 1

• The amount of the eligible and non-eligible retiring allowances whether transferred or paid in cash;
• The final salary;
• The amount paid as an ROC within an RCA;
• The amount deducted for past service pension contributions;
• The amount deducted in respect of pension contribution deficiencies;
• Income tax.

Relevé 2

• Income tax,
• The amount paid in cash as an ROC or a portion of a transfer value outside income tax limits payment.

NR4

• The amount of retiring allowances;
• The amount paid as an ROC within an RCA;
• The amount paid in cash as an ROC or a portion of a transfer value outside the tax limits payment;
• Income tax.

6 - ANNEX "A"

RETIRING ALLOWANCES - ELIGIBLE LIMIT AMOUNTS TABLE

CALENDAR YEARS OF SERVICE BEFORE 1996	ELIGIBLE AMOUNT PER YEAR
	EMPLOYEE WILL RECEIVE A MONTHLY PENSION BENEFIT, A PTA OR A TRANSFER VALUE PAYMENT
	BEFORE 1989	AFTER 1988
CURRENT FEDERAL PUBLIC SERVICE
Employee was a contributor	$2,000	$2,000
Employee was not a contributor	$3,500	$2,000
Employee elects for the first six months of employment	$2,000	$2,000
PREVIOUS FEDERAL PUBLIC SERVICE
A - Where the employee had received an ROC or the employee was not a contributor:
Employee elected for that service	$2,000	$2,000
Employee did not elect for that service	$3,500	$2,000
B - Where the employee had not received an ROC: Employee is receiving or will receive a pension benefit for that service	$2,000	$2,000
OUTSIDE FEDERAL PUBLIC SERVICE
A - The employee elected for any part of the outside service or any part of the outside service is credited under a PTA:
The part of service elected or credited	$2,000	$2,000
The part of service, with that employer, not elected or credited	$3,500	$2,000
B - The employee did not elect for any part of the outside service nor is any part of the service credited under a PTA	$0	$0

6 - ANNEX "B"

CALCULATION EXAMPLES - DETERMINING ELIGIBLE LIMIT AMOUNTS

EXAMPLE 1

The employee has been employed in the public service from July 1970 and will be leaving in September 2005.

• The employee has been a contributor under the PSSA since July 1971.
• The employee has not elected for the period from July 1970 to June 1971.

The eligible limit amount of the retiring allowance that can be transferred to an RRSP/RPP will be calculated as follows.

The employee will receive a monthly pension benefit or a transfer value:

1970

1 year x $3,500 =

$3,500

1971 to 1995

25 years x $2,000 =

$50,000

Total amount eligible for transfer

$53,500

EXAMPLE 2

The employee had previous federal public service from July 1969 to July 1979.

• The employee received an ROC.
• Part of the employee's retiring allowance ($10,000) has been transferred to an RRSP.

The employee was re-employed in December 1983 and will be leaving in September 2005.

• The employee has been a contributor since April 1984.
• The employee did not elect for the previous service (July 1969 to July 1979) and for the period from December 1983 to April 1984.

The employee chooses to receive a monthly pension benefit or a transfer value. The eligible limit amount of the retiring allowance that can be transferred to an RRSP/RPP will be calculated as follows:

1969 to 1979	11 years x $3,500 =	$38,500
1983	1 year x $3,500 =	$3,500
1984 to 1995	12 years x $2,000 =	$24,000
Total amount eligible for transfer		$66,000

NOTE: Since the employee's retiring allowance was transferred to an RRSP prior to November 12, 1981, there is no reduction in the current eligible amount. Refer to Section 4.3 (c) of this document.

EXAMPLE 3

The employee had previous federal public service from July 1973 to July 1983.

• The employee received an ROC.
• Part of the employee's retiring allowance ($10,000) was transferred to an RRSP.

The employee was re-employed in December 1983 and will be leaving in September 2005.

• The employee has been a contributor since December 1983.
• The employee did not elect for the previous service.

The employee chooses to receive a monthly pension benefit or a transfer value. The eligible limit amount of the retiring allowance that can be transferred to an RRSP/RPP will be calculated as follows:

1973 to 1982	10 years x $3,500 =	$35,000
1983 to 1995	13 years x $2,000 =	$26,000
	Less FN3	($10,000)
Total amount eligible for transfer		$51,000

³ Less the amount already transferred to an RRSP from the first retiring allowance paid in July 1983.

