FEDERAL REG

SOR/2016-203: Certain Regulations Made Under the Public Service Superannuation Act — Regulations Amending Public Service Superannuation Act Financial Administration Act

REGISTRATION OF FEDERAL REGULATION - VIA PART II OF THE GAZETTE

Registered
June 24, 2016


REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Issues The Public Service Superannuation Act was amended by the Jobs and Growth Act, 2012, to increase contribution rates for all plan members and increase the normal retirement age from 60 to 65 for new public service pension plan members hired on or after January 1, 2013. These new legislative provisions are d... (Click for more)


Published on June 24, 2016

Bill Summary

SOR/2016-203: Certain Regulations Made Under the Public Service Superannuation Act — Regulations Amending Public Service Superannuation Act Financial Administration Act

REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Issues The Public Service Superannuation Act was amended by the Jobs and Growth Act, 2012, to increase contribution rates for all plan members and increase the normal retirement age from 60 to 65 for new public service pension plan members hired on or after January 1, 2013. These new legislative provisions are designed to ensure that the public service pension plan continues to provide appropriate benefits to plan members at a fair cost, shared between plan members and Canadian taxpayers. However, regulations made under the Public Service Superannuation Act have not been correspondingly amended to incorporate the 2012 amendments to the Public Service Superannuation Act. As a result, certain pension benefits cannot be administered correctly for plan members hired on or after January 1, 2013. In addition, the method for calculating the cost to reinstate certain types of pensionable service does not account for the difference in the cost of benefits for plan members hired before and after January 1, 2013. The current cost methodology may cause inequitable treatment between plan members. Background In 2012, the Public Service Superannuation Act was amended by the Jobs and Growth Act, 2012, increasing the age of retirement for public service employees who began participating in the public service pension plan as of January 1, 2013. This amendment created a new group of pension plan members: “Group 1” plan members are those plan members who were participating in the pension plan before January 1, 2013, and are eligible for an unreduced pension benefit at age 60, or at age 55 if they have at least 30 years of pensionable service. “Group 2” plan members are those plan members who began participating in the plan as of January 1, 2013, and are eligible for an unreduced pension benefit at age 65, or at age 60 if they have at least 30 years of pensionable service. Group 2 members pay lower contribution rates than Group 1 members because they receive a benefit that has a lower overall cost. Regulations made under the Public Service Superannuation Act (the Act) provide direction on how to apply provisions of the Act, such as the application of pension deductions, benefits, transfer values and survivor benefits. However, as a result of the 2012 changes to the Act, the Public Service Superannuation Regulations, the Withdrawal of Entities Regulations and the set of 18 divestiture regulations are no longer aligned with the Act. These regulations do not reference Group 2 plan members and their later age of eligibility for pension benefits. As a result, certain pension benefit entitlements cannot be applied correctly to Group 2 plan members. For example, without the amended regulations, a Group 2 plan member cannot revoke a benefit option or receive a disability pension. A Group 2 plan member between the ages of 50 and 55 is ineligible to opt for a transfer value payment, which is a lump sum pension amount representing the present value of a plan member’s accrued pension entitlement that is payable in the future. Finally, in the event of a Group 2 member’s death, eligible dependent children are ineligible to receive a children’s allowance. Under the public service pension plan, if a member received a transfer value when they left the public service, and became re-employed and resumed their contributions to the public service pension plan, they may be able to reinstate all or part of the pensionable service for which they received a transfer value. Pensionable service transferred out of the public service pension plan by a Pension Transfer Agreement can also be reinstated if a plan member becomes re-employed in the public service. However, the method of determining the cost to reinstate the pensionable service may result in inequitable treatment between public service pension plan members who choose to reinstate certain types of prior pensionable service. The current regulations for determining the cost to reinstate certain types of pensionable service are based on the amount previously paid out to the plan member, plus interest. However, this costing method