Pay increases and changes to severance benefits for Canadian Forces personnel – Q&Ahttp://www.cmp-cpm.forces.gc.ca/dgcb-dgras/ps/sg-ig/sg-ig/pi-as-eng.asp
Q1. What wage increases will Canadian Forces (CF) members receive?
A1. Wage increases for most CF members will be 1.75% for 2011-2012, 1.50% for 2012-2013 and two percent for 2013-2014. Included in the pay increases are adjustments of 0.25% for FY 2011-2012 and 0.50% for FY 2013-2014 in consideration of the changes to the severance benefit.
In addition, the CF environmental allowances (for example: Paratroop, Rescue Specialist, Aircrew, Land Duty, Sea Duty) and special allowances (Submarine Crewing, Special Operations Assaulter, Stress Allowance for Test Participants, and Special Allowance Canadian Forces Station Alert) are increased by 1.50% each year for FY 2011-2012, FY 2012-2013 and FY 2013-2014.
At this time, there has been no decision made regarding wage increases applicable to General Officers, Colonels, and Legal Officers in the rank of Brigadier General, Colonel and Lieutenant-Colonel of the Legal Branch for FY 2013-2014.
For Legal Officers in the rank of Captain and Major, pay increases are subject to a separate process and will be announced at a later date.
The revised rates of pay and allowances are available on the DGCB website
Q2. Why has the accumulation of severance benefits for resignations and retirements ceased for the military?
A2. Severance benefits for the purpose of resignation and retirement are infrequent amongst other employers.
In addition, the ending of the severance entitlement for retirement and resignation will provide financial predictability for the Government in these times of fiscal restraint.
In this context, the Government signed collective agreements with bargaining units representing over 95,000 public servants that included the elimination of severance for voluntary departures.
Since compensation for the CF is benchmarked to that of public servants, these changes now also apply to CF members.
Q3. What impact do the changes to severance benefits have for CF members releasing for reasons of retirement and resignation?
A3. CF members will cease to accrue eligible years of service for a severance benefit paid upon retirement and resignation.
The accumulation ceases:
effective 1 October 11, for General Officers, Colonels, and Legal Officers in the rank of Lieutenant-Colonel and above;
effective the date of promotion, for members promoted to the substantive rank of Colonel and to Legal Officers to the substantive rank of Lieutenant-Colonel after 30 September 2011 and before 1 March 2012; and
effective 1 March 2012, for all other CF Officers and Non-Commissioned Members (NCMs), excluding Military Judges.
CF members will have an opportunity to receive a one-time payment in lieu of their accumulated severance benefit.
The calculation of a severance benefit will be based on a CF member’s years of eligible service, including prorated partial years, to a lifetime maximum of 30 years.
Q4. What are some of the advantages to the changes to severance benefits?
A4. Under the new provisions, members will be able to receive a full or partial payment of their severance benefits by indicating that this is their choice during the election period mid-December 2012 to mid-March 2013, rather than waiting to receive this payment at release. This can give members greater flexibility in financial planning prior to retirement.
Under previous severance benefit provisions, all members voluntarily releasing (release Item 4(c)) with less than ten years of eligible service received no benefit. Regular Force members releasing voluntarily with ten or more years of eligible service received a benefit calculated at 3.5 days of pay per year. A Reserve Force Retirement Gratuity (RFRG) benefit for eligible Reserve Force members releasing voluntarily with ten to twenty years of eligible service was calculated at 3.5 days of pay per year; with twenty or more years of eligible service, it was calculated at 7 days of pay per year. Under the new provisions, all severance benefits will be calculated at 7 days of pay for every year of eligible service, including partial years. The requirement to have a certain number of years before being eligible for severance benefits when voluntarily releasing has been eliminated.
Under previous severance benefit provisions, benefits were calculated based on full years of service. Under new provisions, a severance benefit will include prorated partial years of eligible service to the lifetime maximum of 30 years. For example, a member with 23 years and 50 days of eligible service would have received a benefit for 23 years only under the former provisions. Under the new severance pay provisions, the member would receive a payment for the total period.
In addition, eligible Primary Reserve Force service will be calculated based on elapsed time (i.e. continuous enrolment) rather than paid service.
Q5. What will be the impact of the changes on departures for involuntary reasons?
A5. The accumulation of years of eligible service continues for a member who is released for medical reasons (release Items 3(a) and 3(b)), or involuntarily (release Items 5(b), 5(d), 5(e), or 5(c) where the member has not reached retirement age under QR and O Chapter 15 but has completed the period of obligatory service because of a change in classification or trade specifications or in the establishment requirements of the CF). For these release items, and for death, the severance benefit will be calculated at seven days per year of eligible service and paid at the rate of pay for the substantive rank at release to a 30 year lifetime maximum.
Q6. What are the options for the payment in lieu of a severance benefit?
A6. Members have three options regarding the payment of a severance benefit under the revised policy:
elect to be paid a full severance benefit prior to release;
elect to be paid part of a severance benefit prior to release and to receive any remaining severance benefit at release, or
receive all severance benefits at release.
Q7. When will the election period occur?
A7. The election period will be between mid-December 2012 and mid-March 2013.
Q8. What rate of pay will be used to determine the payment in lieu?
A8. The payment in lieu of a severance benefit will be based on the CF member’s substantive rank and pay increment for the following effective dates:
1 October 2011, Colonel and above or Lieutenant-Colonel Legal and above;
date of promotion if promoted substantively to Colonel or Lieutenant-Colonel Legal between 1 October 2011 and 29 February 2012; and
1 March 2012, NCMs and all other Officers.
Q9. What rate of pay will be used to determine the severance benefit upon release?
A9. Should a CF member elect to receive a severance benefit upon release, then the monthly rate of pay and pay increment for the member’s substantive rank in effect on the date of release or transfer, from the Regular Force or Primary Reserve Force, will be used to calculate the final severance benefit.
Q10. What happens if a CF member does not make an election before the deadline?
A10. An election for a payment in lieu of a severance benefit is a one-time opportunity. Once made, an election is irrevocable.
If the deadline is missed or if a member chooses not to make an election, it will be deemed that a member has chosen to receive their severance benefit payment on the day before the member ceases to serve in the Regular Force or in the Primary Reserve.
The election period will not be extended, and no elections will be processed if received after the end of the election period.
Q11. Will the payment in lieu be taxable?
A11. The payment in lieu of a severance benefit is considered employment income. As such, the one time payment will be subject to Income Tax and will be reported as income on the T4 (Relevé 1 in Quebec).
If a CF member has unused RRSP room, they can request for a reduction of Income Tax at source. Please consult the Canada Revenue Agency (CRA) for further details; residents of Quebec should consult Revenu Quebec (MRQ).
Q12. How many such payouts will be made?
A12. To date, over 100,000 Regular and Reserve Force members are affected by the cessation of severance accumulation for resignation and retirement.
Q13. When will payments be sent to members?
A13. Payments will be processed on an ongoing basis once election forms are received and information is verified.
Q14. What is the largest anticipated payment in lieu likely to be?
A14. The payment in lieu of a severance benefit is calculated at the rate of one week of pay for each year of eligible service up to a lifetime maximum of 30 years.
The largest potential payment in lieu of a severance benefit would be at the maximum level paid to officers at the highest ranks.
Q15. What is the rationale behind this, in a time of government austerity?
A15. The cessation of accumulation of severance benefits brought public service compensation more in line with the private sector, where severance benefits for voluntary separation are usually not offered. The compensation package for CF members is benchmarked to that of the public service.