NOTE: Since the retiring allowance was transferred after November 12, 1981, the amount transferred must be reduced from the current eligible amount.

EXAMPLE 4

The employee had previous federal public service from July 1969 to July 1979.

• The employee received an ROC.
• Part of the employee's retiring allowance ($10,000) was transferred to an RRSP.

The employee was re-employed in December 1983 and will be leaving in September 2005.

• The employee has been a contributor since December 1983.
• The employee elected for the period from July 1974 to July 1979 from the previous service.

The employee chooses to receive a monthly pension benefit or a transfer value. The eligible limit amount of the retiring allowance that can be transferred to an RRSP/RPP will be calculated as follows:

1969 to 1973	5 years x $3,500 =	$17,500
1974 to 1979	6 years x $2,000 =	$12,000
1983 to 1995	13 years x $2,000 =	$26,000
Total amount eligible for transfer		$55,500

NOTE: Since the employee's retiring allowance was transferred to an RRSP prior to November 12, 1981, there is no reduction in the current eligible amount. Refer to Section 4.3 (c) of this document.

EXAMPLE 5

The employee had previous federal public service from July 1973 to July 1983.

• The employee received an ROC.
• Part of the employee's retiring allowance ($10,000) was transferred to an RRSP.

The employee was re-employed in December 1983 and will be leaving in September 2005.

• The employee has been a contributor since December 1983.
• The employee elected for the period from July 1973 to July 1983 from the previous service.

The employee chooses to receive a monthly pension benefit or a transfer value. The eligible limit amount of the retiring allowance that can be transferred to an RRSP/RPP will be calculated as follows:

1973 to 1995	23 years x $2,000 =	$46,000
	Less FN4	($10,000)
Total amount eligible for transfer		$36,000

NOTE: Since the retiring allowance was transferred after November 12, 1981, the amount transferred must be reduced from the current eligible amount.

⁴ Less the amount already transferred to an RRSP from the first retiring allowance paid in July 1983.

EXAMPLE 6

The employee had previous service with Ontario Hydro from July 1973 to September 1983.

• Part of the employee's retiring allowance from Ontario Hydro ($10,000) was transferred to an RRSP.

The employee was employed in the federal public service from December 1983 and will be leaving in September 2005.

• The employee has been a contributor since December 1983.
• The period of service from July 1975 to September 1983 has been recognized as pensionable service under the PSSA because the employee took advantage of a reciprocal transfer agreement.
• The employee did not elect for the period from July 1973 to June 1975.

The employee chooses to receive a monthly pension benefit or a transfer value. The eligible limit amount of the retiring allowance that can be transferred to an RRSP/RPP will be calculated as follows:

1973 to 1974	2 years x $3,500 =	$7,000
1975 to 1995	21 years x $2,000 =	$42,000
	Less FN5	($10,000)
Total amount eligible for transfer		$39,000

NOTE: Since the retiring allowance was transferred after November 12, 1981, the amount transferred must be reduced from the current eligible amount.

⁵ Less the amount already transferred to an RRSP from the first retiring allowance paid in September 1983.

EXAMPLE 7

The employee had previous service with Ontario Hydro from July 1973 to September 1979.

• Part of the employee's retiring allowance from Ontario Hydro ($10,000) was transferred to an RRSP.

The employee was employed in the federal public service from December 1979 and will be leaving in September 2005.

• The employee has been a contributor since December 1979.
• The full period of previous service (from July 1973 to September 1979) has been recognized as pensionable service under the PSSA because the employee took advantage of a reciprocal transfer agreement.

The employee chooses to receive a monthly pension benefit or a transfer value. The eligible limit amount of the retiring allowance that can be transferred to an RRSP/RPP will be calculated as follows:

1973 to 1995	23 years x $2,000 =	$46,000
Total amount eligible for transfer		$46,000

NOTE: Since the employee's retiring allowance was transferred to an RRSP prior to November 12, 1981, there is no reduction in the current eligible amount. Refer to Section 4.3 (c) of this document.

