CANFORGEN on Pay and PIL

[bridges]

Sounds like the P.Res pension......

;D

Seriously.  My "immediate" annuity took 2.5 years to appear.  Grateful to have it, though, and I felt bad for the staff working on all those files. 

In that regard - if I understand this CFG & discussion thread correctly, there's no application of this change to mbrs who released outright prior to 1 Mar 12, correct? 

 

[stretch]

Seriously.  My "immediate" annuity took 2.5 years to appear.  Grateful to have it, though, and I felt bad for the staff working on all those files. 

In that regard - if I understand this CFG & discussion thread correctly, there's no application of this change to mbrs who released outright prior to 1 Mar 12, correct?

2.5 years!?  well that answers the question I came here to ask ha ha

I'll just forget it ever happened and then maybe ill get a surprise come Christmas one year.

 

[dapaterson]

According to the CF Ombudsman's last annual report, as of 29 Feb there were 1321 completed Res pension election files, and the backlog might not be cleared until December 2017.

 

[navymich]

Just received my Severance pay estimate package in the mail today.

 

[Fishbone Jones]

I got mine also. It shows an estimate of years but no dollar figure.

How do we arrive at that $ figure?:dunno:

Is it the same as the previous RFRG, one week for every year served at retirement rank, or what?

 

[fraserdw]

Right, for PRes, Current Daily Rate x 7 x # of years, Reg F Monthly Rate/4 x # of years.  That's rough but close enough!

Wow, if I RRSP this I will get 20K back at income tax time!

 

[McG]

Good question.  The new CBI 240.40 has yet to be posted; hopefully it will clarify that point.  One possible hiccup in your otherwise cunning plan may be the CF's (mis)management of Component Transfers - did you transfer directly from the Reserve Force into the Regular Force, or did you release and then re-enrol?  Breaks in service can have damaging effects on individuals in some circumstances.

Where the CF admin system records effective day of component transfers as "date of enrolment", what documentation might individuals be required to provide in order to demonstrate that there was continuous service?

 

[dapaterson]

Copies of both Reg and Res MPRRs should do the trick (famous last words)

 

[McG]

… and if I have a guy who went Reg F to Supp Res to P Res and finally back to Reg F?

 

[dapaterson]

Give up hope.

Or take the statement he receives in the mail, compare it to prior service, and see what corrections are needed.

 

[fraserdw]

… and if I have a guy who went Reg F to Supp Res to P Res and finally back to Reg F?

In my case I went from Reg to Ready Sup Res to PRes and I am credited with all my Reg and PRes time for Severence.  As long as you have unbroken service and Sup counts as unbroken, you get the whole thing.

 

[old fart]

Up to this point, eligible  "Retiring allowance (severance pay)" amounts could be transferred to an RRSP or RPP in excess to normal contribution limits IAW CRA rules....quick summary below:

http://docs.quicktaxweb.ca/ty11/english/text/en/common/cra_other/cra_t4040_chart_8.html

"A retiring allowance is an amount you receive on or after your retirement from an office or employment in recognition of long service. It can include payment for unused sick leave and amounts you receive for loss of office or employment, whether as a payment of damages or a payment under an order or judgment of a tribunal.

You can transfer only the eligible part of your retiring allowance to your own RPP or RRSP. The eligible part is $2,000 for each year or part-year of service before 1996 in which you were employed by the employer or a person related to that employer from whom you received the retiring allowance. You can also transfer an extra $1,500 for each year or part-year of service before 1989 in which you had earned no pension or DPSP benefit from employer contributions that were either vested in you at the time of payment or that were previously paid to you."

So with regard to our payments in lieu of CF severance pay, I wonder if these additional contributions will remain eligible; be they taken early or at the end of military service and then contributed by eligible pers to an RRSP in addition to normal contribution room.

This aspect has not been made clear in the recent Estimate/letter received.  Not very forthright IMHO.

At first glance it seems to me that the payment still meets the CRA rules below particularly if taken at the end of service:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/130/rtrng-eng.html

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/trnsfrrng/lgbl-eng.html

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/trnsfrrng/rtrng-eng.html

I am endeavouring to claify this...any info by those in a position to offer comment appreciated.

Yours aye....

 

[Occam]

So with regard to our payments in lieu of CF severance pay, I wonder if these additional contributions will remain eligible; be they taken early or at the end of military service and then contributed by eligible pers to an RRSP in addition to normal contribution room.

This aspect has not been made clear in the recent Estimate/letter received.  Not very forthright IMHO.

At first glance it seems to me that the payment still meets the CRA rules below particularly if taken at the end of service:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/130/rtrng-eng.html

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/trnsfrrng/lgbl-eng.html

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/trnsfrrng/rtrng-eng.html

I am endeavouring to claify this...any info by those in a position to offer comment appreciated.

Yours aye....