does not take into account that the retirement age that applies to the plan member as a Group 2 member when they reinstate the pensionable service may be five years later than the retirement age that applied when the pensionable service was paid out. As a result, the plan member might be overpaying for the pensionable service they are reinstating because Group 2 benefits have an overall lower cost than Group 1 benefits. Objectives The objective of the Regulations Amending Certain Regulations Made Under the Public Service Superannuation Act is to ensure that the Public Service Superannuation Regulations, the Withdrawal of Entities Regulations and the set of 18 regulations pertaining to divestitures are aligned with the 2012 amendments made to the Public Service Superannuation Act. Description The amendments incorporate the distinction between Group 1 (retirement age 60) and Group 2 (retirement age 65) public service pension plan members, as they are defined in the Public Service Superannuation Act; allow for the payment of pension benefits out of the public service pension plan to individuals who are entitled to pension; require the payment of prior pensionable service election contributions into the Public Service Pension Fund for members of the public service pension plan who choose to purchase a period of prior pensionable service; and consist of minor housekeeping amendments which include simplifying the language, repealing outdated provisions, ensuring administrative flexibility and efficiencies, and correcting references to specific provisions of the Public Service Superannuation Act. “One-for-One” Rule The “One-for-One” Rule does not apply to this proposal, as there is no change in administrative costs to business. This proposal does not apply to business. Small business lens The small business lens does not apply to this proposal, as there is no impact on small business. This proposal does not apply to business. Consultation Consultations took place with the Office of the Chief Actuary, the Department of Public Services and Procurement and the Department of Justice. The Public Service Pension Advisory Committee, whose membership includes representatives of employees, was advised of the 2012 amendments made to the Public Service Superannuation Act and its accompanying regulations. This Committee has a statutory mandate to review matters respecting the administration, design and funding of the Public Service Superannuation Act and make recommendations to the President of the Treasury Board. The regulatory amendments simply operationalize the amendments to the Public Service Superannuation Act and do not make any policy changes. Since 2012, plan members, stakeholders and Canadians have been informed through newsletters, information notices and web content posted to the Canada.ca/pension-benefits Web site about the differing retiring ages between Group 1 and Group 2 members, and the annual increases for plan member contribution rates. Rationale The amendments are internal to the operations of Government and are intended to support the full implementation of the legislative amendments made to the Public Service Superannuation Act by the Jobs and Growth Act, 2012. The amendments ensure that applicable regulations made pursuant to the Public Service Superannuation Act, which include the Public Service Superannuation Regulations, the Withdrawal of Entities Regulations, and the existing set of divestiture regulations, recognize the distinctions between the two groups of plan members as defined in the Act and take into account the difference between the overall cost of Group 1 and Group 2 benefits. These amendments ensure that public service pension plan provisions are applied correctly to take into account the later age of retirement of Group 2 members. In addition, the amendment to the methodology to cost the reinstatement of pensionable service ensures that the administration of the plan is equitable and clear in the treatment of benefits between Group 1 and Group 2 public service pension plan members. No additional financial or human resources are required to implement or administer the regulations. Contact Deborah Elder Director Pensions and Benefits Sector Treasury Board Secretariat Ottawa, Ontario K1A 0R5 Telephone: 613-952-3121 Footnote a S.C. 2012, c. 31, s. 498 Footnote b S.C. 2012, c. 31, s. 499 Footnote c S.C. 1999, c. 34, s. 113 Footnote d R.S., c. P-36 Footnote e R.S., c. F-11 Footnote 1 C.R.C., c. 1358; SOR/93-450, s.11 Footnote 2 SOR/96-479 Footnote 3 SOR/96-518 Footnote 4 SOR/97-127 Footnote 5 SOR/97-165 Footnote 6 SOR/98-230 Footnote 7 SOR/98-231 Footnote 8 SOR/98-445 Footnote 9 SOR/99-3 Footnote 10 SOR/99-4 Footnote 11 SOR/99-144 Footnote 12 SOR/99-247 Footnote 13 SOR/2000-1 Footnote 14 SOR/2000-60 Footnote 15 SOR/2000-143 Footnote 16 SOR/2003-286 Footnote 17 SOR/2004-15 Footnote 18 SOR/2009-204 Footnote 19 SOR/2010-290 Footnote 20 SOR/2010-291

This Bill does not amend any statutes.

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