EXAMPLE 8

The employee had previous service with Bell Canada from July 1970 to July 1979.

• The employee received an ROC.
• Part of the employee's retiring allowance ($10,000) was transferred to an RRSP.

The employee was employed in the federal public service from December 1979 and will be leaving in September 2005.

• The employee has been a contributor under the PSSA since December 1979.
• The employee elected for the period from July 1975 to July 1979.

The employee chooses to receive a monthly pension benefit or a transfer value. The eligible limit amount of the retiring allowance that can be transferred to an RRSP/RPP will be calculated as follows:

1970 to 1974	5 years x $3,500 =	$17,500
1975 to 1995	21 years x $2,000 =	$42,000
Total amount eligible for transfer		$59,500

NOTE: Since the employee's retiring allowance was transferred to an RRSP prior to November 12, 1981, there is no reduction in the current eligible amount. Refer to Section 4.3 (c) of this document.

EXAMPLE 9

The employee had previous service with Bell Canada from July 1970 to July 1983.

• The employee received an ROC.
• Part of the employee's retiring allowance ($10,000) was transferred to an RRSP.

The employee was employed in the federal public service from December 1983 and will be leaving in September 2005.

• The employee has been a contributor under the PSSA since December 1983.
• The employee elected for the period from July 1970 to July 1983.

The employee chooses to receive a monthly pension benefit or a transfer value. The eligible limit amount of the retiring allowance that can be transferred to an RRSP/RPP will be calculated as follows:

1970 to 1995	26 years x $2,000 =	$52,000
	Less FN6	($10,000)
Total amount eligible for transfer		$42,000

NOTE: Since the retiring allowance was transferred after November 12, 1981, the amount transferred must be reduced from the current eligible amount.

⁶ Less the amount already transferred to an RRSP from the first retiring allowance paid in July 1983.

EXAMPLE 10

The employee had previous service with the Government of Alberta from July 1970 to July 1975.

• The employee received an ROC.
• Part of the employee's retiring allowance ($10,000) was transferred to an RRSP.

The employee was employed in the federal public service from December 1977 and will be leaving in September 2005.

• The employee has been a contributor under the PSSA since April 1978.
• The employee did not elect for the previous service.

The employee chooses to receive a monthly pension benefit or a transfer value. The eligible limit amount of the retiring allowance that can be transferred to an RRSP/RPP will be calculated as follows:

1977	1 year x $3,500 =	$3,500
1978 to 1995	18 years x $2,000 =	$36,000
Total amount eligible for transfer		$39,500

NOTE: Since the employee's retiring allowance was transferred to an RRSP prior to November 12, 1981, there is no reduction in the current eligible amount. Refer to Section 4.3 (c) of this document.

6 - ANNEX "C"

SAMPLES OF REQUIRED DOCUMENTATION/AUTHORIZATIONS

These are samples of documentation and authorizations that may be required depending upon the type of payment and what is being done with that payment.

1. Sample Letter from Employee

To provide pertinent information as to the disposition of payment and deductions.

2. Sample Letter from Personnel to Report:

(A) Eligible amounts transferred to an RPP under Section 60(J.1) of the Income Tax Act.

(B) Non-eligible amounts used to pay for past service.

Departmental Responsibility

Client departments are responsible for ensuring that the required documentation is completed properly and in accordance with the procedures outlined in this directive. In cases of death, ROCs and multiple retiring allowance payments in the same taxation year, clear instructions are to be provided in writing to the pay office. Ambiguous instructions will result in delays in payment processing as clarification will be required from the client department.

Pay Office Responsibility

Pay offices are responsible for the verification of data, rejection of documentation (if applicable) and the final authorization of the transfer of funds where applicable (i.e. death cases, ROCs, multiple retiring allowance payments in the same taxation year).

1. Sample Letter from the Employee

To: Personnel Office

From: Employee's Name

SUBJECT: Disposition of a Retiring Allowance, a Return of Contributions and a Transfer Value Payment

This is to provide direction as to the disposition of my retiring allowance, my return of contributions (ROC) and my transfer value payment.