I called CRA asking the very same question when the CANFORGEN came out on severance pay.  The answer I got from CRA was:  If you're not retiring, the pre-1996 amount (eligible amount) is not available to you.

As always, you should contact CRA and a tax planner for professional advice before taking an internet post at face value.

 

[old fart]

I called CRA asking the very same question when the CANFORGEN came out on severance pay.  The answer I got from CRA was:  If you're not retiring, the pre-1996 amount (eligible amount) is not available to you.

As always, you should contact CRA and a tax planner for professional advice before taking an internet post at face value.

Occam, thanks for the reply...not had time to do that...but your comment is exactly as I expected the case to be.

For those with eligible contributions, this could make a huge difference and a potential significant loss for for someone who takes the cash incentive early....in my case the loss of taking the early payment would be thousands.....many other are in the same boat.

The accompanying letter like I said not forthright, or to be blunt disingenuous, as this aspect is not new.

I agree with your closing comment.

Yours aye....

 

[meni0n]

Does anyone know if the severance payout is going to be taxed at source or you'll have to pay tax on it at the end of the year.

 

[Occam]

Does anyone know if the severance payout is going to be taxed at source or you'll have to pay tax on it at the end of the year.

Taxed at source, unless you apply for a reduction of tax at source if you're transferring it to unused RRSP headroom.  See http://www.cmp-cpm.forces.gc.ca/dgcb-dgras/ps/sg-ig/sg-ig/pi-as-eng.asp#Q34

 

[old fart]

Well there it is...even if taken at the end of service...the prior provision that used to apply to retirees no longer applies.....Bollox...

39. In accordance with CRA rules, members can only transfer the eligible part (i.e. $2,000 for each year or part-year of service before 1996 in which the member was employed by the employer from whom they received the retiring allowance and additional $1, 500 for each year or part of a year of service before 1989 in which no pension or DPSP benefit was earned from employer contributions that either vested in the member at the time of payment or were paid to the member) of their retiring allowance to their own RPP or RRSP. Does this rule apply to the payment in lieu (PiL) of the Canadian Forces Severance Pay (CFSP)?

No. This rule does not apply to the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP). Members can only transfer the eligible part of their retiring allowance to their own RPP or RRSP.

BOHICA...................

 

[dapaterson]

Well there it is...even if taken at the end of service...the prior provision that used to apply to retirees no longer applies.....Bollox...

39. In accordance with CRA rules, members can only transfer the eligible part (i.e. $2,000 for each year or part-year of service before 1996 in which the member was employed by the employer from whom they received the retiring allowance and additional $1, 500 for each year or part of a year of service before 1989 in which no pension or DPSP benefit was earned from employer contributions that either vested in the member at the time of payment or were paid to the member) of their retiring allowance to their own RPP or RRSP. Does this rule apply to the payment in lieu (PiL) of the Canadian Forces Severance Pay (CFSP)?

No. This rule does not apply to the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP). Members can only transfer the eligible part of their retiring allowance to their own RPP or RRSP.

BOHICA...................

Revenue Canada rules - the CF has no control over it.

However, I suspect that if you wait until you release to take the severance pay, it is considered as a retiring allowance and thus those rules apply. 

 

[old fart]

Revenue Canada rules - the CF has no control over it.

However, I suspect that if you wait until you release to take the severance pay, it is considered as a retiring allowance and thus those rules apply.

That's the point, even if you wait till the end....as written....it's still a "payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP)" .....although if taken at the end of a long service career it remains as it has always been - a retiring allowance / severance pay.....I hope that remains the case.

Some clear direction from the bean counters (CF types) and reflected on the letter with regard to the rules applicable when the payment is taken at the end of service would have been useful.  This aspect should be spelled out...a good question at the very least for the CF SCAN seminar delivery crew....

Anyway, I would like to suspect you are right.  That was my initial belief...until I read and re-read the answer to Q39.....now I am not so sure.

When I have the time, I will endeavour to follow up one way or another.........

Yours aye....

 

[dapaterson]

According to DGCB:

2.7 Tax Implications

A severance benefit that is paid upon release from the CF is considered a retiring allowance under the Income Tax Act. As such, the income tax rules for retiring allowances apply when a severance benefit is paid to the member upon release or transfer from the Reg F or the PRes.*

*The determination of income tax rests with the Canada Revenue Agency (CRA) and/or Ministère du Revenu du Quebec (MRQ) and members should contact CRA or MRQ directly to obtain the best possible advice on tax matters. Refer to sections 3.16 and 3.17 for CRA and MRQ contact information.

See: http://www.cmp-cpm.forces.gc.ca/dgcb-dgras/ps/sg-ig/sg-ig/cfsprlad-idfccr-eng.asp

Thus, it can't be rolled over if you tale the PiL; if you wait for release and take it as a retiring allowance it can be rolled over (subject to CRA and MRQ rules).