The deadline to return your election form and Declaration of Intent form for the CUPE Service Payout is November 6, 2018.
In 2015, government announced it would phase out the Public Service Award, an allowance given on retirement, but that it would honour service amounts accumulated up to that point. The Service Payout is a one-time option to receive a lump-sum payment in place of the Public Service Award (PSA).
In August 2018, an interest arbitration decision made the payout available for CUPE highway workers, Local 1867.
The Service Payout is available to CUPE highway workers who meet all 4 of the following eligibility requirements:
- they have started work with or rejoined the Province before the discontinuance date of April 1, 2015
- they have eligible service before April 1, 2015
- they were an active regular employee with the Province on August 14, 2018
- they belong to the CUPE Highway Workers Local 1867
Employees who are not eligibleYou are not eligible for the Service Payout if you:
- do not meet the eligibility criteria (see eligibility)
- belong to a bargaining unit that does not have a settled or ratified collective agreement in place
- do not have a Public Service Award in your contract
- started working for or rejoined the Province after the relevant discontinuance date (see eligibility). Note if you started work or rejoined the Province after the relevant date you are also not eligible to receive a Public Service Award on retirement.
- previously retired from government and received a PSA recognizing the maximum 26 years of service
Email questions to email@example.com, or call (902) 424-7730. Include in your message your full name, mailing address, employee identification number and a phone number where you can be reached during regular hours.
Calculating your Service Payout
Eligible service for the Service Payout is a month in which you receive 10 days of salary, regardless of whether you were paying into pension at the time. Note that service for the purposes of the Service Payout (or Public Service Award) is not the same as seniority or pensionable service.
Casual time will be included in the service calculation if it is continuous upon reaching CUPE Regular status and meets all the other criteria for eligible service above.
Pregnancy/parental/adoption leave is considered eligible service for the period during which you were receiving a salary top up. Maternity leave taken before September 1, 1989 is not eligible service.
For employees who transferred from other public-sector entities, the impact on your service depends on the specific agreements formalized at the time of transfer. These agreements were applied in the service validation process. Generally, these agreements provide for continuity of employment and recognition of service; however, it depends on the specific terms and conditions.
The Service Payout calculation is based on the formula of one week of salary for each year of full-time service, to a maximum of 26 weeks.
Taxes and deductions
The Service Payout, as employment income, is subject to deductions and withholdings, including:
- Employment Insurance (EI) premiums, unless you have reached your annual maximum.
- Canada Pension Plan (CPP) contributions, unless you have reached your annual maximum, or you are CPP exempt and you have made the Employer aware of the exemption. If you are on CPP disability and have not advised Payroll Client Relations that you are CPP exempt, you need to provide proof as soon as possible. This can be a copy of your CPP disability benefit approval letter, a recent copy of your CPP disability benefit pay statement or a letter from Service Canada confirming your CPP disability status.
- Income tax, although you can seek a Canada Revenue Agency (CRA) exemption with a specific commitment to contribute to a Registered Retirement Savings Plan (RRSP). That commitment means you are choosing Payment Option 2, 3 or 4 (see enclosed Summary of Payment Options). With those options, you must make the full RRSP contribution in the tax year that you receive your payment. You should be aware that the payment you receive after deductions may be less than the amount you commit to contribute, if you specify the full gross Service Payout amount in the table above.
- Any amounts owed due to a Public Service Award advance, salary overpayment, previously unpaid benefit premiums, and/or garnishment or repayment programs in place for you.
There will be no deductions related to current benefit premiums, pension contributions or union dues, and your benefit coverage amounts will not change as a result of the Service Payout.
Estimating your deductions
The payment amount in your letter of offer is your gross (before deductions) amount.
You may want to estimate the amount that will be deducted from your payment.
We cannot tell you the exact amount of income tax that will be deducted from the payment because it depends on many factors that are specific to your personal tax situation, such as your annual salary, your year-to-date earnings, whether you will reach your maximum EI and CPP contributions, what personal tax credits you claim, etc.
Generally, the income tax should compare to what you're paying on your regular salary, unless the Service Payout moves you into a higher tax bracket. Learn about Federal and Nova Scotia Provincial Tax brackets and rates .
Income tax will not be deducted from any amounts that you will contribute to an RRSP, provided you have the personal RRSP contribution room to do so and are covered by the appropriate tax waiver (see Putting your payment into an RRSP).
You can estimate the amount of EI and CPP that will be deducted using the following:
EI and/or CPP will not be deducted if you have reached your annual maximum contributions when your payment is processed.
You are encouraged to seek professional financial advice if you have questions about planning or need help to make your decision.
Putting payment into a Registered Retirement Savings Plan (RRSP)
If you choose to put some or all of your Service Payout into an RRSP, it will be paid directly to you with no income tax deducted, as long as you have the personal RRSP contribution room to do so and you provide all the required forms and information. You will be required to make the RRSP contribution yourself, in the tax year that you received your payment. This is described in more detail in the section on Payment Options and Completing Your Forms.
Amount contributed to RRSP (gross or net)
If you decide to put some or all of your Service Payout into an RRSP, you must indicate the full amount you will contribute in the documents that you return to the PSC and/or submit to CRA.
No income tax will be deducted from that amount, but EI and CPP will be deducted, unless you have already paid the maximum for the year (see Estimating your deductions).
Therefore, the net (after-tax) amount that is deposited into your account may be less than the amount you committed to contribute to an RRSP on your forms. However, you must contribute the full amount stated on your forms to receive the tax exemption for that amount.
This could mean that you have to contribute more to your RRSP than you receive in net payment. You are responsible to make up this difference.
If you do not contribute the full amount to your RRSP that is specified on your tax waiver form, you may owe income tax when you file your annual tax return. CRA may also apply penalties and interest for not complying with the terms of the waiver.
Your gross Service Payout is $10,000. You indicate that you intend to contribute the full amount to an RRSP. No income tax needs to be withheld if you have the appropriate CRA waiver and have the personal RRSP room to make the contribution. EI of $166 and CPP of $495 must be deducted resulting in a net payment to you of approximately $9,339. Although the net payment you receive is $9,339, you are still required to contribute $10,000 to your RRSP. You will be responsible to make up this difference.
Personal RRSP contribution room
You must have enough personal RRSP contribution room to receive your payment without tax withholdings.
You will find the amount of personal RRSP contribution room you have in your most recent Notice of Assessment issued by Canada Revenue Agency (CRA). Questions about your personal RRSP contribution room should be directed to CRA .
The Service Payout can be directed to a spousal RRSP provided you (not your spouse) have sufficient personal RRSP room to do so. The following examples will help clarify:
You have personal RRSP contribution room of $12,000 and your gross Service Payout is $10,000. Your spouse has $0 personal RRSP contribution room. You can elect to have your Service Payout paid without tax withholdings and then contribute the funds to the spousal RRSP.
You have no personal RRSP contribution room. Your spouse has $12,000 of personal RRSP contribution room. Your gross Service Payout is $10,000. Since you have no personal RRSP contribution room, the funds cannot be paid out without tax withholdings and the funds cannot be contributed to a spousal RRSP.
Note: Other accounts, such as a Tax-Free Savings Account (TFSA), Registered Education Savings Plan (RESP), and Registered Disability Savings Plan (RDSP) are not tax-deductible like an RRSP. Therefore, the tax break would not apply to the Service Payout if the funds are being contributed to a TFSA, RESP, or RDSP. Income tax will only be withheld if the funds are being directed to an RRSP.
Taking the Service Payout vs. taking the Public Service Award (PSA) at retirement - What’s the difference?
The Service Payout is a one-time option. If you don't elect to take it by November 6, 2018, your only option is to wait until retirement to receive your Public Service Award (PSA), if you’re eligible.
Your PSA will be subject to the terms of the collective agreement in place at that time.
If you’re waiting for the PSA at retirement, you should still return your election form and check the “I choose not to take the Service Payout” option. You would then follow the same process as you normally would for retirement.
If you're taking the one-time Service Payout option:
The Service Payout is treated as employment income and subject to all applicable statutory deductions (income tax, EI, CPP). The payment will be made through the SAP HR/Payroll system by direct deposit and added to one of your bi-weekly pays.
If you’re taking the Service Payout as cash, the payroll system will calculate the appropriate amount of income tax to be deducted by taking into consideration your annual salary, plus the amount of your payment.
EI and CPP are deducted from employment income. For EI, 1.66% will be deducted (up to the annual maximum of $858.22) and for CPP, 4.95% will be deducted (up to the annual maximum of $2,593.80). If you have already reached these maximums at the time the payment is made, no EI and/or CPP will be deducted.
If you’re putting some or all of your Service Payout into an RRSP, there are options for a tax waiver so that no income tax will be deducted. These options are outlined in detail in your Service Payout letter of offer and on the Payment Options and Completing your Forms page.
If you're waiting to take the PSA at retirement:
If you’re considering waiting to take your PSA when you retire,remember that the PSA will only include service up to April 1, 2015 when it was frozen.
When paid at retirement, Canada Revenue Agency (CRA) classifies the PSA as a retiring allowance. It is subject to income tax only. No EI or CPP will be deducted.
If you take the PSA as cash when you retire, the payment will be subject to a withholdings tax as follows:
- 10% on amounts up to $5,000
- 20% on amounts between $5,000 and $15,000
- 30% on amounts over $15,000
This income tax deducted from the PSA at retirement is simply a withholdings tax. The amount of income tax you pay will be calculated based on your total income from all sources and determined when you file your personal income tax return.
As a retiring allowance, your PSA can also be transferred directly to an RRSP with no income tax deducted. No tax waiver is required for this when you take the PSA at retirement. You just need sufficient personal RRSP contribution room to make the transfer.
In addition to your personal RRSP contribution room, another $2,000 per year for each year worked prior to 1996 (and that you were a part of our pension plan and had contributions that are vested), is eligible for transfer to RRSP.
Note: The Service Payout is not a retiring allowance so the rules surrounding retiring allowances, such as the pre-1996 eligible room, do not apply. Government also cannot transfer the Service Payout to an RRSP for you as with a retiring allowance. You will receive the payout, and you must make the contribution to an RRSP yourself. See How the process works for additional information.
Salary for PSA at retirement
If you choose to wait to receive the Public Service Award at retirement, it will be subject to the collective agreement in place when you retire. Currently, the PSA is based on your salary at retirement (or best of 5 years, if higher, as per pension calculation) and service is frozen as of April 1, 2015.
If you still have questions
Email your questions to firstname.lastname@example.org. or call (902) 424-7730. Include in your message your full name, mailing address, employee identification number and a phone number where you can be reached during regular hours.
If Public Service Commission staff contact you by phone, they will ask for your employee identification number or the last three digits of your Social Insurance Number (SIN) to confirm your identity.