(  ) The amount of $_______ from my non-eligible retiring allowance should be transferred to my registered retirement savings plan (RRSP). The amount of $_______ from my transfer value "outside limit" should be transferred to my RRSP. I certify that I have sufficient RRSP room available. I have checked with the Canada revenue agency (CRA) to confirm that I have sufficient RRSP room available in the current year.

OR

I have attached a copy of my latest "Notice of Assessment" from the Canada Revenue Agency (CRA) showing my RRSP room available. I have signed and dated that copy and indicated the amount of $_______ from my non-eligible retiring allowance that I would like to transfer to an RRSP. I have indicated that the amount of $_______ from my transfer value "outside limit" should be transferred to my RRSP. I have checked with the CRA to confirm that I have sufficient RRSP room available in the current year.

This amount should be transferred to:

Financial Institution Name

Address Full Address

RRSP Account Number xxxxxxxxxx

(  ) The amount of $_______ from my eligible retiring allowance should be transferred to my RRSP. This amount should be transferred to:

Financial Institution Name

Address Full Address

RRSP Account Number xxxxxxxxxx

(  ) The amount of $_______ (or full amount) of my ROC should be transferred to my RRSP. This amount should be transferred to:

Financial Institution Name

Address Full Address

RRSP Account Number xxxxxxxxxx

(  ) The full amount of the "inside limit" of my transfer value payment will be transferred to a registered locked-in retirement vehicle. I have completed and attached the CRA form T2151, entitled "DIRECT TRANSFER OF A SINGLE AMOUNT UNDER SUBSECTION 147(19) OR SECTION 147.3".

(  ) The amount of $_______ of my ROC should be paid directly to me. (Optional) The income tax on the amount of $________ should be waived as per the attached CRA and/or the ministère du Revenu du Québec (MRQ) letters of authority.

(  ) The amount of $_______ from my eligible retiring allowance should be paid directly to me. (Optional) The income tax on the amount of $_______ should be waived as per the attached CRA and/or the MRQ letters of authority

(  ) The amount of $_______ from my non-eligible retiring allowance should be paid directly to me. (Optional) The income tax on the amount of $_______ should be waived as per the attached CRA and/or the MRQ letters of authority.

(  ) The amount of $_______ should be deducted from my eligible retiring allowance for payment of past service or pension contribution deficiencies.

(  ) The amount of $_______ should be deducted from my non-eligible retiring allowance for payment of past service or pension contribution deficiencies.

(  ) The amount of $_______ should be deducted from my (eligible retiring allowance/non-eligible retiring allowance/ROC) for payment of my debt due to the Crown (e.g. overpayment, Disability Insurance/Supplementary Death Benefit deficiencies). Note: The employee may choose to pay in cash.

DATE:

SIGNATURE OF EMPLOYEE:

Attach.:

2. Sample Letter from Personnel to Report:

a. Eligible amounts transferred to an RPP under Section 60(J.1) of the Income Tax Act.

b. Non-eligible amounts used to pay for past service.

TO: Canada Revenue Agency or ministère du Revenu du Québec

EMPLOYEE NAME:

SOCIAL INSURANCE NUMBER:

SUBJECT: Lump Sum Payment of Past Service Contributions from Retiring Allowances for the 20__ taxation year

(  ) 1. Eligible amounts transferred to a Registered Pension Plan (RPP) under Section 60(J.1) of the Income Tax Act.

An amount of $_______ has been transferred (under Section 60(J.1) of the Public Service Superannuation Act [PSSA]) from the eligible retiring allowances to pay for past service contributions.

(  ) 2. Non-eligible amounts used to pay for past service.

An amount of $_______ has been withheld from the non-eligible monies to pay for past service contributions. The distribution of the payment is as follows:

(  ) Election made prior to March 28, 1988:

• While the employee was a contributor under the PSSA: $______
• While the employee was not a contributor under the PSSA: $______

(  ) Election made on or after March 28, 1988:

• For service which occurred before January 1, 1990, while the employee was a contributor to a pension plan: $_______
• For service which occurred before January 1, 1990, while the employee was not a contributor to a pension plan: $_______
• For service which occurred after December 31, 1989: $_______

DATE:

SIGNATURE OF COMPENSATION ADVISOR:

TITLE:

TELEPHONE NUMBER: